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Trinity Health-Warde Lab, LLC v. Charter Township of Pittsfield

Court of Appeals of Michigan

November 3, 2016

TRINITY HEALTH-WARDE LAB, LLC, Petitioner-Appellee,
v.
CHARTER TOWNSHIP OF PITTSFIELD, Respondent-Appellant.

         Michigan Tax Tribunal LC No. 00-455553

          Before: Ronayne Krause, P.J., and O'Connell and Gleicher, JJ.

          O'CONNELL, J.

         Respondent, Charter Township of Pittsfield (the Township) appeals as of right the Michigan Tax Tribunal's order granting a charitable institution exemption to petitioner, Trinity Health-Warde Lab, LLC (the Lab), because the Lab is wholly owned by a charitable institution even though it is organized as a for-profit institution. We reverse and remand.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         According to Craig Killingbeck, vice president of lab services for Trinity Health Michigan (Trinity), the Lab is a wholly owned subsidiary of Trinity. Trinity appoints the Lab's board of directors, who manage the Lab's business and affairs. Trinity created the Lab for the purpose of acquiring, owning, and operating the Lab's real property, a 57, 000 square foot building used solely as a medical laboratory. Trinity and other nonprofit hospitals use the Lab's facilities under a co-tenancy laboratory agreement.[1]

         In May 2013, the Lab filed a petition with the Tax Tribunal alleging its real property was exempt from taxation. The Township responded that the property was not eligible for tax-exempt status because the Lab is a for-profit entity. The Lab moved for summary disposition under MCR 2.116(C)(10), asserting that Trinity has complete corporate control of the Lab and because Trinity is a charitable institution under MCL 211.7o, the Lab is also a charitable institution. The Township responded that summary disposition was inappropriate because the Lab, as a for-profit entity, does not meet several of the requirements of a charitable institution.

         The Tribunal granted summary disposition to the Lab. The Tribunal concluded that Trinity so dominated the Lab's management and operation that it was proper to ignore the Lab's separate corporate entity. Concluding that the Lab and Trinity were essentially the same entity, the Tribunal determined that the Lab was entitled to tax-exempt status under MCL 211.7o. The Township now appeals.

         II. STANDARD OF REVIEW

         This Court's review of a decision by the Tax Tribunal is limited. Mich Props, LLC v Meridian Twp, 491 Mich. 518, 527; 817 N.W.2d 548 (2012). When a party does not dispute the facts or allege fraud, we review whether the Tribunal "made an error of law or adopted a wrong principle." Id. at 527-528. This Court reviews de novo the interpretation and application of tax statutes. Id. at 528. We construe exemption statutes in favor of the taxing authority. Inter Coop Council v Dep't of Treasury, 257 Mich.App. 219, 222; 668 N.W.2d 181 (2003). If an exemption exists, statutory construction may not enlarge it. Menard Inc v Dep't of Treasury, 302 Mich.App. 467, 475; 838 N.W.2d 736 (2013).

         III. ANALYSIS

         The Township argues that the Tribunal made an error of law when it concluded that, because Trinity wholly owns the Lab, the Lab was entitled to a charitable institution exemption even though it did not meet the exemption's requirements. We agree.

         The General Property Tax Act (the Act) provides that "all property, real and personal, within the jurisdiction of this state, not expressly exempted, shall be subject to taxation." MCL 211.1. The petitioner bears the burden of proving it is entitled to an exemption. ProMed Healthcare v Kalamazoo, 249 Mich.App. 490, 492-493; 644 N.W.2d 47 (2002).

         MCL 211.7r provides an exemption for real property owned or operated by nonprofit trusts used for ...


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