Family of Care Real Estate Holding Co. v. Supervisor of Assessments of Charles Cnty.

FAMILY OF CARE REAL ESTATE HOLDING COMPANY, INC. v. SUPERVISOR OF ASSESSMENTS OF CHARLES COUNTY

No. 1632

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2017

July 9, 2019

Circuit Court for Charles County

Case No.: 08-C-16-001740

UNREPORTED

Meredith, Kehoe, Salmon, James P. (Senior Judge, Specially Assigned), JJ.

Opinion by Salmon, J.

* This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

Family of Care Real Estate Holding Company, Inc. ("Family of Care") applied to the State Department of Assessments & Taxation ("SDAT") for a full charitable property tax exemption for two properties it owns in Charles County where a charity for which it holds the properties operates: 1) an adult daycare facility; 2) a nursing home; 3) an assisted living unit; and 4) a memory care unit. Family of Care also owns property, on which the charity for which Family of Care holds the property, rents a building to a third party that runs a dialysis center.

SDAT allowed the exemption in part and denied it in part. The Property Tax Assessment Appeals Board for Charles County affirmed SDAT's decision, as did the Maryland Tax Court. Family of Care sought judicial review in the Circuit Court for Charles County. Following a hearing, the circuit court affirmed the Tax Court's decision.

Family of Care presents the following question for our review, which we have rephrased slightly:

Did the Maryland Tax Court err, as a matter of law, in ruling that two parcels of land owned by [Family of Care] ... are not entitled to 100% property tax exemptions ... pursuant to Maryland Code, Tax-Property Article § 7-202(b)?

For the reasons set forth below, we shall affirm the judgment of the circuit court.

I.BACKGROUND

A. Portion of the Properties that are Indisputably Tax Exempt

Family of Care is a Maryland non-stock corporation formed for the sole purpose of holding real property for the benefit of the Charles County Nursing and RehabilitationCenter ("CCNRC"). CCNRC is a Maryland non-stock corporation formed "exclusively to further and promote charitable, religious, scientific and educational purposes[.]" The main purpose and object promoted by CCNRC is "(1) to operate and maintain a nonprofit nursing home and rehabilitation center; [and] (2) to operate and maintain facilities and provide services in the communities in which the Corporation operates[.]" Both Family of Care and CCNRC are charitable nonprofit organizations exempt from federal and state income tax.

Family of Care owns a 16.83 acre parcel of property located on La Plata Road, in Charles County. The parcel contains two buildings. The first building is a single-story nursing home built in 1980, consisting of approximately 68,000 square feet, which contains the long-term nursing care unit, rehabilitative nursing service unit and a unit that provides adult daycare services. The long-term nursing care and rehabilitative services unit has a 165-bed capacity, with an average occupancy of approximately 157 on a daily basis, with over 200 residents admitted annually. For the fiscal year ending June 30, 2014, approximately 86.5% of the patients served in the long-term nursing care and rehabilitative service unit were indigent and their bills were mostly paid for by either Medicare or Medicaid. About 13.5% were private pay. CCNRC provides some services not covered by Medicare or Medicaid, such as dentistry and other medical services, free of charge to the patients.

The adult daycare unit is a 63-slot program which serves elderly, disabled and severely disabled adults, and provides medical supervision, daily activities and therapy.The adult daycare center participates in the Maryland Medical Assistance Program, and offers additional services not covered through Medicaid, free of charge. Ability to pay is not a criterion for participation in the adult daycare unit; the unit serves approximately 50 participants on a daily basis. For the year ending June 30, 2014, approximately 94% of the adult daycare participants were indigent and qualified for Medicaid assistance. About 6% of the participants were private pay.

On January 21, 2015, the Supervisor of Assessments of Charles County ("the Supervisor") ruled that the long-term nursing care and rehabilitative services unit and the adult daycare unit were exempt from property taxes because of the high percentage of Medicaid patients that were treated there. Based on the aforementioned ruling, the Supervisor granted Family of Care a 69% tax exemption on the 16.83 acres located on La Plata Road.¹ A 100% tax exemption was not granted for the La Plata Road Property because, as explained below, the Supervisor deemed other parts of the property non-exempt.

B. Property Determined by the Supervisor to be Non-Exempt

The second building owned by Family of Care and located on the La Plata Road property, is known as the Zimmerman building. The first floor of the Zimmerman building contains a dialysis center, which is operated by BIO-Medical Application of Maryland, Inc. d/b/a Fresenius Medical Care, a third-party lessee. The lessee pays CCNRC $123,000per year in rent. The dialysis center is a for-profit organization and is charged market rates. Having a dialysis center nearby is convenient for the nursing home patients who live in the adjacent building. Prior to the lease, nursing home patients had to travel a substantial distance to obtain dialysis services. According to the testimony received by the Tax Court, nursing home patients received 1,803 treatments at the dialysis center in 2015 and about 960 treatments at the dialysis center in 2014. The dialysis center facility also serves the general public and has the capacity to provide about 7,800 dialysis treatments per year.

On the second floor of the Zimmerman building, CCNRC operates a memory care unit. That unit provides housing and nursing care for patients with Alzheimer's disease and other forms of dementia. That unit provides specially designed activities and therapy to stimulate those with memory loss. The unit has 12 beds and is entirely private pay.

The second property owned by the appellant that is the subject of this appeal, is property located on Morris Drive in La Plata. The Morris Drive property is a 2.15-acre parcel improved by two one-story buildings. The buildings are both assisted living facilities for the elderly. CCNRC provides care and support to the patients who have medical diagnoses and require assistance with activities of daily living. The unit has a 32-bed capacity and on average, 31 of those beds are utilized daily. The assisted living unit is entirely private pay.

II.THE GOVERNING STATUTE

This case is governed by Md. Code (1986, 2012 Repl. Vol.) Tax-Property ("Tax-Prop."), § 7-202(b) which reads, in material part, as follows:

(b) Requirements for exemption.—(1) Except as provided in subsection (c) of this section, property is not subject to property tax if the property:

(i) is necessary for and actually used exclusively for a charitable or educational purpose to promote the general welfare of the people of the State, including an activity or an athletic program of an educational institution; and

(ii) is owned by: . . .

2. a nonprofit charitable, fraternal, educational, or literary organization[.] . . . [or]

3. a corporation, limited liability company, or trustee that holds the property for the sole benefit of an organization that qualifies for an exemption under this section[.]

In this case, there is no dispute that both properties at issue were owned by a non-profit charitable organization.²

The Maryland General Assembly addressed its concerns about too many properties being exempt from taxes in the Maryland Legislative Council Committee on Taxation and Fiscal Matters Report of 1970. This was discussed by the Court of Appeals in Supervisorof Assessments of Baltimore County v. Trustees of Bosley Methodist Church Graveyard, 293 Md. 208, 217-18 (1982), as follows:

The present exemptions from real property taxation embodied in Section 9 of Article 81 were enacted, substantially verbatim, from legislation proposed in 1970 by the Maryland Legislative Council Committee on Taxation and Fiscal Matters. See 1970 Report, Md. Leg. Council Committee on Taxation and Fiscal Matters, Exhibit F and compare 1972 Md. Laws, ch. 350. That committee received its mandate in part from House Joint Resolution 97 (printed as Joint Resolution 55 appended to 1970 Md. Laws) which recognized "that the State of Maryland is being deprived of much revenue as a result of the fact that non-profit organizations are not taxed," and resolved "(t)hat the Legislative Council is requested to appoint a committee to study the activities of non-profit organizations and the possibility of taxing those organizations . . . ." After analysis of the tax exemption issue, the committee filed its report describing the problem presented as follows:

Tax exemptions constitute an erosion of the property tax base. For various reasons tax exemptions have been granted, and in recent years in increasing numbers, causing a loss of property tax revenues at the very time when local financial needs are great and the financial burden on taxpayers is heavy. The effect of exemptions is cumulative; one exemption by itself may appear to be justified, but taken together, the effect of all exemptions is serious.

The compelling factor which must be borne in mind in considering reform of tax exemptions was well expressed in the preface to the comprehensive review of personal property taxation reported by the Committee in 1957: "Our obligation to remove defects in the tax structure, although compelling, will always remain subordinate to the absolute need of maintaining an adequate supply of revenue to the State and local governments." [Report, supra, at 93-94.]

The committee, after

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