St. Mary's Medical Center of Evansville, Inc. v. State Bd. of Tax Com'rs

• Decision Date: 29 May 1991
• Docket Number: No. 82S00-8905-TA-0367,82S00-8905-TA-0367
• Citation: 571 N.E.2d 1247
• Parties: ST. MARY'S MEDICAL CENTER OF EVANSVILLE, INC. and St. Mary's Building Corporation, Appellants, v. STATE of Indiana BOARD OF TAX COMMISSIONERS and County Board of Review for Vanderburgh County, Appellees.
• Court: Indiana Supreme Court

Page 1247

571 N.E.2d 1247

ST. MARY'S MEDICAL CENTER OF EVANSVILLE, INC. and St. Mary's Building Corporation, Appellants, v. STATE of Indiana BOARD OF TAX COMMISSIONERS and County Board of Review for Vanderburgh County, Appellees.

No. 82S00-8905-TA-0367.

Supreme Court of Indiana.

May 29, 1991.

G. Michael Schopmeyer, Harry P. Dees, Marilyn R. Ratliff, Kahn, Dees, Donovan & Kahn, Evansville, for appellants.

Linley E. Pearson, Atty. Gen., Joel Schiff, Deputy Atty. Gen., Indianapolis, for appellees.

DeBRULER, Justice.

St. Mary's Medical Center of Evansville, Inc. (St. Mary's) and its building corporation, both not-for-profit corporate persons, own and operate a large modern hospital complex in Evansville, Indiana. They applied to the County Board of Review for a property tax exemption for three of their nearby medical office buildings pursuant to I.C. 6-1.1-11-3, and the applications were disapproved. They then petitioned the State Board of Tax Commissioners for review of the county board's determination pursuant to I.C. 6-1.1-11-7(c). The State Board thereafter made its final determination, affirming the action of the county board. In so doing, the State Board said:

Under I.C. 6-1.1-10-36.3, the property is not predominantly used or occupied for an exempt purpose, and therefore the entire assessment is taxable.

The Board does not accept the petitioner's contention that the doctrine of legislative acquiescence applies.

St. Mary's filed its original tax appeal with the Indiana Tax Court pursuant to I.C. 6-1.1-15-5, Tax Court Rule 2, and long-standing case law. See State Bd. of Tax Comm'rs v. Wright (1966), 139 Ind.App. 370, 215 N.E.2d 57. The Tax Court made findings of fact and decided against St. Mary's. St. Mary's Medical Center v. State Bd. of Tax Comm'rs (1989), Ind.Tax Ct., 534 N.E.2d 277. In so doing, the Tax Court concluded:

[T]he determination of whether or not the petitioners are entitled to property tax exemptions should be based on whether the medical office buildings are reasonably necessary for the maintenance of St. Mary's religious, educational or charitable purposes....

According to the Indiana Supreme Court, the doctrine of legislative acquiescence is applied generally where there has been an administrative interpretation of ambiguous statutory language.... [This] court cannot conclude that "owned, occupied, and used" is ambiguous statutory language. It is difficult to see how the legislature could be less "ambiguous" unless they specifically state that medical office buildings are or are not exempt from property taxes.

Furthermore, it is not clear that the legislature was apprised of the interpretation of IC 6-1.1-10-16 one way or the other.

Id. at 278, 281-82 (citation omitted).

This is an appeal from that written decision of the Tax Court. Specifically, St. Mary's now claims that the Tax Court committed error in concluding (1) that there was substantial evidence supporting the State Board's denial of the exemption and that the denial was not contrary to law or an abuse of discretion, and (2) that the exemption was not required by application of the doctrine of legislative acquiescence.

The three buildings denied exemption are owned by appellants and are situated on tracts of land next to the hospital. Two are occupied by doctors, dentists, and a pharmacy who rent space from appellants. Two-thirds of the other is occupied in like manner, with the remaining one-third of it occupied by hospital employees. These doctors and dentists engage in the traditional private practice of medicine and dentistry in their offices. They are also on the staff of the hospital. The building which was occupied in two-thirds part by leasing physicians and dentists had been granted exempt status by the county board for several years prior to being denied exemption upon these applications for the first time for 1983.

In Indiana, the legislature must provide by law for the taxation of property, but in doing so it may exempt "property being used for municipal, educational, literary, scientific, religious or charitable purposes." Ind. Const. Art. 10, Sec. 1(a)(1). By statute, it did exempt property which is "owned, occupied, and used by a person for educational, literary, scientific, religious, or charitable purposes." I.C. 6-1.1-10-16. Use or occupation for "one or more of the stated purposes," for more than fifty percent (50%) of the time that it is used or occupied in the assessment year qualifies the property for at least a partial exemption. I.C. 6-1.1-10-36.3(a) and (b). Property is not "used or occupied for one or more of the stated purposes" during the time that a predominant part of the property is used or occupied in connection with a trade or business that is not substantially related to the exercise or performance of one or more of the stated purposes. Id. at (c).

In resolving the first issue against St. Mary's, the Tax Court applied the...