Western Massachusetts Lifecare Corporation v. Board of Assessors of Springfield

• Citation: 434 Mass. 96,747 NE 2d 97
• Parties: WESTERN MASSACHUSETTS LIFECARE CORPORATION v. BOARD OF ASSESSORS OF SPRINGFIELD.
• Decision Date: 06 November 2000
• Court: United States State Supreme Judicial Court of Massachusetts

434 Mass. 96

747 NE 2d 97

WESTERN MASSACHUSETTS LIFECARE CORPORATION v. BOARD OF ASSESSORS OF SPRINGFIELD.

Supreme Judicial Court of Massachusetts, Suffolk.

November 6, 2000.

May 11, 2001.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, & SOSMAN, JJ.

John M. Lynch (Stephen W. DeCourcey with him) for the defendant.

Jeffrey P. Allen for the plaintiff.

The following submitted briefs for amici curiae:

M. Robert Dushman, Jeffrey M. Sacks, Elissa M. McMillen & Stephanie M. Taverna for Rogerson Communities & others.

James F. Sullivan, Jennifer Dopazo & Thomas J. Urbelis for Massachusetts Association of Assessing Officers & others.

Martin J. Newhouse & Elaine J. Goldenberg for The Cambridge Homes, Inc., & others.

SOSMAN, J.

Western Massachusetts Lifecare Corporation (Western) has appealed from a decision of the Appellate Tax Board (board) rejecting Western's request for a property tax abatement. Western claims that it is entitled to a charitable exemption pursuant to G. L. c. 59, § 5, Third. If not exempt, Western further claims that the assessment by the board of assessors of Springfield (assessors) overvalued the property. We transferred its appeal to this court on our own motion. We agree with the board that Western is not entitled to the charitable exemption of G. L. c. 59, § 5, Third, and that Western has not carried its burden of establishing overvaluation. We therefore affirm the board's decision.

1. Facts. Western's claim of charitable exemption was submitted to the board on a statement of agreed facts, which we now summarize. Western is a corporation organized pursuant to G. L. c. 180. Since 1993, Western has been exempt from Federal income tax as an organization classified under § 501(c)(3) of the Internal Revenue Code. As set forth in its articles of organization, Western was formed "exclusively for charitable purposes and, in furtherance thereof, to provide housing, nursing care, social and recreational services and other related services designed to meet the special needs of the elderly in order to enable them to maintain their independence."

In 1990, Western entered into a long-term ground lease for the property at 807 Wilbraham Road, a site belonging to Springfield College, which is also a nonprofit corporation organized under G. L. c. 180. Under the lease, Western is responsible for all real estate taxes.

Western constructed a continuing care retirement community on the Wilbraham Road property, which operates under the name "Reeds Landing." Reeds Landing opened for occupancy in September, 1995. The facility provides housing and services to elderly residents in 117 "independent living units" (ILUs), fifty-four "assisted living units" (ALUs), and a forty-bed skilled nursing facility. Common facilities include formal and informal dining rooms, recreation rooms, lounges, library, beauty and barber shop, convenience store, coffee shop, and gift shop.¹ In its promotional materials, Western describes Reeds Landing as a "luxury residential complex" offering a "safety net" of services and support for the elderly.

The 117 ILUs at Reeds Landing comprise forty-four per cent of the total space at the complex. The units vary from one-bedroom apartments to two-bedroom cottages with a den, deck, and garage. The layout of the ILUs is intended to accommodate the decreased sensory acuity and mobility of aging persons, enabling them to maintain an essentially independent life style. Services available to ILU residents include fifteen to thirty meals a month, biweekly light housekeeping, weekly linen and towel service, trash removal, unit and grounds maintenance, local scheduled transportation, assistance filling out insurance forms, arranging for inpatient hospital care, and exercise programs.

Western does not provide health care to residents of the ILUs. Residents may visit the Wellness Center clinic for routine examinations and minor health problems, but that clinic is independently owned and operated and charges its own separate fees. Residents may also arrange for private medical care to be provided in their individual units. Residents are required to apply for Medicare insurance benefits and to maintain supplemental health insurance satisfactory to Reeds Landing management. Residency in the ILU includes the "LifeCare Benefit," which grants ILU residents the right to transfer to an assisted living unit or to the skilled nursing facility if such a transfer becomes necessary. If skilled nursing is needed on a temporary basis, residents of ILUs may also stay briefly in the skilled nursing facility and then move back to their own units.

Applicants seeking admission to an ILU at Reeds Landing must be at least sixty-five years old (or the spouse of a person at least sixty-five years old), must satisfy the resident review committee (consisting of three Western board members) that they are healthy and capable of caring for themselves, and must demonstrate that they have the financial ability to pay both the entrance fees and the monthly service fees.

The initial entrance fees for ILUs range from $100,200 (for the smallest one-bedroom apartment) to $230,500 (for a two-bedroom unit with den and balcony). These fees are partially refundable when a resident vacates Reeds Landing, with the refund amount declining by one per cent for each month of residence. An applicant can opt for a guaranteed refund of eighty-five per cent, but that option increases the initial entry fees to a range of $128,200 (for the one-bedroom unit) to $290,200 (for the largest unit). All entrance fees are increased by $15,000 if a second occupant will reside in the unit. The monthly service fees range from $1,325 (for the smallest unit) to $2,050 (for the largest unit), plus an additional $475 a month for any second occupant.²

Applicants must demonstrate that they have sufficient assets with which to pay the entrance fee and that, from remaining assets, they will have sufficient stable income to meet the ongoing monthly service fees. In order to qualify, an applicant's monthly income must be at least one and one-half to two times the monthly service fee. If the applicant's income is less than one and one-half times the monthly fee, admission will be denied unless the applicant demonstrates adequate assets sufficient to cover all projected costs or provides a guarantee of payment from a person or organization of proven means. While Reeds Landing has a policy of not displacing a resident solely because the resident later becomes unable to pay the fees, the financial screening criteria are such that, to date, no resident has been unable to meet the monthly fees.

There are fifty-four ALUs at Reeds Landing. The ALUs are designed for elderly persons who require some assistance with normal daily activities, such as bathing, dressing, and taking medications. Certain of the ALUs are designed for persons with impaired memory, providing specialized security and safety features for such residents.

Residents transferring from an ILU to an ALU pay a slightly increased monthly fee (reflecting the increased number of meals provided), but are not charged any further entry fee for that transfer. Persons seeking initial entry into a Reeds Landing ALU must demonstrate acceptable health, and must have the financial means to pay the ALU entrance fees and monthly charges. If a new ALU resident contracts for the LifeCare Benefit (that guarantees access to the skilled nursing facility at no additional charge), the entrance fee is $75,000, and the monthly service fees range from $2,200 to $2,800. Applicants may also enter an ALU without the LifeCare Benefit and avoid all entrance fees, but the monthly fees for such ALU residents are higher ($2,700 to $2,800). Monthly fees for residents in the ALUs adapted for the memory impaired range from $3,250 to $3,500. The same measurements are used to determine whether an ALU applicant meets Reeds Landing's financial criteria (i.e., sufficient assets to pay the entrance fee and a stable monthly income of at least one and one-half to two times the monthly service fees).

The skilled nursing facility (SNF) is a forty-bed long-term care facility providing nursing care to residents twenty-four hours a day. SNF residents have all of their meals provided for them, and many require assistance with feeding. They also receive their medication from a licensed nurse. Residents of the ILU and those in the ALU with the LifeCare Benefit are entitled to transfer to the SNF if such a transfer becomes necessary. Former ILU residents pay their regular monthly fees with an increase for the additional meals provided. Former ALU residents who opted for the LifeCare Benefit pay the same monthly fee they were charged in their ALUs.

To the extent beds are available, members of the general public may use the SNF on a per diem basis.³ Western is a party to a Medicare provider agreement for the SNF and may not deny admission to the SNF based on source of payment. However, with residents of 117 ILUs (plus those ALU residents who opted for the LifeCare Benefit) all guaranteed access to the same forty-bed nursing home facility, the board inferred that access to the SNF was, as a practical matter, only available to those who had entered Reeds Landing by way of an ILU or an ALU (and thus had already paid substantial entry fees). There was no evidence that anyone who had not been a resident of an ILU or ALU had ever been admitted to the SNF.

On January 30, 1998, Western applied to the assessors for an abatement of its property taxes, claiming that it was entitled to a statutory exemption for the Reeds Landing property or, in the alternative, that the property had been overvalued. The application was denied and Western filed a timely appeal with the board. The board bifurcated the appeal, considering first the claim of exemption (which was submitted on a statement of agreed facts), and then hearing evidence on the issue of overvaluation. After...