                          STATE OF MICHIGAN

                            COURT OF APPEALS



HOPE NETWORK – REHABILITATION                                        UNPUBLISHED
SERVICES,                                                            December 2, 2014

               Petitioner-Appellant,

v                                                                    No. 317367
                                                                     Tax Tribunal
CITY OF KENTWOOD,                                                    LC No. 00-412553

               Respondent-Appellee.


Before: SHAPIRO, P.J., and WHITBECK and STEPHENS, JJ.

PER CURIAM.

       Petitioner, Hope Network-Rehabilitation Services (HNRS) appeals by right the Tax
Tribunal’s final opinion and judgment denying it a charitable institution tax exemption for its
Forest Glen facility under MCL 211.7o for the 2010, 2011, and 2012 tax years. We affirm.

                                       I. BACKGROUND

        Petitioner’s property for which it claims tax exempt status is an adult foster care facility
referred to as its Forest Glen facility and is located in the city of Kentwood at 4222 Burton Street
SE. It has the capability to house up to six residents who are there for specialized care related to
brain and/or spinal cord injuries they have suffered.

       Petitioner filed an “Application for the Exemption of Real Estate” with respondent’s
assessor’s office on October 23, 2009, seeking an exemption commencing with assessment year
2010. Instead of a response to its application for exemption, petitioner received a Notice of
Assessment from respondent from which it appealed to the Board of Review. Subsequent to the
Board’s denial petitioner appealed the decision to the Tax Tribunal on April 13, 2011.1




1
  The 2011 petition referred to a May 28, 2010 petition and stated it was reiterating from that
prior petition. Upon review, we could not find the May 28, 2010 petition as part of the lower
court file or as any attached exhibit.


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       The parties entered a six-page stipulation to the Tribunal on May 1, 2013. The parties
agreed to the subject property’s address and location in the city of Kentwood; that the subject
property was at all relevant times classified as commercial real property; that petitioner acquired
the subject property on May 9, 2007, and completed construction of its adult foster care facility
in August 2009; that since December 31, 2009, the subject property “operated between 95-100%
occupancy”; that “[t]he structure on the Subject property consists of a 6,024-square-foot barrier-
free building with (6) individual bedrooms, each with its own bathroom and shower, communal
dining and living areas, a large kitchen, and laundry area and two office areas”; and to “[t]he
values on the tax roll for the tax years at issue” to be as follows:

             Tax Year      True Cash Value        Assessed Value      Taxable Value

                2010             635,200              317,600             317,600

                2011             582,000              291,000             291,000

                2012             543,800              271,900             271,900


       Also included in the stipulation was the language from petitioner’s Articles of
Incorporation Article II (Purposes) and Article III (Capitalization: Plan of Financing).

        The parties’ stipulation isolated the issue in this case to “whether the Subject Property is
exempt from ad valorem property taxes under MCL 211.7o for the tax years at issue, which are
2010, 2011, and 2012.” The parties agreed that petitioner was a nonprofit corporation and that
the case of Wexford Med Group v City of Cadillac, 474 Mich 192, 203, 215; 713 NW2d 734
(2006), controlled and provided a definition for the word “charity”; enumerated 6 factors to
consider when determining whether an institution is charitable and that of the six factors, the
parties stipulated to petitioner’s compliance with number 1 and number 4.

         At the hearing before the Tribunal two witnesses gave testimony: Shane Kistler and
Denise Osborne. Kistler was the business manager for petitioner and Osborne was the
supervisor for petitioner’s Forest Glen facility. Osborne testified regarding the operations of the
facility and Kistler offered testimony as to the corporate and business operations. The Tribunal
found that petitioner was not entitled to an exemption in an Opinion and Judgment that was
entered on July 3, 2013. The Tribunal found that the Forest Glen facility was not used for
charitable activity since its articulated charitable efforts of writing off bad debt for insured
patients whose insurance did not cover the billed costs was nothing more than a business
practice.

                                 II. STANDARD OF REVIEW

       Our review of decisions by the Tribunal is limited. Mt Pleasant v State Tax Comm, 477
Mich 50, 53; 729 NW2d 833 (2007). In the absence of fraud, a decision of the Tribunal is
reviewed for “misapplication of the law or adoption of a wrong principle.” Briggs Tax Serv,
LLC v Detroit Pub Schs, 485 Mich 69, 75; 780 NW2d 753 (2010). The factual findings of the
Tribunal are conclusive “if they are supported by competent, material, and substantive evidence
on the whole record.” Liberty Hill Housing Corp v City of Livonia, 480 Mich 44, 49; 746 NW2d

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282 (2008) (internal citations omitted). This Court construes tax exemption statutes in favor of
the taxing government. OCLC Online Computer Library Ctr, Inc v Battle Creek, 224 Mich App
608, 611–612; 569 NW2d 676 (1997).

                                       III. DISCUSSION

        It is important to highlight what the Tribunal did not do in its Opinion and Judgment. It
did not make any credibility findings regarding either of the petitioner’s witnesses nor did it
evaluate the documents presented at the hearing. It did not address whether the admissions
policy of petitioner was discriminatory nor did it evaluate the fees charged residents at the
subject property. Instead, the Tribunal declined the relief requested based on its factual finding
and legal conclusion that petitioner did not use Forest Glen solely for charitable purposes.

        The second Wexford factor provides that “[a] ‘charitable institution’ is one that is
organized chiefly, if not solely, for charity.” Wexford, 474 Mich at 215. The Tribunal reviewed
the testimony and the documents and found that petitioner “wrote –off” the difference between
what it billed automobile insurance companies for residents services and the amount paid by
those companies for services. The Tribunal found that petitioner had a scholarship program but
that no scholarships had been awarded to any Forest Glen resident since 2009 and that all of the
residents at Forest Glen were covered by auto insurance payments. These findings were
supported by the testimony of petitioner’s business manager and thus will not be disturbed by
this Court.

        The Tribunal concluded that

               As such, Petitioner has provided no “gifts” (i.e., charity) for purposes of
       MCL 2.11.7o since the subject property began operations in 2009 because
       Petitioner has always been able to recoup payment, whether in part or in full, in
       return for the services it has rendered at the subject property. Furthermore,
       although Petitioner argues that its write-offs, for what insurance companies or
       governmental agencies do not cover, constitute charity, the Tribunal disagrees.

       The tax exemption here is claimed under MCL 211.7o (1) which provides:

       Real or personal property owned and occupied by a nonprofit charitable
       institution while occupied by that nonprofit charitable institution solely for the
       purposes for which that nonprofit charitable institution was incorporated is
       exempt from the collection of taxes under this act.

Petitioner argues that the Tribunal misapplied the statute by focusing on the activity at Forest
Glen. It argues that petitioner, even by the admission of the respondent city, is organized
primarily for charitable purposes and that so long as Forest Glen is operated as a residential care
facility it is entitled to an exemption from taxation. Respondent agrees with the Tribunal’s focus
on activity at Forest Glen and further argues that the petitioner failed to prove that it did not
discriminate or that its charges were no more than what was necessary to maintain its operation.

        In support of its argument that the Tribunal’s focus on the operations at Forest Glen is
error, petitioner cites Wexford:

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               …it is clear that the institution’s activities taken as a whole must be
       examined; it is improper to focus on one particular facet or activity . . . it is the
       overall nature of the institution, as opposed to specific activities, that should be
       evaluated. [474 Mich at 212-213.]

We agree that the initial inquiry regarding charitable institution status is on the overall activities
of HNRS. Indeed the Tribunal and respondent agree that HNRS is organized primarily for the
charitable purpose of providing medical care. Wexford’s companion case, McLaren Regional
Medical Center v City of Owosso, 275 Mich App 401; 738 NW2d 777 (2007), underscores the
need to consider an entity’s overall character as an initial inquiry. McLaren was critical of the
position of the City of Owosso that McLaren was not charitable because it only gave charity
when it wrote-off bad debt. However, the court in McLaren gave great attention to the actual
operations at the sites for which exemption was sought. The actual holding of McLaren was to
award an exemption to only those portions of buildings that were owned by an entity organized
for a charitable purpose and used solely for that purpose. Id. at 418. In McLaren the court noted
that substantial resources were devoted to indigent medical care. Id. at 416. In addition to
“write-offs,” the petitioner in McLaren provided free care, free medicine health screenings and
exams. Id. 415-416. Wexford requires us to evaluate first, the overall character of the property
owning institution but also, as the statute demands, that it be proven that the property for which
an exemption is sought be used solely for the charitable purpose.

        Next, petitioner argues that the Tribunal erred in relying on the logic or holding of
Healthlink Medical Transportation Services, Inc v City of Taylor2, an unpublished pre-Wexford
case, to find that write-offs are not charity. Indeed, Healthlink is not precedential. However, in
the absence of evidence that the facility is otherwise used for charitable purposes during the tax
period in question, the logic that simply writing off a debt after it is billed and not paid is a
business practice rather than charity is persuasive. In Wexford and McLaren the petitioner knew
when it undertook care that it was providing a service at below market rates or costs. Here,
petitioner provided no proofs of ever admitting a patient to Forest Glen without expectation of
payment, or for caring for a Medicare or Medicaid patient at the facility. Petitioner asserted the
existence of a scholarship fund which was unfunded and never used at Forest Glen. The
Tribunal did not err in finding in this instance that the $75,000 write-off was a business practice
and not a charity.

       Affirmed.



                                                              /s/ Douglas B. Shapiro
                                                              /s/ William C. Whitbeck
                                                              /s/ Cynthia Diane Stephens



2
  Unpublished per curiam of the Court of Appeals, issued February 15, 2005 (Docket No.
249969).


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