West Virginia Record

Monday, July 15, 2019

State Supreme Court says foundation isn’t exempt from property tax

By Kyla Asbury | Oct 13, 2016

CHARLESTON – The West Virginia Supreme Court of Appeals has ruled that University Healthcare Foundation is not exempt from property taxes because it is not primarily and immediately used for charitable purposes.

Justice Allen Loughry authored the majority opinion. Justice Brent Benjamin dissented and reserves the right to file a dissenting opinion.

The petitioners appealed the May 15, 2015, order of Berkeley Circuit Court-Business Court Division, overruling the denial by both Larry A. Hess, the assessor of Berkeley County, and State Tax Commissioner Mark W. Matkovich of ad valorem property tax exemption to University Healthcare Foundation for property known as the Dorothy McCormack Cancer Treatment & Rehabilitation Center, according to an opinion filed Oct. 11 in the West Virginia Supreme Court of Appeals.

In reversing the denial of a property tax exemption, the circuit court reasoned that the healthcare and recreational services provided in the 18 different suites of the center were “primarily and immediately” related to the joint charitable purposes of the Center and Berkeley Medical Center.

“In view of its conclusion that only twenty-eight percent of the Center’s physical space is being used for charitable purposes, the commissioner asks this court to reverse the ruling of the circuit court regarding the grant of a property tax exemption,” the opinion states.

Based on the fact that the foundation leased suites within the center to for-profit tenants the commissioner argues that state law inexorably prohibits an exemption from ad valorem property taxation.

“Upon our careful review of the record submitted in this matter in conjunction with the state constitution, applicable statutes, regulations and controlling precedent, we find that the circuit court erred in concluding that the center was being used exclusively for charitable purposes,” the opinion states. “Based on our consequent determination that the foundation is not entitled to an ad valorem property tax exemption, we reverse.”

The foundation first sought an exemption from ad valorem taxation of the center for tax year 2014, which was denied by the assessor and then from the commissioner. The foundation then appealed the ruling and a bench trial took place on Jan. 9, 2015.

The judge reversed the decisions of both the assessor and commissioner on May 15, 2015, granting the foundation an exemption from ad valorem property taxation.

For the purposes of determining whether a qualifying charitable organization has established the exclusive, or primary and immediate, charitable use required for seeking ad valorem tax exemption under West Virginia code, the physical use of the property, rather than any income derived from such property, is the determining factor as to the usage of such property, according to the opinion.

The Supreme Court reversed Berkeley County’s decision.

Matkovich is represented by Attorney General Patrick Morrisey and Assistant Attorney General L. Wayne Williams.

Hess is represented by Norwood Bentley III.

UHF is represented by Michael E. Caryl and J. Tyler Mayew of Bowles Rice LLP.

W.Va. Supreme Court of Appeals case number: 15-0597

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Bowles Rice LLP Virginia Attorney General's Office West Virginia Supreme Court of Appeals

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