United Hosp. Ctr., Inc. v. Romano

• Citation: 233 W.Va. 313,758 S.E.2d 240
• Decision Date: 29 May 2014
• Docket Number: No. 13–0120.,13–0120.
• Court: Supreme Court of West Virginia
• Parties: UNITED HOSPITAL CENTER, INC., Petitioner Below, Petitioner v. Cheryl ROMANO, Assessor of Harrison County, and Craig Griffith, Tax Commissioner, Respondents Below, Respondents.

233 W.Va. 313

758 S.E.2d 240

UNITED HOSPITAL CENTER, INC., Petitioner Below, Petitioner

v.Cheryl ROMANO, Assessor of Harrison County, and Craig Griffith, Tax Commissioner, Respondents Below, Respondents.

No. 13–0120.

Supreme Court of Appeals of West Virginia.

Submitted Jan. 28, 2014.

Decided March 26, 2014.

Dissenting Opinion of Justice Davis

May 29, 2014.

Syllabus by the Court

1. “Under section 1, art. 10, Const., the exemption of property from taxation depends on its use. To warrant such an exemption for a purpose there stated, the use must be primary and immediate, not secondary or remote.” Syllabus, State ex rel. Farr v. Martin, 105 W.Va. 600, 143 S.E. 356 (1928).

2. “In order for real property to be exempt from ad valorem property taxation, a two-prong test must be met: (1) the corporation or other entity must be deemed to be a charitable organization under 26 U.S.C. § 501(c)(3) or 501(c)(4) as is provided in 110 C.S.R. § 3–19.1; and (2) the property must be used exclusively for charitable purposes and must not be held or leased out for profit as is provided in W. Va.Code § 11–3–9.” Syl. Pt. 3, Wellsburg Unity Apartments, Inc. v. County Comm'n of Brooke County, 202 W.Va. 283, 503 S.E.2d 851 (1998).

3. “A constitutional provision authorizing legislative exemption of property from taxation is strictly construed and nothing can be exempted that does not fall within its terms; but rational construction within the terms used is required as well as permitted.” Syl. Pt. 3, State v. Kittle, 87 W.Va. 526, 105 S.E. 775 (1921).

4. A healthcare corporation, qualified as a charitable organization under federal law, whose construction of a replacement hospital facility is substantially complete on the legal date of assessment and who has significant departmental staff on site working to fulfill the organization's charitable purposes, comes within the spirit, purpose, and intent of the constitutional framers for purposes of entitlement to exemption from ad valorem property taxation pursuant to West Virginia Code § 11–3–9(a)(12) (2013).

Michael S. Garrison, Esq., Kelly J. Kimble, Esq., Spilman Thomas & Battle, PLLC, Morgantown, WV, Dale W. Steager, Esq., Spilman Thomas & Battle, PLLC, Charleston, WV, for Petitioner.

Patrick Morrisey, Esq., Attorney General, Katherine A. Schultz, Esq., Senior Deputy Attorney General, Charleston, WV, for Respondent Griffith.

James Armstrong, Esq., Harrison County Courthouse, for Respondent Romano.

LOUGHRY, Justice:

The petitioner, United Hospital Center, Inc. (the “Hospital”), appeals from the January 7, 2013, order of the Circuit Court of Harrison County by which the respondents, Cheryl Romano, the Assessor of Harrison County, and Craig Griffith, the West Virginia Tax Commissioner,¹ were granted summary judgment with regard to the Hospital's dispute of its 2011 assessment of ad valorem property taxes for its newly-constructed facility located in Bridgeport, West Virginia. Given the charitable purpose of its operations, the Hospital challenges the circuit court's ruling that it was not entitled to exemption from property taxes for the subject tax year. In rejecting the Hospital's appeal, the circuit court focused on the fact that the Bridgeport location was not physically housing and treating patients on July 1, 2010. ² The Hospital argues that not only was the lower court's application of the statutory exemptions at issue contrary to legislative authorization, but it produced a result clearly adverse to the spirit, purpose, and intent of exempting charitable organizations from ad valorem taxation. We agree.

I. Factual and Procedural Background

For years, the Hospital owned and operated a hospital in Clarksburg, West Virginia, which was exempt from ad valorem property taxes. This exemption was premised on the undisputed operation of the Hospital for charitable purposes.³ In 2006, the Hospital began construction on a new hospital in Bridgeport to replace the aging Clarksburg facility.⁴

On July 1, 2010—the date used for property tax assessment purposes—the transfer of patients from the Clarksburg facility to the Bridgeport facility had not yet occurred. Due to unexpected issues,⁵ the physical relocation of patients and physicians was delayed until October 3, 2010. ⁶ Although the doors were not open to patients on July 1, 2010, the Bridgeport facility was 95% complete from a construction standpoint. Prior to July 1, 2010, the Hospital's information technology (“IT”) department was both situated and operating to support the Clarksburg hospital facility's needs from the Bridgeport locale. In addition to the IT employees, security employees were on site working at the new hospital as well as housekeeping staff and climate engineers.

In timely filing its commercial property tax report on June 30, 2010, the Hospital reported the cost of building materials and other tangible personal property incorporated into the Bridgeport facility as having a cumulative cost of $108,006,015.80. The Assessor determined that this tangible personal property had an assessed value of $62,895,013.00 and the real estate had an assessed value of $1,219,260.00.

Pursuant to West Virginia Code § 11–3–24a (2013), the Hospital inquired of the respondent assessor by written correspondence dated October 18, 2010, as to whether its Bridgeport facility was subject to ad valorem property taxes for 2011.⁷ In a letter dated October 25, 2010, the assessor concluded the property was taxable, reasoning that “the property was not being used for any purpose; let alone a charitable purpose” on the July 1st assessment date. The Hospital requested a tax ruling from the State Tax Commissioner, who, by letter dated February 28, 2011, similarly advised that the property was taxable. ⁸

On March 29, 2011, the Hospital filed its petition for appeal of the State Tax Commissioner's ruling on the issue of taxability in the Circuit Court of Harrison County.⁹ The circuit court, without the benefit of an evidentiary hearing, issued its ruling on January 7, 2013, granting summary judgment to the respondents. It is from this adverse ruling that the petitioner seeks relief.

II. Standard of Review

Because this case involves both the interpretation of statutes and regulations, our review is de novo. See Syl. Pt. 1, Appalachian Power Co. v. State Tax Dep't, 195 W.Va. 573, 466 S.E.2d 424 (1995) (“Interpreting a statute or an administrative rule or regulation presents a purely legal question subject to de novo review.”); see also Syl. Pt. 1, Chrystal R.M. v. Charlie A.L., 194 W.Va. 138, 459 S.E.2d 415 (1995) (“Where the issue on an appeal from the circuit court is clearly a question of law or involving an interpretation of a statute, we apply a de novo standard of review.”); Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994) (“A circuit court's entry of summary judgment is reviewed de novo.”). With this plenary standard in mind, we proceed to consider whether the circuit court erred in ruling that the Hospital was not entitled to a property tax exemption for its Bridgeport facility for the tax year 2011.¹⁰

III. Discussion

At the core of this appeal is the availability of an exemption from ad valorem property taxation that is premised on the organization's charitable purposes. After first requiring that “taxation shall be equal and uniform throughout the State,” our constitution further recognizes that “property used for educational, literary, scientific, religious or charitable purposes ... may by law be exempted from taxation.” W.Va. Const. art. X, § 1; see In re Hillcrest Mem'l Gardens, Inc., 146 W.Va. 337, 341, 119 S.E.2d 753, 755 (1961) (“ ‘Constitution ... does not of itself exempt any property from taxation[;] it merely authorizes legislative exemption thereof.’ ”) (quoting State v. Kittle, 87 W.Va. 526, 533, 105 S.E. 775, 777 (1921)).

Pursuant to authority reposed by article X, section 1, the Legislature enacted West Virginia Code § 11–3–9 (2013) for the purpose of specifying which classifications of property are exempt from taxation. The Hospital relies on two separate subsections of section nine to assert its entitlement to exemption: subsections (a)(12) and (a)(17). Under the more generic provisions of subsection 12, a tax exemption is extended in broad fashion to all “[p]roperty used for charitable purposes and not held or leased out for profit.” W.Va.Code § 11–3–9(a)(12). Under a more specific provision directed at hospitals, a tax exemption exists for “[p]roperty belonging to ... any hospital not held or leased out for profit.” W.Va.Code § 11–3–9(a)(17). A qualification which applies solely to “educational, literary, scientific, religious or other charitable corporations” seeking a tax exemption is that “such property ... [must be] used primarily and immediately for the purposes of the corporations or organizations.” W.Va.Code § 11–3–9(d) (emphasis supplied).

In support of its position that the Hospital was not entitled to the subject tax exemption for the 2011 tax year, the respondents focus primarily on the fact that as of July 1, 2010, the Bridgeport facility did not have its doors physically open to the public. As a result, the respondents maintain that no charitable purpose was being achieved which would permit a tax exemption. Upon a careful examination of the issues presented by this case, we are compelled to conclude that the analytical approach taken by the respondents is unduly narrow in scope. To suggest that the cynosure of demonstrating an organization's charitable purpose hinges on the swinging of its doors—especially in this day of voluminous regulations which govern both qualification as a charitable organization and approval to construct and operate a hospital facility—indicates a rather myopic view of the realities of both construction and health care law. With full awareness of the regulatory complexity of modern corporate existence, the determination of the Hospital's entitlement to exemption...