Wexford Medical Group v. City of Cadillac

Michigan Supreme Court
Lansing, Michigan
Chief Justice: Justices:

Opinion Clifford W. Taylor Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman

FILED MAY 4, 2006

WEXFORD MEDICAL GROUP,

Petitioner-Appellant,

v No. 127152

CITY OF CADILLAC,

Respondent-Appellee.

_______________________________

BEFORE THE ENTIRE BENCH

CAVANAGH, J.

This case calls on this Court to interpret certain provisions of the General

Property Tax Act (GPTA), MCL 211.1 et seq. Specifically, we must decide

whether the Tax Tribunal improperly denied petitioner’s request to be exempt

from ad valorem property taxes because of its claimed status as a charitable

institution under MCL 211.7o and 211.9(a), and its claim that it serves a public

health purpose as described in MCL 211.7r. Because there is no statutory

language that precludes finding petitioner exempt as a charitable institution, and

because exempting petitioner on that basis fully comports with the reasoning of

our previous cases, we hold that petitioner does in fact qualify for that exemption.
In refusing to grant the exemption, the Tax Tribunal adopted a wrong principle

and misapplied the law by failing to distinguish ProMed Healthcare v City of

Kalamazoo, 249 Mich App 490; 644 NW2d 47 (2002), and by focusing only on

the amount of free medical services plaintiff provided. Instead, the tribunal should

have considered plaintiff’s unrestricted and open-access policy of providing free

or below-cost care to all patients who requested it.

Our finding in that regard makes it unnecessary to determine whether

petitioner also exists for a public health purpose. As such, we reverse the part of

the Court of Appeals judgment that held that petitioner was not a charitable

institution and vacate the part of the judgment that held that petitioner did not exist

for a public health purpose. The matter is remanded to the Tax Tribunal for entry

of a judgment for the petitioner.

I. BACKGROUND

Petitioner Wexford Medical Group is a nonprofit corporation that provides

health care in Wexford County, Michigan, which is a federally designated health

professional shortage area. Petitioner does business as Great Lakes Family Care.

Petitioner is a § 501(c)(3)1 (nonprofit) organization and is owned jointly by Trinity

Health Care and Munson Health Care, two other § 501(c)(3) organizations.

Petitioner’s articles of incorporation identify petitioner’s mission as “providing

access to quality and affordable health care services to the communities it serves.”

1
26 USC 501(c)(3).

2

Both its statement of purpose and its bylaws further declare that petitioner will,

among other things, conduct its activities within the confines of the rules

governing § 501(c)(3) organizations, prevent inurement of funds to private

individuals, and refrain from political activities.2

In accord with its mission, petitioner has a “charity care” policy and an

“open-access” policy for Medicare and Medicaid patients. The charity care policy

provides free and discounted health care to anyone whose income is up to twice

the federal poverty level. Under its open-access policy, patients are treated on a

first-come, first-served basis, and petitioner places no limit on the number of

Medicare and Medicaid patients it will treat. In 2000, two patients took advantage

of the charity care program; 11 patients used it in 2001. The total value of care

rendered to these 13 patients was $2,400. Petitioner also reported that 50 percent

of its patients utilized Medicare or Medicaid, which it stated was a significantly

higher percentage than was true for other providers in the area.

2
Specifically, the bylaws state as follows:

The Corporation shall be operated exclusively for charitable,
scientific and educational purposes as a nonprofit corporation. No
individual Trustee shall have any right, title to or interest in the
corporate property or earnings in his/her individual or private
capacity and no part of the net earnings of the Corporation shall
inure to the benefit of any Trustee or any individual. No substantial
part of the activities of the Corporation shall consist of carrying on
propaganda or otherwise attempting to influence legislation, nor
shall the Corporation participate in or intervene in any political
campaign on behalf of or in opposition to any candidate for public
office.

3

 In the years at issue, petitioner’s annual budget was $10 million, and it

handled approximately 40,000 to 44,000 patient visits a year. Petitioner’s

expected fee collection was as follows: 83 percent recovery from self-pay

patients, 75 percent from Blue Cross Blue Shield patients, 60.3 percent from

Medicare patients, and 40.4 percent from Medicaid patients. Under its policy of

accepting patients who cannot pay their Medicare or Medicaid co-pays, petitioner

provided below-cost health care totaling nearly $2 million more than its receipts.

Overall, petitioner suffered financial losses in 1999, 2000, and 2001 of $575,000,

$731,000, and $673,000, respectively. These losses were subsidized by its parent

companies. And while petitioner’s goal was to eventually become profitable, its

agent testified that any surplus would be invested back into the organization in

accord with its statement of purpose.

Petitioner also engaged in a variety of health-based community services

such as offering classes, lectures, training, testing and screening, and sports

physicals. Other of its community endeavors included treating communicable

diseases such as human immunodeficiency virus-acquired immune deficiency

syndrome (HIV-AIDS), tuberculosis, hepatitis, and meningitis; treating maladies

such as diabetes, obesity, and heart disease; and providing educational services

such as disease screening, blood-borne pathogen instruction, defibrillator training,

and first aid instruction. A significant number of these and other services provided

by petitioner are not provided by anyone else in the community.

4

 After respondent assessed and taxed petitioner’s property in 2000 and

2001,3 petitioner appealed the assessments to the Tax Tribunal. Petitioner argued

that it was entitled to the GPTA’s charitable institution exemption, MCL 211.7o,

and its public health purpose exemption, MCL 211.7r, so it should not have to pay

ad valorem property taxes.

MCL 211.7o creates the ad valorem property tax exemption for charitable

institutions. Section 70 (1) states as follows:

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 it was incorporated is
exempt from the collection of taxes under this act.

The corollary statute addressing personalty, MCL 211.9(a), exempts from

taxation

[t]he personal property of charitable, educational, and scientific
institutions incorporated under the laws of this state.

MCL 211.7r, which contains the public health purpose exemption, states, in

pertinent part:

The real estate with the buildings and other property located
on the real estate on that acreage, owned and occupied by nonprofit
trust and used for hospital or public health purposes is exempt from
taxation under this act, but not including excess acreage not actively
utilized for hospital or public health purposes and real estate and
dwellings located on that acreage used for dwelling purposes for
resident physicians and their families.

3
Thirteen percent of petitioner’s property is leased to a for-profit entity and
is, thus, not tax-exempt; petitioner’s arguments pertain only to the remaining 87
percent.

5

 The Tax Tribunal upheld the assessment, finding that petitioner did not

qualify for either exemption. With respect to the charitable institution exemption,

the tribunal held that while petitioner extended charity care and indigent services

to the community, its primary purpose was to operate as a typical family medical

practice. It found that it could not distinguish petitioner’s case from ProMed,

supra. The tribunal commented:

While, unlike ProMed, Petitioner is able to document the
number of individuals it has served under its charity care policy,
serving 13 patients under that program in a two-year time period is
not sufficient for a medical practice that has up to 44,000 patient
visits per year.

Citing petitioner’s $10 million annual budget, the tribunal concluded that “[a]

charity care write-off of approximately $2,400 is not an appropriate level of

charity care to qualify Petitioner as a charitable institution.”

Petitioner appealed the tribunal’s decision,4 and relying heavily on ProMed,

supra, the Court of Appeals affirmed the tribunal’s decision. Wexford Med Group

v Cadillac, unpublished opinion per curiam of the Court of Appeals, issued August

24, 2004 (Docket No. 250197). The Court of Appeals held that petitioner “failed

to present evidence that its ‘provision of charitable medical care constituted

anything more than an incidental part of its operations.’ Specifically, the evidence

4
The Court of Appeals consolidated this case with a similar appeal,
McLaren Regional Med Ctr v Owosso, unpublished opinion per curiam of the
Court of Appeals, issued August 24, 2004 (Docket No. 244386). An application
for leave to appeal in McLaren is being held in abeyance for the resolution of this
case. 696 NW2d 708 (2005).

6

indicated that Wexford provided no-cost services to only two people in 2000, and

eleven people in 2001, which amounted to writing off $129.13 in 2000, and

$2,229.09 in 2001.” Id., slip op at 2, quoting ProMed, supra at 500. The Court of

Appeals was also not persuaded by petitioner’s argument that it had written off

losses sustained from underpayments by Medicare and Medicaid, reasoning as

follows: “That the amount of payment under these programs often does not cover

the cost of providing the service does not change the character of the service from

service in exchange for payment to charity. Further, it is undisputed that

Wexford’s aim is to become profitable.” Wexford, supra at 2. The Court was

similarly unpersuaded by petitioner’s argument that it was a charitable institution

because it provided health care in an area deficient of such services.

With respect to whether petitioner served a public health purpose that

would entitle it to ad valorem tax exemption, the Court also found against

petitioner. The Court concluded that petitioner’s “operations parallel a typical

private medical clinic, rather than an organization that provides public health

services” and that “the services that Wexford claims as serving public health

purposes were ‘inherent to the medical profession.’” Id. at 3. Therefore,

petitioner’s appeal was rejected.

This Court granted petitioner’s application for leave to appeal, 472 Mich

899 (2005), as well as motions by various amici curiae to file briefs. Briefs were

received from amici Michigan Rural Health Clinics Organization, McLaren Health

Care Corporation, Michigan Health & Hospital Association, and Michigan

7

Association of Homes and Services for the Aging in support of petitioner, and by

amici Michigan Municipal League and Michigan Townships Association in

support of respondent.

II. STANDARD OF REVIEW

The standard of review for Tax Tribunal cases is multifaceted. Where fraud

is not claimed, this Court reviews the tribunal’s decision for misapplication of the

law or adoption of a wrong principle. Michigan Bell Tel Co v Dep’t of Treasury,

445 Mich 470, 476; 518 NW2d 808 (1994). We deem the tribunal’s factual

findings conclusive if they are supported by “competent, material, and substantial

evidence on the whole record.” Id., citing Const 1963, art 6, § 28 and Continental

Cablevision v Roseville, 430 Mich 727, 735; 425 NW2d 53 (1988). But when

statutory interpretation is involved, this Court reviews the tribunal’s decision de

novo. Danse Corp v Madison Hts, 466 Mich 175 (2002).

III. ANALYSIS

While our courts have had occasion to examine the charitable institution

and public health purpose statutes in the past, this case tests the boundaries of

those decisions by presenting a more finely tuned question. We must now decide

precisely how, in the absence of a statutory yardstick, we should measure whether

an institution is a “charitable institution” when it performs some level of charitable

work. Similarly, we are asked to calculate whether an institution exists for a

“public health purpose” when it engages in some level of activities designed to

benefit public health. Stated differently, we must determine in which instances an

8

organization claiming to perform charity work or work benefiting the public health

does so to an extent that would merit the respective tax exemptions, and,

importantly, whether there are any concrete parameters that can be imposed to

assist with these inquiries.

Because the Legislature chose not to define the terms “charitable

institution,” found in MCL 211.7o, or “public health purposes,” found in MCL

211.7r, the specific meaning of these phrases has been the subject of decades of

case law. Turning our attention first to the term “charitable institution,” a brief

look back at the development of the law surrounding this phrase is useful to the

analysis.

As an initial matter, the seminal cases addressing the meaning of

“charitable institution” were written before parts of the GPTA were revised and

renumbered by 1980 PA 142. Before those amendments, the pertinent exemption

was found in MCL 211.7. In line with the statutory language as it then existed, a

four-part test was developed to help assess whether a claimant was entitled to a tax

exemption:

(1) The real estate must be owned and occupied by the
exemption claimant;

(2) The exemption claimant must be a library, benevolent,
charitable, educational or scientific institution;

(3) The claimant must have been incorporated under the laws
of this State;

(4) The exemption exists only when the buildings and other
property thereon are occupied by the claimant solely for the

9

 purposes for which it was incorporated. [Engineering Society of
Detroit v Detroit, 308 Mich 539, 550; 14 NW2d 79 (1944).]

Because of the 1980 amendments, the second and third factors must now be

adapted to correspond with the present wording of MCL 211.7o. Because the

Legislature did not retain language requiring in-state incorporation,5 we remove

factor three. And under factor two, a claimant must now show that it is a

“nonprofit charitable institution.” Thus, the revised test for this particular

subsection is as follows:

(1) The real estate must be owned and occupied by the exemption claimant;

(2) the exemption claimant must be a nonprofit charitable institution; and

(3) the exemption exists only when the buildings and other property thereon

are occupied by the claimant solely for the purposes for which it was incorporated.

In the present case, there is no dispute with respect to factors one or three.

Nor is there a question whether petitioner is a nonprofit organization; it is.6

5
The requirement that to be tax-exempt, an institution be incorporated
within the state has been found to be unconstitutional. See American Youth
Foundation v Benona Twp, 37 Mich App 722, 724; 195 NW2d 304 (1972), citing
WHYY v Glassboro, 393 US 117; 89 S Ct 286; 21 L Ed 2d 242 (1968).
6
And the statute’s plain language disposes of any argument that an
institution is automatically a charitable one if it is first a nonprofit institution. By
requiring an institution to show that it is both nonprofit and charitable, the
Legislature has presumed that there are instances when a nonprofit institution
might not be considered “charitable.” See also Ladies Literary Club v Grand
Rapids, 409 Mich 748, 752 n 1; 298 NW2d 422 (1980) (noting that our tax
exemption statutes are more narrowly drawn than the federal statute governing §
501[c][3] corporations).

10

Instead, the central inquiry is whether petitioner is a “charitable institution,” and,

in a more general sense, what precise meaning that term has.

In examining this issue, we bear in mind the time-honored rules of statutory

construction, under which our paramount concern is identifying and effecting the

Legislature’s intent. Michigan United Conservation Clubs v Lansing Twp, 423

Mich 661, 665; 378 NW2d 737 (1985). And where a tax exemption is sought, we

recall that because tax exemptions upset the desirable balance achieved by equal

taxation, they must be narrowly construed. Id.; see also Michigan Baptist Homes

& Dev Co v City of Ann Arbor, 396 Mich 660, 669-670; 242 NW2d 749 (1976).

A. “CHARITABLE INSTITUTION”

It appears that the earliest examination of the term “charitable institution,”

albeit brief, was conducted in Attorney General v Common Council of Detroit, 113

Mich 388; 71 NW 632 (1897). Construing a precursor to the current charitable

institution exemption statute,7 this Court determined that real estate of the Masonic

Temple Association, the Harmonie Society, and the Arbeiter Society were not

exempt from taxation. Id. at 390. Although this Court did not discuss the factual

7
At the time, the statute exempted the following property:

Such real estate as shall be owned and occupied by library,
benevolent, charitable, educational and scientific institutions
incorporated under the laws of this State, with the buildings and
other property thereon, while occupied by them solely for the
purposes for which they were incorporated: Provided, that such
exemption shall not apply to fraternal or secret societies, but all
charitable homes of such societies shall be exempt. [1893 PA 206 §
7(4).]

11

underpinnings of the decision, we did set forth this foundational principle: “It is

not enough, in order to exempt such associations from taxation, that one of the

direct or indirect purposes or results is benevolence, charity, education, or the

promotion of science. They must be organized chiefly, if not solely, for one or

more of these objects.” Id.

An opportunity to construe the term “charitable institution” in a slightly

different context presented itself in Michigan Sanitarium & Benevolent Ass’n v

Battle Creek, 138 Mich 676; 101 NW 855 (1904). At issue in that case was a

statute that, in conjunction with a predecessor to MCL 211.7o(3), governed the tax

exemption of property gifted to another with the condition that the property be

used “‘for the purpose of founding or endowing a hospital or other charitable

asylum within this State, for the care or relief of indigent or other sick or infirm

persons . . . .’” Id. at 680, quoting 1897 CL 8288. A dispute arose when the

respondent city taxed the petitioner’s property because the respondent believed,

among other things, that the petitioner was not using the property for charitable

purposes as required by the statute.

To determine whether the petitioner was a “charitable” hospital, it was

necessary to examine the nature of the petitioner’s activities. We observed first

that the petitioner operated a hospital in which it treated sick and infirm persons.

Id. at 682. We noted that the petitioner treated some patients for free and some at

a reduced rate. Id. And while most of the petitioner’s patients paid “a regular

schedule of prices fixed by [the petitioner’s] management,” id. at 682, we

12

concluded, because the respondent did not show otherwise, “that the charges

collected from patients were not larger than were necessary to the successful

maintenance of the institution.” Id. at 682-683. Therefore, we determined that if

we were to accept the respondent’s position that to be considered “charitable,” the

petitioner could accept no fees from patients, we would be adopting the untenable

position that “persons who dedicate a hospital to the public must pay taxes on that

hospital unless they maintain the same from their private means.” Id. at 683. We

favored a different, more sensible, rule and held that “a corporation is sufficiently

charitable to entitle it to the privileges of the act when the charges collected for

services are not more than are needed for its successful maintenance.” Id.

This Court next visited the meaning of “charitable institution” in Auditor

General v R B Smith Mem Hosp Ass’n, 293 Mich 36, 38; 291 NW 213 (1940),

where we again examined the predecessor to the current version of MCL 211.7o.

There, we approvingly noted an ALR discussion on tax exemption for charitable

institutions:

“The determination of the exemption in a particular case
seems to depend, in the last analysis, upon two things: First, whether
the organization claiming the exemption is a charitable one; and,
second, whether the property on which the exemption is claimed is
being devoted to charitable purposes. In general, it may be said that
any body not organized for profit, which has for its purpose the
promotion of the general welfare of the public, extending its benefits
without discrimination as to race, color, or creed, is a charitable or
benevolent organization within the meaning of the tax exemption
statutes. In determining whether the property is being devoted to
charitable purposes within the meaning of the statute, the rule that
tax exemptions are to be construed strictly is generally applied, with
the result that, in the absence of a specific charter or statutory

13

 provision, no property owned by a charitable institution, but held as
a source of income, can escape taxation, although the fact that a
charge is made for benefits conferred, against those who are able to
pay, in no way detracts from the charitable character of an
organization.” [Id. at 38-39, quoting 34 ALR 634, 635.]

Along with observing this ALR explanation, we relied on the definition we

applied in Michigan Sanitarium, supra, and found that the facts of the case

compelled the conclusion that the hospital was tax-exempt. For example, the

hospital operated as a public hospital, rather than a private one, relying heavily on

donations of money and volunteer work from the community. Id. at 40. It was

maintained without anyone profiting monetarily from it, and it did not pay any

dividends. Id. And surpluses, when there were any, were invested back into the

hospital and used to maintain it. Id. Thus, we held that the hospital was entitled to

tax exemption, pointedly noting that an institution does not lose its charitable

character merely because “in some years, instead of the usual deficit, it shows a

small surplus which is used to supply needed equipment.” Id. at 41.

On the next occasion we construed the charitable institution exemption

statute, we were faced with a petitioner’s claim of disparity when two of its

nursing homes were granted tax-exempt status, but one, Hillside Terrace, was not.

Michigan Baptist, supra. We affirmed the city’s decision to tax Hillside Terrace,

cataloguing the following differences between one home owned by another

association that was granted tax-exempt status and the one by the petitioner that

was not. For instance, Hillside Terrace was funded entirely by loans, debentures,

and resident fees. Michigan Baptist, supra at 667. In fact, the residents paid a

14

substantial up-front sum and monthly fees thereafter. Id. at 667, 668. Hillside

Terrace had losses for two consecutive years, although the petitioner admitted that,

should the losses continue, it would raise the residents’ fees to eliminate the

deficit. Id. at 669. The petitioner had neither solicited nor received any gifts,

despite that gifts to Hillside Terrace were tax-deductible. Id. at 667. The

petitioner offered reduced rates to four of its 72 residents in one year and waived

the fees for one other resident. Id. at 668. Residents were hand-selected by the

establishment after an application process that asked them to fully detail their

financial status and their health. Id. at 668-669. Those who could not show

sufficient means or who were in less than reasonably good health were, in large

part, rejected. Id. at 669.

On the other hand, the other nursing home, the Anna Botsford Bach Home,

was endowed by and partially financed through charitable contributions and

annual charity drives. Id. at 674. Rather than rely on resident fees for its

maintenance, operational costs were paid using principal and interest from the

endowment fund. Id. The Bach Home residents did not pay the full cost of their

care, nor were they expected to. Id. And residents were accepted on the basis of

their lack of ability to find care elsewhere, not on the basis of being in good

financial and physical health. Id.

We found these differences critical and, thus, rejected the petitioner’s equal

protection claim that Hillside Terrace deserved the same tax exemption granted to

the Bach Home. Id. at 674. In light of the fundamental differences in the way the

15

homes were run, we held that the city’s decision to treat the entities differently

was fully justified. Moreover, we found that Hillside Terrace, while purported to

exist for benevolent, charitable, and general welfare purposes, was not actually

furthering those objectives. Id. at 671. Because of its selection process and

resident-funded mechanism, we concluded that the home did not “serve the elderly

generally,” but, rather, “provide[d] an attractive retirement environment for those

among the elderly who have the health to enjoy it and who can afford to pay for

it.” Id. at 671. This structure for the nursing home, we held, did not comport with

the legislative intent behind the charitable institution exemption statute. Id.

This Court again visited the meaning of the term “charitable institution” in

Retirement Homes of the Detroit Annual Conference of the United Methodist

Church, Inc, v Sylvan Twp, 416 Mich 340, 348-349; 330 NW2d 682 (1982),

wherein we construed another previous version of the charitable institution

exemption.8 The petitioner in Retirement Homes sought tax exemption as a

charitable institution for the apartment complex it operated in conjunction with a

licensed nursing home and a licensed home for the aged. Id. at 343. While the

8
At that time, the statute exempted the following types of property:

[S]uch real estate as shall be owned and occupied by library,
benevolent, charitable, educational or scientific institutions and
memorial homes of world war veterans incorporated under the laws
of this state with the buildings and other property thereon while
occupied by them solely for the purposes for which they were
incorporated. Also charitable homes of fraternal or secret societies .
. . . [MCL 211.7.]

16

two licensed care facilities had already been established as tax-exempt, the

apartments were a new addition to the complex and had not yet been evaluated.

Id. We accepted the Tax Tribunal’s finding that the apartment building was not

entitled to tax exemption merely by virtue of its association with the tax-exempt

properties, and, thus, had to be examined separately. See id. at 346 n 9.

We then looked closely at how the apartment component of the complex

was operated and found that the apartments differed little from the nursing home

in Michigan Baptist, supra, that was not tax-exempt. We observed the Tax

Tribunal’s findings that residents were admitted “on the basis of their health and

ability to pay the monthly fee,” which contradicted the petitioner’s articles of

incorporation. Id. We also noted the tribunal’s finding that “the apartments were

merely ‘a method whereby [the apartment] residents assure themselves a bed in a

nursing home upon becoming disabled’ and ‘a convenient method of keeping a

ready supply of prospective nursing home and old age home residents on hand’.”

Id.

It was unclear whether the apartments were profitable, but we took care to

note the juxtaposing propositions that while “[a] corporation does not qualify for a

tax exemption merely because it is structured to be nonprofit and in fact makes no

profit,” “[b]y the same token, a nonprofit corporation will not be disqualified for a

charitable exemption because it charges those who can afford to pay for its

services as long as the charges approximate the cost of the services.” Id. at 350 n

15, citing Michigan Sanitarium, supra at 683; Auditor General, supra at 39; and

17

Gull Lake Bible Conference Ass’n v Ross Twp, 351 Mich 269; 88 NW2d 264

(1958). We noted that apartment residents who became unable to pay the monthly

fee were relocated into areas of the retirement homes’ complex that would entitle

them to government assistance, which, consequently, lifted the petitioner’s burden

of charity. Id. at 345-346.

Commencing our legal analysis, we first sought the meaning of “charity.”

Id. at 348. We noted the proposition pronounced in our past cases that “to qualify

for a charitable or benevolent tax exemption, property must be used in such a way

that it ‘benefit[s] the general public without restriction’.” Id. at 348, quoting

Michigan Baptist, supra at 671, and citing Auditor General, supra at 38.

Surveying case law from other jurisdictions, we also took note of a widely used

definition that seemed to restate and elaborate on that principle, and which

similarly seemed to have stood the test of time:

“[Charity] * * * [is] a gift, to be applied consistently with
existing laws, for the benefit of an indefinite number of persons,
either by bringing their minds or hearts under the influence of
education or religion, by relieving their bodies from disease,
suffering or constraint, by assisting them to establish themselves for
life, or by erecting or maintaining public buildings or works or
otherwise lessening the burdens of government.” [Id. at 348-349,
quoting Jackson v Phillips, 96 Mass (14 Allen) 539 (1867)
(emphasis deleted; alterations in original).]

As such, we framed the pertinent question as follows: “Does Retirement

Homes operate the apartments in such a way that there is a ‘gift’ for the benefit of

‘the general public without restriction’ or ‘for the benefit of an indefinite number

18

of persons’?” Id. at 349. In light of the particular facts of the case, we concluded

in the negative and explained our reasoning as follows:

[T]here is no “gift” for the benefit of an indefinite number of
persons or for the benefit of the general public without restriction in
the operation of the apartments. The monthly fee is designed to
cover all operating costs as well as to recover the construction costs
of the apartments. While it does not appear that the apartments are
operated for a profit, neither does it appear that the residents receive
any significant benefit that they do not pay for. There is no “gift” to
the residents.

The operation of the apartments does not appear to benefit the
general public. Its residents are chosen on the basis of their good
health, their ability to pay the monthly charge, and, generally, their
ability to live independently. [Id. at 349-350.]

Most recently, we applied the charitable institution microscope to an

environmental organization engaged in conservation efforts, the promotion of

natural resource management, and the protection of the rights of citizens to bear

arms. Michigan United Conservation Clubs, supra at 665. To further these goals,

the petitioner conducted or sponsored educational seminars and courses, published

informational brochures, maintained a library, conducted lobbying, and

administered a fund to oppose any movement to restrict gun ownership. Id. at

666-667. Restating the definition of charity set forth in Retirement Homes, supra,

we concluded that the petitioner was not a charitable institution, although we

rejected the Court of Appeals exclusive focus on the petitioner’s lobbying

activities. Id. at 673. And while we agreed that the petitioner did provide some

services that could be deemed charitable gifts, we found that, on balance, the

petitioner was organized to benefit its paying members rather than to benefit “the

19

general public without restriction” or “for the benefit of an indefinite number of

persons.” Id. at 673.

Several common threads can be found in this line of cases. First, it is clear

that the institution’s activities as a whole must be examined; it is improper to focus

on one particular facet or activity. In that sense, the inquiry pertains more to

whether an institution could be considered a “charitable” one, rather than whether

the institution offers charity or performs charitable work. So it is the overall

nature of the institution, as opposed to its specific activities, that should be

evaluated.

A second indispensable principle is that the organization must offer its

charitable deeds to benefit people who need the type of charity being offered. In a

general sense, there can be no restrictions on those who are afforded the benefit of

the institution’s charitable deeds. This does not mean, however, that a charity has

to serve every single person regardless of the type of charity offered or the type of

charity sought. Rather, a charitable institution can exist to serve a particular group

or type of person, but the charitable institution cannot discriminate within that

group. The charitable institution’s reach and preclusions must be gauged in terms

of the type and scope of charity it offers.

From these precepts, it naturally follows that each case is unique and

deserving of separate examination. Consequently, there can be no threshold

imposed under the statute. The Legislature provided no measuring device with

which to gauge an institution’s charitable composition, and we cannot presuppose

20

the existence of one. To say that an institution must devote a certain percentage of

its time or resources to charity before it merits a tax exemption places an artificial

parameter on the charitable institution statute that is unsanctioned by the

Legislature.

The Tax Tribunal and the Court of Appeals focused exclusively on the

dollar amount of free health care petitioner gifted as part of its charity care

program, looking no further into the nature of petitioner’s organization. This was

error because it is clear that both tribunals had in mind a monetary threshold that is

not only not discernable from the statute, but that would be, by its very nature,

quite arbitrary.

As petitioner aptly pointed out, there are multiple reasons why inventing

legislative intent in this regard would be ill-advised and most unworkable. In fact,

the difficulties with formulating a monetary threshold illuminate why setting one

is the Legislature’s purview, not the courts’. To set such a threshold, significant

questions would have to be grappled with. For instance, a court would have to

determine how to account for the indigent who do not identify themselves as such

but who nonetheless fail to pay. A court would have to determine whether

facilities that provide vital health care should be treated more leniently than some

other type of charity because of the nature of its work, or even if a health care

provider in an underserved area, such as petitioner, is more deserving of

exemption than one serving an area of lesser need. A court would need to

consider whether to premise the exemption on whether the institution had a

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surplus and whether providing below-cost care constitutes charity. Clearly, courts

are unequipped to handle these and many other unanswered questions. Simply

put, these are matters for the Legislature.

We conclude that the definition set forth in Retirement Homes, supra at

348-349, sufficiently encapsulates, without adding language to the statute, what a

claimant must show to be granted a tax exemption as a charitable institution:

“[Charity] * * * [is] a gift, to be applied consistently with
existing laws, for the benefit of an indefinite number of persons,
either by bringing their minds or hearts under the influence of
education or religion, by relieving their bodies from disease,
suffering or constraint, by assisting them to establish themselves for
life, or by erecting or maintaining public buildings or works or
otherwise lessening the burdens of government.” [Id., quoting
Jackson v Phillips, 96 Mass (14 Allen) 539 (1867) (emphasis
deleted; alterations in original).]

In light of this definition, certain factors come into play when determining

whether an institution is a “charitable institution” under MCL 211.7o and MCL

211.9(a). Among them are the following:

(1) A “charitable institution” must be a nonprofit institution.

(2) A “charitable institution” is one that is organized chiefly, if not solely,

for charity.

(3) A “charitable institution” does not offer its charity on a discriminatory

basis by choosing who, among the group it purports to serve, deserves the

services. Rather, a “charitable institution” serves any person who needs the

particular type of charity being offered.

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 (4) A “charitable institution” brings people’s minds or hearts under the

influence of education or religion; relieves people’s bodies from disease, suffering,

or constraint; assists people to establish themselves for life; erects or maintains

public buildings or works; or otherwise lessens the burdens of government.

(5) A “charitable institution” can charge for its services as long as the

charges are not more than what is needed for its successful maintenance.

(6) A “charitable institution” need not meet any monetary threshold of

charity to merit the charitable institution exemption; rather, if the overall nature of

the institution is charitable, it is a “charitable institution” regardless of how much

money it devotes to charitable activities in a particular year.

Examining petitioner under these factors, we find that it is a charitable

institution. Petitioner’s medical clinic is readily distinguishable from the entities

that we have found nonexempt under MCL 211.7o. Petitioner is not only

organized as a charitable institution as reflected in its statement of purpose and its

bylaws, but it devotes itself to charitable works on the whole. We instructed in

Attorney General v Common Council of Detroit, supra at 390, that an institution

must be “organized chiefly, if not solely” for charity, and petitioner meets this test.

Respondent has pointed to no other reason for petitioner’s existence. Nor has

respondent shown any evidence that petitioner is not actively pursuing its mission

to the exclusion of any noncharitable activities. We find these omissions telling.

Petitioner is also fundamentally different from the Hillside Terrace home

for the aged in Michigan Baptist, supra, and the apartment complex in Retirement

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Homes, supra. In both of those cases, the cost of maintaining the institutions was

covered by fees collected from the residents. Prospective residents whose health

or financial status did not meet strict requirements were not accepted. And

although the petitioner in Michigan Baptist made some small exceptions in that

regard, the general rule was of an exclusionary nature, not a charitable one.

Petitioner in the present case shares no similarities with those institutions.

Petitioner has a charity care program that offers free and reduced-cost medical

care to the indigent with no restrictions. It operates under an open-access policy

under which it accepts any patient who walks through its doors,9 with preferential

treatment given to no one. Although petitioner sustains notable financial losses by

not restricting the number of Medicare and Medicaid patients it accepts, it bears

those losses rather than restricting its treatment of patients who cannot afford to

pay.

Petitioner more closely matches the hospitals examined in R B Smith,

supra, and Michigan Sanitarium, supra, hospitals we found qualified for the

charitable institution exemption. Just as in those cases, the overall nature of

petitioner’s organization is charitable. The losses the institution sustains are not

fully subsidized by the patients, but by petitioner’s parent corporations, patients

9
Petitioner’s agent did explain that it must occasionally turn away patients
who have destroyed the physician-patient relationship by exhibiting violence,
being dishonest to the detriment of petitioner’s ability to treat them, or engaging in
drug-seeking behavior. We find those exceptions to petitioner’s general rule to be
well-justified and, thus, to have no effect on petitioner’s status as a charitable
institution.

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who can afford to pay, and, to some extent, by government reimbursements. And

the fact that petitioner receives government reimbursements has little bearing on

the analysis because, despite any government aid, the beneficiary of the medical

care receives a gift. See, e.g., Huron Residential Services v Pittsfield Charter

Twp, 152 Mich App 54; 393 NW2d 568 (1986) (holding that a petitioner who

received approximately 99 percent of its revenues from state funding was a

charitable institution because the residents did not pay full value for the services

rendered and, thus, received a charitable gift from the petitioner). See also

Retirement Homes, supra at 350 n 15 (“[A] nonprofit corporation will not be

disqualified for a charitable exemption because it charges those who can afford to

pay for its services as long as the charges approximate the cost of the services.”).

Moreover, it is clear in this case that the reimbursements petitioner receives

from government funding fall well short of defraying the costs petitioner incurs to

render medical care. Thus, not only are Medicare and Medicaid patients receiving

a gift from petitioner, but petitioner is not fully recouping its costs from the

government because of the government’s underpayments.

Respondent argues that petitioner’s goal of profitability negates its claim

that it is a charitable institution. We find that argument hollow. Petitioner’s

bylaws do not allow any individual to profit monetarily from the petitioner’s

clinic; thus, “profitability” has a different meaning for this institution than it would

for an entity whose goal it was to reward its agents or shareholders with profits.

And the idea that an institution cannot be a charitable one unless its losses exceed

25

its income places an extraordinary—and ultimately detrimental—burden on

charities to continually lose money to benefit from tax exemption. A charitable

institution can have a net gain—it is what the institution does with the gain that is

relevant. See R B Smith Mem Hosp, supra at 36, 41 (1940). When the gain is

invested back into the institution to maintain its viability, this serves as evidence,

not negation, of the institution’s “charitable” nature.

Nor can credence be given to respondent’s argument that petitioner is not

“charitable” because it is not open 24 hours a day or because it includes

noncompetition clauses in its physicians’ contracts. Taken alone, these are merely

neutral facts, and whether they gain or lose relevance depends on their importance

when considered as part of the broader picture. In the totality of petitioner’s

circumstances, we do not find them particularly meaningful. First, just as there is

no monetary threshold by which we can gauge an institution’s charity, there is

certainly no rule requiring a charity to never sleep. Petitioner holds regular

business hours, and during those hours, it accepts any patient who needs medical

care. And with respect to the noncompetition clauses, petitioner explained that it

is very difficult to attract physicians to the region, so these clauses are included to

encourage physicians to remain with the charity and assist petitioner with carrying

out its charitable work. Moreover, petitioner’s agent testified that petitioner has

never enforced one of its noncompete clauses. Thus, these facts do nothing to

reduce petitioner’s charitable status.

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 Respondent also unconvincingly argues that petitioner does not “lessen the

burden of government,” see Retirement Homes, supra at 349, because it enlists

eligible patients in government-subsidized programs. While “lessening the burden

of government” is a component of the definition of “charity” found in Retirement

Homes, supra, respondent takes it out of context. This Court stated that a

charitable institution is one that benefits an indefinite number of persons “‘either

by bringing their minds or hearts under the influence of education or religion, by

relieving their bodies from disease, suffering or constraint, by assisting them to

establish themselves for life, or by erecting or maintaining public buildings or

works or otherwise lessening the burdens of government.’” Id. (emphasis added;

citation omitted). Implicit in the definition is that relieving bodies from disease or

suffering is lessening the burden of government. In other words, petitioner does

not have to prove that its actions lessen the burden of government. Rather, it has

to prove, as it did, that it “reliev[es] their bodies from disease, suffering or

constraint,” which is, by its nature, a lessening of the burden of government. In

any event, even though petitioner helps to enroll patients in Medicare and

Medicaid, it still subsidizes the cost of care in light of the government’s

underpayment, thus lessening the government’s burden of covering the full cost of

a person’s care.

Finally, we reject the reliance of the lower tribunals and respondent on

ProMed, supra. The Court of Appeals holding in that case was directly tied to its

finding that the petitioner had presented no documentation of the level of

27

charitable service it provided. The Court of Appeals was correct to hold that when

an institution presents no evidence of its charitable works, then, as a matter of law,

it cannot be found to be a charitable institution. But it does not follow that an

institution must present evidence of a particular level of charitable care because

there is no such threshold level contained in the statute. And we refuse to create

one. Accordingly, ProMed must not be interpreted as requiring quantitative proof

of the value of charitable care. Rather, the focus should be on the overall nature of

the institution as judged by the particular facts presented in each individual case.10

In sum, the Tax Tribunal and Court of Appeals erred by denying

petitioner’s request for tax exemption as a charitable institution. Petitioner

satisfies the concepts we have previously set forth with respect to what a claimant

must show to be found “charitable.” See Retirement Homes, supra at 348-349.

10
The ProMed Court also reasoned that to allow ProMed a charitable
exemption, it “would in effect be granting tax exempt status to every doctor’s
office in the state, as well as every organization offering health-related services, as
long as those organizations are structured as nonprofit corporations and maintain
policies of offering some ‘appropriate’ level of charity medical care to indigent
persons.” ProMed, supra at 500-501. We reject that reasoning for two reasons.
Most importantly, the Court inappropriately based its statement on its subjective
fear of the outcome of applying the clear statutory language, rather than simply
applying the language of the statute itself, which says nothing about an
“appropriate” level of care. And even if the Court’s concern were relevant, we
find it somewhat overblown in that it is doubtful that any significant number of
profitable medical institutions would forgo their for-profit status in exchange for
property tax exemption. In any event, the charitable institution exemption has
been in place for over 100 years, and we discern no sign of rampant abuse of it.
Nor, apparently, has the Legislature because it has not altered the exemption in
any significant way since we first interpreted it in 1897.

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Petitioner provides a gift—free or below-cost health care—to an indefinite number

of people by relieving them of disease or suffering.

As such, while we will generally “defer to the Tax Tribunal’s interpretation

of a statute that it is delegated to administer,” Maxitrol Co v Dep’t of Treasury,

217 Mich App 366, 370; 551 NW2d 471 (1996), we decline to do so in this case

because we find that the tribunal misinterpreted the law. The statute says nothing

about how much “charity” an institution should provide. Despite that, the tribunal

erroneously engrafted a nonexistent threshold of charitable activity. Had the

Legislature wanted such a threshold, it could have easily included one. Therefore,

we find that petitioner is a charitable institution entitled to the corresponding tax

exemption.

B. “PUBLIC HEALTH PURPOSE”

Petitioner also argued that it was entitled to the exemption offered under

MCL 211.7r to organizations serving a “public health purpose.” Because we find

that petitioner is exempt as a charitable institution under MCL 211.7o, there is no

need to delve any further. Thus, we leave further examination of the meaning of

“public health purpose” for another day. We do, however, vacate the part of the

Court of Appeals judgment that held that petitioner did not qualify for this

exemption.

IV. CONCLUSION

Whether an institution is a charitable institution within the meaning of

MCL 211.7o is a fact-specific question that requires examining the claimant’s

29

overall purpose and the way in which it fulfills that purpose. The determination

will rarely, if ever, rest on one specific fact, such as the percentage of monetary

value of services given for free. Because the Tax Tribunal and the Court of

Appeals misapplied existing law by erroneously narrowing the focus of their

inquiry to the value of the free medical care petitioner rendered in the given tax

years, they erroneously denied the requested exemption. Petitioner is a charitable

institution because it exists for, and carries out, the purpose of giving a gift for the

benefit of an indefinite number of persons by providing free and below-cost

medical care to anyone who needs it without qualification, and it realizes no

pecuniary gain from its activities. As such, it is entitled to an ad valorem tax

exemption.

We reverse the part of the Court of Appeals judgment that held that

petitioner was not a charitable institution. We further vacate the part of its

judgment pertaining to whether petitioner served a public health purpose. We

remand this case to the Tax Tribunal for entry of judgment for petitioner.

Michael F. Cavanagh
Clifford W. Taylor
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman

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