State By and Through Dept. of Revenue Gross Income Tax Division v. Bethel Sanitarium, Inc.

• Decision Date: 19 August 1975
• Docket Number: No. 1--774A108,1--774A108
• Citation: 332 N.E.2d 808,165 Ind.App. 421
• Parties: STATE of Indiana, acting By and Through its DEPARTMENT OF REVENUE GROSS INCOME TAX DIVISION, Appellant, v. BETHEL SANITARIUM, INC., an Indiana Corporation, Appellee.
• Court: Indiana Appellate Court

Page 808

332 N.E.2d 808

165 Ind.App. 421

STATE of Indiana, acting By and Through its DEPARTMENT OF REVENUE GROSS INCOME TAX DIVISION, Appellant, v. BETHEL SANITARIUM, INC., an Indiana Corporation, Appellee.

No. 1--774A108.

Court of Appeals of Indiana, First District.

Aug. 19, 1975.

Theodore L. Sendak, Atty. Gen., A. Frank Gleaves, III, Deputy Atty. Gen., Indianapolis, for appellant.

Howard P. Trockman, James F. Flynn, Trockman, Flynn, Swain & Tyler, Evansville, for appellee.

LOWDERMILK, Judge.

The State of Indiana, Department of Revenue, Gross Income Tax Division (State) brings this appeal from the trial court's determination that appellee, Bethel Sanitarium, Inc., (Bethel) was entitled to a tax refund for the gross income taxes it paid to the State as a result of an erroneous tax assessment. The trial court found that Bethel qualified for an exemption because it was a 'hospital' within the meaning of IC 1971, 6--2--1--7 (Burns Code Ed.) which read, prior to the 1971 amendments, in pertinent part as follows:

'There shall be excepted from the gross income under this act: . . .

(i) Amounts received by institutions, trusts, groups and bodies organized and operated exclusively for religious, charitable, scientific, fraternal, educational, social and/or civic purposes and not for private benefit, as contributions, tuition fees, initiation fees, matriculation fees, membership fees, and earnings on, or receipts from sales of, intangible property owned by them: Provided, however, That gross income received by churches . . . hospitals . . . or any corporation organized and operated solely for the benefit of any of the same . . . none of the foregoing being organized or operated for private profit, shall be excepted from taxation under the provisions of this act . . .'

Judgment was duly entered for Bethel, and the State perfected this appeal.

Bethel was organized as a not-for-profit corporation in 1949. The State did not make an assessment of gross income taxes for any year prior to 1965. In July, 1971, the State assessed Bethel $34,853.98 for gross income tax due for the years 1965 through 1969. Bethel paid the tax, but then filed this action to obtain a refund. The trial court found for Bethel, and granted the refund.

On appeal, the State contends that the trial court erred in its finding that Bethel was a hospital within the statutory meaning of that term. It is the State's contention that the term 'hospital' as used in the exemption statute is specifically defined in IC 1971, 16--10--1--6 (Burns Code Ed.) That section, prior to the recent amendments, provided:

"Hospital' defined--Authority of council.--'Hospital' within the meaning of this act . . . shall be defined to be any institution, place, building, or agency represented and held out to the general public as ready, willing and able to furnish care, accommodations, facilities, and equipment, for the use, in connection with the services of a physician, of persons who may be suffering from deformity, injury, or disease, or from any other condition, for which medical or surgical services would be appropriate for care, diagnosis or treatment. The term 'hospital' as used in this act does not include convalescent homes, boarding homes, or homes for the aged; nor does it include any hospital or institution specially intended for use in the diagnosis, care and treatment of those suffering from mental illness, mental retardation, convulsive disorders, or other abnormal mental conditions; nor does it include offices of physicians where patients are not regularly kept as bed patients. The council shall have the authority to determine whether or not any institution or agency comes within the scope of this act, and its decisions in that regard shall be subject only to such rights of review as the courts exercise with respect to administrative actions. It shall be unlawful for any institution, place, building or agency, to be called a hospital which is not a hospital as defined in this section.'

It is admitted that Bethel does not meet the licensing requirements of that chapter, although Bethel is now licensed under that same article as a health facility (nursing home, home for the aged, et cetera.) See IC 1971, 16--10--2--3 (Burns Code Ed.).

The State contends that from this definition, it is clear that Bethel is not eligible for an income tax exemption. The State points out that while the tax laws in general are strictly construed against the State, Gross Income Tax Division v. L. S. Ayres & Co. (1954), 233 Ind. 194, 118 N.E.2d 480; Gross Income Tax Division v. Surface Combustion Corp. (1953), 232 Ind. 100, 111 N.E.2d 50, there is an exception to the rule when an exemption is involved. All exemption statutes must be strictly construed in favor of the tax and against the one seeking the exemption. Indiana Dept. of State Revenue v. Boswell Oil Co. (1971), 148 Ind.App. 569, 268 N.E.2d 303; Storen v. Jasper County Farm Bureau Coop. Ass'n (1936), 103 Ind.App. 77, 2 N.E.2d 432. Further, the exemption statute in force at the time here relevant provided that no gross income was to be excluded except as specifically set out in the statute.

The difficulty presented by the State's contention is that the definition they rely on is not contained within the Tax Code, but, rather, is in the Health and Hospital Code, and is limited by its own terms to the chapter on hospital licensing and regulation. The State would have us apply this very narrow definition of 'hospital' to a completely different area of the law, even though it admits in its brief that the State does not license for income tax purposes. We are bound by the express limitation contained within the above definitional statute, and thus cannot rely on it in construing this exemption statute.

The word 'hospital' is not defined in the exemption statute, and thus must be defined by this court for the purpose of determining if this institution is entitled to an exemption. While the statute should be construed against the one claiming the exemption, the evident intention of a statute should not be defeated because such a statute is required to be strictly constured. Greenbush Cemetery Association v. Van Natta (1911), 49 Ind.App. 192, 94 N.E. 899. We believe the Legislature intended that an institution like Bethel should be included within the definition of 'hospital', as used in a general sense and as such should be exempt from taxation.

IC 1971, 1--1--4--1 (Burns Code Ed.) provides, in part:

'The construction of all statutes of this state shall be by the following rules, unless such construction be plainly repugnant to the intent of the legislature or of the context of the same statute:

First. Words and phrases shall be taken in their plain, or ordinary and usual, sense. But technical words and phrases having a peculiar and appropriate meaning in law shall be understood according to their technical import.'

Here, 'hospital' is not used in a technical sense, but rather in a general sense. Thus it should be given its plain, ordinary and usual meaning. The ordinary and usual meaning of the term 'hospital,' as opposed to various specialized meanings, is that a hospital is an institution for the reception and care of sick, wounded, infirm, or aged persons. Blacks Law Dictionary 871 (4th ed. 1951); Noble v. First National Bank of Anniston (1941), 241 Ala. 85, 1 So.2d 289. See also 41 C.J.S. Hospital § 1 (1944).

The trial court found that Bethel met this definition, and the evidence was adequate to sustain its finding of fact in this regard. The sufficiency of the evidence will not be weighed on appeal. Phar-Crest Land Corp. v. Therber (1969), 251 Ind. 674, 244 N.E.2d 644.

In Washington Fidelity Nat. Ins. Co. v. Smith (1935, Tex.Civ.App.), 80 S.W.2d 413, an insured was confined to a sanitarium. It was held that he was entitled to recover on a health insurance policy which required that the insured be confined in an incorporated or licensed hospital, since a 'sanitarium' is a 'hospital.'

In a case that comes closest to the present problem, the North Dakota Supreme Court held that an exemption for hospitals contained within the Labor-Management Relations Act of North Dakota also exempted nursing homes from the coverage of the act. In St. Vincent's Nursing Home v....