Opinion ID: 1465764
Heading Depth: 1
Heading Rank: 4

Heading: Relieving a State Burden

Text: The third factor we have considered in determining whether an entity claiming a charitable tax exemption is organized for a charitable purpose is whether the organization's activities relieve the state of a burden it otherwise would be compelled to bear. The town claims that the Center does not relieve the state of any such burden because it applies for, and accepts, taxpayer funding through the Medicare and Medicaid programs. The Center argues that furnishing services to the elderly who cannot afford such services is charitable, despite the existence of state funding, because such funding is, in many cases, deficient. We agree with the Center. The trial court found that [t]he operation of the ... Center does not lessen the burden on society or taxpayers since it receives compensation for services rendered. Closely related to this finding is the court's declaration that [there was no financial burden from the operation of the facility either on the ... Center or on the diocese. These findings are clearly erroneous. The requirement that a charitable entity relieve a public burden is inextricably tied to the public policy justifying the granting of such exemptions to charitable institutions: [E]xemptions are made, and can be made lawfully, only in recognition of a public service performed by the beneficiary of the exemption. They are not bestowed, as is too often unthinkingly supposed, as a matter of grace or favor.... [T]hey are granted in aid of the accomplishment of a public benefit and for the advancement of the public interest. It is in recognition of their position as an agency in the doing of things which the public, in the performance of its governmental duties, would otherwise be called upon to do at its own expense, or which ought to be done in the public interest and without private intervention would remain undone. Corbin v. Baldwin, 92 Conn. 99, 107, 101 A. 834 (1917); see also Isaiah 61:1, Inc. v. Bridgeport, supra, 270 Conn. at 85, 851 A.2d 277 (when a charitable organization does nothing to make it less likely that [the individuals it services] will become burdens on society and more likely that they will become useful citizens, the subject property cannot qualify for a tax exemption [internal quotation marks omitted]), quoting United Church of Christ v. West Hartford, supra, 206 Conn. at 719, 539 A.2d 573. This requirement compels an organization seeking charitable status, and the advantage of tax exemption that that status entails, to give something to the state in return for the privilege, either by relieving it of a financial burden or by pursuing a publicly mandated moral obligation. See Corbin v. Baldwin, supra, 92 Conn. at 107, 101 A. 834. The mere fact that the state is not completely relieved of any obligation, and may even partially subsidize the activity, does not necessarily defeat a claim for tax exemption. Although this court has not directly addressed this requirement with respect to the receipt of state funds by a nursing home, our analysis is informed by the approach taken in other jurisdictions. For instance, in a well reasoned opinion, the Pennsylvania Supreme Court stated that the test of whether an institution has relieved the government of some of its burden does not require a finding that the institution has fully funded the care of some people who would otherwise be fully funded by the government. The test is whether the institution bears a substantial burden that would otherwise fall to the government. [When a] home pays a substantial portion of the cost for Medicaid patients, who comprise about half of its residents ... this fulfills the requirement that the home relieve the government of some of its burden. St. Margaret Seneca Place v. Board of Property Assessment, Appeals & Review, supra, 536 Pa. at 487, 640 A.2d 380. The Michigan Supreme Court has similarly declared: [R]elieving [patients] from disease or suffering is lessening the burden of government. In other words, [the purportedly charitable entity] does not have to prove that its actions lessen the burden of government. Rather, it has to prove ... that it reliev[es] [its patients] from disease, suffering or constraint, which is, by its nature, a lessening of the burden of government. In any event, even though [the entity] 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. (Emphasis in original; internal quotation marks omitted.) Wexford Medical Group v. Cadillac, supra, 474 Mich. at 219, 713 N.W.2d 734; see also Catholic Charities of the Diocese v. Pleasantville, supra, 109 N.J.Super. at 481, 263 A.2d 803 ([the plaintiff nursing home] performs a charitable function that benefits the public-at-large inasmuch as the burden of taxation is lessened by obviating the necessity on the part of government to construct facilities to accommodate the poor who are unacceptable to or who cannot afford the rates charged by nursing homes operating for profit); cf. Evangelical Lutheran Good Samaritan Society v. Gage, supra, 181 Neb. at 836, 151 N.W.2d 446 (pure charity is rare in health care context because assistance is available to the poor under [state] programs). The Center clearly undertakes a financial burden by virtue of the factwhich the trial court expressly recognizedthat reimbursement under the Medicaid program does not fully [compensate] the [Center] for actual patient care costs. [38] This funding gap relieves the state of having to shoulder the entire financial burden of caring for the indigent elderly. Moreover, under state law, as well as its own policy, the Center is prohibited from discriminating on the basis of a patient's ability to pay. Thus, because the Center cannot plan its patient mix in advance, it cannot predict with any certainty how large a gap in funding may exist for any given period. The fact that the Center may pass on some of this shortfall to private paying patients in the form of higher rates [39] is insignificant in light of the uncertain number of such patients and the fact that these higher rates merely hasten the pace at which such patients spend down their assets and become reliant on the Medicaid program themselves. [40] The trial court completely ignores this substantial burden in its memorandum of decision. It is important to note that, as long as a corporation is organized and operated for the public welfare without profit to itself or any individual ... [t]he mere fact that some patients pay for part or all of their care does not destroy its charitable character. Boardman v. Burlingame, 123 Conn. 646, 653-54, 197 A. 761 (1938). Indeed, the trial court's conclusion that receiving state subsidies for health care services means that no public burden is relieved ignores the realities of the modern health care delivery system in the United States and the substantial role that the federal and state governments play in that system. [41] In modern America it is hard to find any person in need of nursing home care who is uninsured, unable to pay, and wholly ineligible for government support in the form of Medicare or Medicaid coverage.... The decision to accept Medicaid payments to help defray the cost of care for residents is perfectly consistent with a finding that the nursing home advances a charitable purpose. St. Margaret Seneca Place v. Board of Property Assessment, Appeals & Review, supra, 536 Pa. at 483, 640 A.2d 380. The trial court also found that the Center does not admit indigent patients at the expense of the ... Center since all patients at the Center are either supported by Medicare, Medicaid or self-supporting. This finding also ignores the realities of modern health care. First, under the current health care system in this country, accepting those patients who are eligible, or keeping those who thereafter become eligible, for Medicaid is the modern equivalent of caring for the indigent. [42] [T]he absence of indigent residents who receive no government support is not surprising, and is certainly not, standing alone, enough to disqualify a nursing home from an exemption as a purely public charity. St. Margaret Seneca Place v. Board of Property Assessment, Appeals & Review, supra, 536 Pa. at 483, 640 A.2d 380. In order to qualify for Medicaid, an individual must establish that he or she is financially needy by virtue of the lack of significant income and assets. See 42 U.S.C. § 1381 et seq. (2000 & Sup. V 2005). Indigence is essentially a prerequisite for Medicaid eligibility, and the care of such poor elderly is clearly charitable. See Waterbury First Church Housing, Inc. v. Brown, supra, 170 Conn. at 565, 367 A.2d 1386 (This is not to say that all residents [of the plaintiff corporation's elderly housing] must be indigent or that the acceptance of payment from some will defeat tax exemption. It is to say that the institution must be one whose properties and assets are pledged in perpetuity to the relief of persons in financial need and to their assistance in obtaining the care they must have to prevent their becoming a burden on society. [Internal quotation marks omitted.]); cf. Isaiah 61:1, Inc. v. Bridgeport, supra, 270 Conn. at 86, 851 A.2d 277 (an organization's use of its property exclusively for charitable purposes is not negated by the organization's `renting' of the property to its occupants as long as `the use [is] exclusively for [charitable] purposes [and not] for some other purpose'), quoting Hartford Hospital v. Hartford, supra, 160 Conn. at 377, 279 A.2d 561; Boardman v. Burlingame, supra, 123 Conn. at 654, 197 A. 761 ([t]he mere fact that some patients pay for part or all of their care does not destroy [the health care provider's] charitable character). We conclude that the Center's receipt of taxpayer funded government assistance alone is irrelevant to the question of whether it relieves a burden that would otherwise be borne by the state. The trial court specifically found that Medicaid does not fully reimburse the [Center] for actual patient care costs. This funding shortfall and the accompanying risk that payments from private paying patients and charitable contributions will fail to make up for the funding shortfall are sufficient to satisfy the requirement that the Center relieve a burden on society. [43] As the Pennsylvania Supreme Court has recognized, if the nursing home does not accept an aged Medicaid patient whose allotment does not fully cover his costs, the public will fund the patient's care at a public institution because such care is not viewed as a privilege ... but is deemed to be a public responsibility. The aged in need of medical care are legitimate objects of charity.... The partial subsidy of the costs of caring for an elderly patient is unquestionably a charitable act. St. Margaret Seneca Place v. Board of Property Assessment, Appeals & Review, supra, 536 Pa. at 485, 640 A.2d 380. We conclude, therefore, that the trial court's determination that the Center does not relieve a burden on society is clearly erroneous.