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Harmony Montessori Center v. City of Oak Park

Supreme Court of Michigan

March 9, 2018

HARMONY MONTESSORI CENTER, Petitioner-Appellant,
v.
CITY OF OAK PARK, Respondent-Appellee.

         Tax Tribunal: 00-370214

          Stephen J. Markman, Chief Justice Brian K. Zahra Bridget M. McCormack David F. Viviano Richard H. Bernstein Kurtis T. Wilder Elizabeth T. Clement, Justices

          ORDER

         On January 11, 2018, the Court heard oral argument on the application for leave to appeal the October 13, 2016 judgment of the Court of Appeals. On order of the Court, the application is again considered, and it is DENIED, because we are not persuaded that the questions presented should be reviewed by this Court.

          Markman, C.J. (concurring).

         I concur in this Court's order denying leave to appeal because petitioner has failed adequately to brief the specific issue raised by this Court in its order for supplemental briefing, which was "whether Ladies Literary Club v Grand Rapids, 409 Mich. 748 (1980), and David Walcott Kendall Memorial School v Grand Rapids, 11 Mich.App. 231 (1968), continue to provide the appropriate test of what constitutes a 'nonprofit . . . educational . . . institution[]' under MCL 211.7n." Harmony Montessori Center v Oak Park, 500 Mich. 1016 (2017) (alterations in original). I write separately because I believe that this Court's current interpretation of what constitutes an "educational institution" under MCL 211.7n is a "strained construction that is contrary to the Legislature's intent." SBC Health Midwest, Inc v Kentwood, 500 Mich. 65, 71 (2017) (quotation marks and citation omitted). In a future case, this Court should consider adopting a definition of "educational institution" that is more consistent with the plain meaning of that phrase.

         The General Property Tax Act (GPTA), MCL 211.1 et seq., provides that "all property, real and personal, within the jurisdiction of this state, not expressly exempted, shall be subject to taxation." MCL 211.1. Section 7 of the GPTA provides property tax exemptions for properties put to particular uses. As relevant here, MCL 211.7n provides:

Real estate or personal property owned and occupied by nonprofit theater, library, educational, or 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 the institutions were incorporated is exempt from taxation under this act. In addition, real estate or personal property owned and occupied by a nonprofit organization organized under the laws of this state devoted exclusively to fostering the development of literature, music, painting, or sculpture which substantially enhances the cultural environment of a community as a whole, is available to the general public on a regular basis, and is occupied by it solely for the purposes for which the organization was incorporated is exempt from taxation under this act. [Emphasis added.]

         Thus, "nonprofit educational institutions" are exempt from property taxes under the GPTA if they are "incorporated under the laws of this state with the buildings and other property thereon while occupied by them solely for the purposes for which the institutions were incorporated." Id.

         In Detroit v Detroit Commercial College, 322 Mich. 142, 153 (1948), this Court held that an institution is only entitled to a tax exemption as an "educational institution" if it "fit[s] into the general scheme of education provided by the State and supported by public taxation." This Court went on to hold that, because the institution seeking an exemption in that case was "a specialized school operated for the purpose of training its students to enter into specialized fields of employment, " it was not entitled to a tax exemption as an "educational institution." Id. In David Walcott Kendall Mem Sch (Kendall), the Court of Appeals addressed the Detroit Commercial College case, opining:

To apply the rule of [that] case to the present case, we must find that even if a school exists, and is created or is expanded to meet the needs of these students in a specialized major field of advanced study which substantially parallels the same major field of study as a State supported college or university, tax exemption cannot be granted for that school. It must be a "general educational institution"; not a "special school". [Kendall, 11 Mich.App. at 238.]

         The Court of Appeals then noted the change in educational demands and the public need for such education since this Court's decision in 1948, and how specialized schools addressing a particular area of study might meet these needs. Id. at 238-240. In light of these developments, the Court of Appeals, in an apparent attempt to expand the scope of institutions entitled to an exemption, "formulate[d] the following test to be applied in dealing with schools of higher education" that seek an exemption as an "educational institution":

If the particular institution in issue were not in existence, then would, and could, a substantial portion of the student body who now attend that school instead attend a State-supported college or university to continue their advanced education in that same major field of study? [Id. at 240.]

         In Ladies Literary Club, this Court adopted the test from Kendall:

In [Detroit Commercial College], our Court determined that an institution seeking an educational exemption must fit into the general scheme of education provided by the state and supported by public taxation. This proposition was refined in [Kendall], which declared that an educational exemption may be available to an institution otherwise within the exemption definition, if ...

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