Court Opinion

ID: 7953729
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:44:55.90171+00
Date Added: 2024-06-11T16:34:15.192675
License: Public Domain

Per Curiam.
This is an appeal from the Court of Appeals which reversed the decision of the Michigan State Tax Commission approving the assessment of tax under MCLA 211.181; MSA 7.7(5) by the City of Ann Arbor.
We reverse the decision of the Court of Appeals and affirm the assessment by the State . Tax Commission.
The pertinent facts giving rise to the controversy are stipulated:
"1. The physicians assessed determine the fees they will charge and bill their patients directly. St. Joseph Mercy Hospital (the Hospital) does not regulate the amount charged by the physicians assessed or by any other physician who practices in the Hospital and bills his patients directly.
"2. The Hospital maintains complete control over who uses office space in the Hospital and charged the physicians no rent. Since the institution of this litigation, two of the plaintiff doctors have been required by the Hospital to vacate their office space.
"3. Many of the physicians assessed make contribu*153tions to the Hospital. These contributions for the years 1970, 1971 and 1972 are indicated on Exhibit A attached to the Third Affidavit of August Janovits.
"4. The registration procedure and use of outpatients’ hospital medical records is as described in the Third Affidavit of August Janovits.
"5. The current administrative and committee assignments of the physicians assessed are as listed on Exhibit D of the Third Affidavit of August Janovits.
"6. All of the physicians assessed derive part of the income attributable to their medical practices from treating patient in the offices they use in the Hospital. The most substantial part is 100% of annual medical income. The least is 3%, and the average percentage is about 32.4%. Those physicians in the lowest percentage categories are specialists whose practice requires the use of Hospital-provided facilities, including for example, the operating room and cardiac catheterization unit. Staff physicians who do not have offices in the Hospital also use these specialized facilities, such as the operating room and various laboratories, and special care units. The patient receives only one bill for the entire procedure, which includes related office examinations. Only in the infrequent case where the specialized procedure is not indicated would a separate bill for use of office facilities be issued.
"7. The Hospital does not pay any of the physicians for any of the teaching, committee or administrative work they do for the Hospital, or for staffing the outpatient department.”
MCLA 211.181; MSA 7.7(5) provides in pertinent part:
"When any real property which for any reason is exempt from taxation is leased, loaned or otherwise made available to and used by a private individual, association or corporation in connection with a business conducted for profit, * * * the lessees or users thereof shall be subject to taxation in the same amount and to the same extent as though the lessee or user were the owner of such property. * * * ”
*154In explaining their decision the Court of Appeals said:
"A review of the facts in the instant case clearly reveals that any profit that the doctors may have received was merely incidental to their function of furthering the purposes of the hospital. It is obvious that a hospital needs a certain number of doctors physically present in order to treat its patients, teach its interns, and serve on medical committees. The fact that the doctors may make a profit on treating hospital patients is not sufficient to make them subject to the real property tax imposed by the Commission.
The State Tax Commission concluded that the doctors were carrying on a business for profit and therefore subject to the tax. We now hold, as a matter of law, that where the profit is incidental to the essential functioning of the exempt organization, the exemption must stand and the tax on the incidental profit must fall.”
Such reasoning misses the question in issue.
We are not concerned with whether the arrangement benefits or advances the essential functioning of the hospital.
We look only to whether or not the doctors are carrying on a business for profit. If they are, under the terms of the statute they are subject to tax for the use of otherwise exempt property in connection therewith.
We are satisfied that the private practice of medicine is the carrying on of a business for profit under the taxing statute.
Reversed, no costs, a public question.
T. G. Kavanagh, C. J., and Williams, Levin, and Fitzgerald, JJ., concurred.
Coleman and Lindemer, JJ., took no part in the decision of this case.