Court Opinion

ID: 9667935
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:58:04.559085+00
Date Added: 2024-06-11T18:15:41.648062
License: Public Domain

Fitzgerald, J.
The principal issue on appeal is whether a home for the aged, Hillside Terrace, owned and operated by plaintiff, is entitled to a statutory exemption from the payment , of ad valorem property taxes for the tax years 1971-72 as property owned and occupied by a benevolent or charitable institution solely for the purposes for which said institution was incorporated.1 Plaintiff *665also maintains that the state is constitutionally required to extend to it the bénefits of the separate exemption contained in § 7d of the General Property Tax Act.2 Finally, plaintiff asserts that it is a denial of equal protection to grant an exemption to the Anna Botsford Bach Home, which is owned and occupied by the Old Ladies Home Association of Ann Arbor, and to deny plaintiff the same exemption under §§ 7 and 9 of the General Property Tax Act.
The exemption claimed by plaintiff was denied by the Ann Arbor City Assessor. This action was affirmed by the Ann Arbor Board of Review, by the State Tax Commission, and by the Court of Appeals at 55 Mich App 725; 223 NW2d 324 (1974). We likewise affirm.
*666Facts
Plaintiff is a Michigan nonprofit corporation whose purposes as set forth in article II of its articles of incorporation are as follows:
"To acquire or erect, and to equip, conduct, and maintain on the broadest Christian principles of service to humanity, nursing and convalescent homes, and homes for the aged, or other institutions for the care of the mentally and physically handicapped, the sick, disabled, aged or destitute persons.
"The purpose of the organization of this corporation is for the general welfare and not for profit and any income derived therefrom shall not be paid out on dividends to any person or corporation, but shall be used for benevolent, charitable and general welfare purposes, and only for the purposes of such institutions organized hereunder. Any receipts of this organization in excess of the expenses of purchase or erection and maintenance of said institution or institutions provided for herein shall be applied to the care of charity patients and to the equipment and enlargement of said institutions.”
In addition to its Hillside Terrace facility, plaintiff has established and operates three other retirement centers: Olds Manor in Grand Rapids, Whittier Towers in Detroit, and Whitcomb Tower in St. Joseph. As of the date of the proceedings before the State Tax Commission, the Grand Rapids and Detroit Assessors had exempted the real and personal property used in connection with the Olds Manor and Whittier Towers facilities. The Whit-comb Tower facility had not yet been opened for operation.
The Hillside Terrace facility at issue was constructed between June 1968 and October 1969 at a cost of $2,742,953.30. It has been licensed by the *667State Department of Health as a home for the aged. The residence facility consists of 55 one- and two-bedroom apartments of which there are five basic designs, ranging from the most modest at 252 square feet to the largest at 504 square feet. Each apartment is equipped with air-conditioning, wall-to-wall carpeting, and safety features, and has a private bath attached. Other features of the residential complex include a central dining room, a library, a chapel, solariums, and areas for recreational activities. There is also a 23-bed health center which has been licensed as a nursing home.
Although contributions to plaintiff are deductible for Federal income, estate and gift tax purposes, there is no indication that contributions have ever been solicited or received by plaintiff for use in connection with Hillside Terrace. Construction and initial start-up costs were financed by bank mortgage loans and by the sale of debentures. The debentures are sold mainly through churches affiliated with the Michigan Baptist Convention, which also guaranteed the mortgage notes. The debentures are of several series, with maturities ranging from 90 days to 15 years, and bear interest from 5% to 8%.
Plaintiffs mortgage and debenture obligations are met by the fees charged to its residents. The fees of Hillside Terrace were structured with the aim that the facility would be self-supporting and self-liquidating. Each resident of Hillside Terrace pays, upon admission, a life-lease fee which, in 1970, ranged between $8,000 and $20,000. The amount of the life-lease fee is based on the size of the apartment rented. The average life-lease fee paid through 1970 was approximately $11,000. The residency contract provides that, in the event of death after occupancy, the life-lease fee and all other sums paid to plaintiff shall be forfeited to *668plaintiff. Amounts thus forfeited are not treated by plaintiff as income in the year of death, but are amortized over the deceased’s actuarial life expectancy.
In addition to the life-lease fee, each resident pays a monthly service charge for daily meals, maid and bed-linen service. Dry cleaning and the laundry of personal apparel are specifically not included in this charge. The monthly service charge is likewise based upon the number of square feet in the apartment rented. During 1970, this fee ranged between $240 and $440 per month. The average monthly service charge was $283.
Each resident is provided 10 days of free care in the nursing center each year. This benefit may be accumulated to a maximum of 30 days. Physicians’ fees, drugs, dental and optical care are extra.
Plaintiff offered testimony to the effect that during 1970 the monthly service charge to 4 of its 72 Hillside Terrace residents was reduced because of special consideration given to the financial status of these residents. The extent of the reduction was not made clear. Plaintiff also proved that there were two instances during 1970 where life-lease fees were waived.
With but few exceptions above noted, ability to pay all fees is a factor determining whether an applicant will be admitted to Hillside Terrace. Although it is plaintiff’s policy not to evict anyone because of that person’s financial reverses, plaintiff’s rules state that there is a corresponding responsibility on all residents to care properly for financial resources. To determine whether these resources are sufficient to begin with, each applicant is asked to make a rather complete disclosure of assets and income.
Based on the information disclosed on the appli*669cation forms, plaintiff attempted to establish before the commission income and net worth averages for Hillside Terrace residents as of December 31, 1970. However, the data on which these averages were based contained a great number of exceptions and omissions. Many residents failed to disclose all assets, and others disclosed only the fact that assets exceeded a certain amount. Even by plaintiff’s low estimates, average yearly income was $6,811 and average net worth was $74,274. One resident did disclose assets of over one-half million dollars, while seven others listed assets of over one-quarter million.
During plaintiff’s fiscal years ending September 30, 1970 and 1971, the initial years of Hillside Terrace’s operations, the facility lost $148,460 and $191,332 respectively. The losses may be accounted for by such nonoperational expenses as depreciation, amortization and interest. One of plaintiff’s officers stated that if such losses continued, plaintiff would raise resident fees to eliminate the deficit. As previously noted, the fee structure had been designed so that the facility would be self-supporting and self-liquidating.
In addition to the financial restrictions upon admission, there are strict health requirements. Prior to admission, each applicant must submit to a physical examination. Applicants must be at least 65 years of age, must be in reasonably good health, and must be free of all contagious or objectionable diseases. Applicants must demonstrate ability to maintain themselves in apartments and take meals in the dining facility without the aid of nursing personnel.
I.
Exemption from taxation effects the unequal *670removal of the burden generally placed on all landowners to share in the support of local government. Since exemption is the antithesis of tax equality, exemption statutes are to be strictly construed in favor of the taxing unit.3 In examining the facts upon which each case will necessarily turn, a four-part test has evolved for claims based on paragraph "Fourth” of § 7 of the General Property Tax Act:
"(1) The real estate must be owned and occupied by the exemption claimant;
"(2) The exemption claimant must be a library, benevolent, charitable, educational or scientific institution;
"(3) The claimant must have been incorporated under the laws of this State;
"(4) The exemption exists only when the buildings and other property thereon are occupied by the claimant solely for the purposes for which it was incorporated.”4
If the four-part test is met, the fact that charges approximating cost are made for services and benefits offered by the exemption claimant does not alone defeat the exemption claim.5 On the other hand, exempt status requires more than a mere showing that services are provided by a nonprofit corporation.
That plaintiff has satisfied parts one and three of the test above set forth is not in controversy. Regarding parts two and four, while it is clear that the purposes of plaintiff as set forth in its articles *671are benevolent, charitable, and general welfare purposes, we are of the opinion that Hillside Terrace was not occupied for what would traditionally be called charitable or benevolent objectives during the years in question. Basically, it may be said that charity or benevolence benefit the general public without restriction.6 On this record, it appears that the management of Hillside Terrace does not serve the elderly generally, but rather provides an attractive retirement environment for those among the elderly who have the health to enjoy it and who can afford to pay for it. Plaintiff’s health and financial limitations on admission cannot be said to benefit the elderly as a general proposition. By purchasing a life-care contract at cost through plaintiff, the residents of Hillside Terrace have provided for themselves. Furthermore, we cannot presume that the Legislature intended to grant the claimed exemptions to these relatively favored individuals while at the same time granting only limited property tax relief to the less affluent elderly who rent or own modest homes. In the years here at issue, those taxpayers age 65 or over who met certain residency and income limitations could obtain only a partial exemption of $2,500 in state equalized valuation if their homestead did not exceed $10,000 in SEV.7 Under this statute, no revenue was lost to the local taxing unit since the partial exemption was subsidized by the state. At present, the limited senior citizen tax relief just described has been replaced by an allowance of special credits against state income tax liability for expenditures for rent and taxes.8 We are convinced that the Legislature *672has given no clear mandate to exempt elderly housing per se, and that there is no difference compelling exemption between the housing offered by plaintiffs and that sought to be affected by the above-described statutory schemes.
In so holding, we do not mean to be understood as saying that Hillside Terrace does not serve a valuable social purpose. The Michigan Non-Profit Homes Association and the American Association of Homes for the Aging, as amici curiae, draw our attention to the national policy of promoting programs and facilities which ease the "retirement shock” to which an ever increasing number of our aging are exposed.9 Our attention is also called to decisions of other jurisdictions, some of which have ruled in favor of exemption under the facts and constitutional or statutory language there in controversy.10 Within constitutional directions and limitations, our Legislature is free to exercise its exemption power as it chooses.* 11 Whether exemption from taxation of facilities such as Hillside Terrace would result in a benefit to the public commensurate with the loss of tax revenue is a legislative determination. Under our statute and under these facts, we cannot say that the Legislature intended that Hillside Terrace be exempt.
II.
By 1966 PA 312, § 1, being MCLA 211.7d; MSA *6737.7(4a), the Legislature did intend to subsidize an exemption for certain low-income senior citizen housing of modest design and material:
"(1) Housing owned and operated by a nonprofit corporation or association or by the state, any political subdivision thereof or instrumentality, for occupancy or use by elderly persons shall be exempt from all general property taxation by the state, city, village or county, or by any public body or agency.
"(4) 'Nonprofit corporation or association’ means any corporation or association incorporated under the laws of this state not otherwise exempt from general ad valorem real and personal property taxes operating a housing facility or project qualified, built or financed under section 202 of the national housing act of 1959, as amended. ” (Emphasis supplied.)
It is important to note that this exemption does not result in loss of revenue to the local taxing unit, since subsection 5 provides for reimbursement from the state directly to the local unit.
Plaintiff contends that this exemption must, of constitutional necessity, be made available to it. Plaintiff argues that subsection 4, by making the exemption depend upon Federal financing pursuant to § 202 of the National Housing Act of 1959,12 is an unconstitutional delegation of legislative authority to the Secretary of Housing and Urban Development.
The intent of the Legislature in enacting MCLA 211.7d is manifest. It would not be possible, without doing violence to that intent, to allow a facility such as Hillside Terrace to qualify under the statute by striking down subsection 4 while giving effect to the remaining portions of the exemption. *674Therefore, in view of our determination that resolution of the issue could have no effect on plaintiffs property tax liability, we decline to address the issue of the constitutionality of MCLA 211.7d.
III.
Finally, plaintiff contends that it has been denied the equal protection of the laws guaranteed by Const 1963, art 1, § 2, and US Const, Am XIV because it has been denied the exemptions which it seeks while the Anna Botsford Bach Home, housing 17 elderly women and owned and operated by the Old Ladies Home Association of Ann Arbor, has been exempted under §§ 7 and 9 of the General Property Tax Act. We agree with the Court of Appeals that the differences between the Bach Home and Hillside Terrace are readily apparent, and that the contention that plaintiffs must be classified like the Bach Home for purposes of exemption is without support on the record. The Bach Home was endowed by and is partially financed through charitable contributions. Annual operating deficits are met by withdrawals of principal and interest from its endowment fund, and by annual contribution drives. None of the Bach Home residents pays the actual cost of her care, and the various payment plans there in effect were not designed with that goal in mind. The overriding criteria for admissibility to the Bach Home is the applicant’s inability to live without supervision. To be contrasted with Hillside Terrace’s rigid health and financial requirements is the Bach Home policy of giving priority to those applicants who are unable to obtain comparable care elsewhere.
The Court of Appeals is affirmed. No costs, a public question being involved.
*675Kavanagh, C. J., and Levin, J., concurred with Fitzgerald, J.
Williams, Lindemer, and Ryan, JJ., took no part in the decision of this case.

 Paragraph "Fourth” of § 7, being MCLA 211.7; MSA 7.7, of the General Property Tax Act read at times here relevant in part as follows: "Fourth, Such real estate as shall be owned and occupied by library, benevolent, charitable, educational or scientific institutions and memorial homes of world war veterans incorporated under the laws of this state with the buildings and other property thereon while occupied by them solely for the purposes for which they were incorporated. Also charitable homes of fraternal or secret societies.” As amended by 1974 PA 358, § 1, eff April 1, 1975, that portion of § 7 now reads:
"Fourth, Such real estate or personal property as shall be owned and occupied by nonprofit theater, library, benevolent, charitable, educational, or scientific institutions and memorial homes of world war veterans incorporated under the laws of this state with the buildings and other property thereon while occupied by them solely for the purposes for which they were incorporated. Also charitable homes of fraternal or secret societies and nonprofit corporations whose stock is wholly owned by religious or fraternal societies which own and operate facilities for the aged and chronically ill, in which no part of the net income from the operation of such corporations inures to the benefit of any person(s) other than the residents.” *665Although special reference is made in the amended statute to nonprofit corporations whose stock is wholly owned by religious societies which own and operate facilities for the aged, nevertheless the language added refers back to the words "charitable homes”.
Likewise, at times here relevant, paragraph "First” of § 9, being MCLA 211.9; MSA 7.9, of the General Property Tax Act read as follows:
"First, The personal property of benevolent, charitable, educational and scientific institutions, incorporated under the laws of this state: Provided, That such exemptions shall not apply to secret or fraternal societies, but the personal property of all charitable homes of such societies shall be exempt.” As amended by 1974 PA 83, § 1, that portion of § 9 now reads:
"(a) The personal property of charitable, educational, and scientific institutions, incorporated under the laws of this state. The exemptions shall not apply to secret or fraternal societies, but the personal property of all charitable homes of such societies and non-profit corporations which own and operate facilities for the aged and chronically ill, in which no part of the net income from the operation of such corporations inures to the benefit of any person(s) other than the residents shall be exempt.”
Although less clear than with the amended § 7, it would seem that the added language in § 9 refers back to the words "the personal property of all charitable homes.” It would appear, therefore, that the issue which confronts this Court, being essentially one of statutory construction, would not be less difficult under the statute as amended.

 MCLA 211.7d; MSA 7.7(4a).

 St. Joseph’s Church v Detroit, 189 Mich 408; 155 NW 588 (1915). Evanston YMCA Camp v State Tax Commission, 369 Mich 1; 118 NW2d 818 (1962).

 Engineering Society of Detroit v Detroit, 308 Mich 539, 550; 14 NW2d 79 (1944). See, also, Gull Lake Bible Conference Assn v Boss Township, 351 Mich 269, 273; 88 NW2d 264 (1958).

 See Gull Lake Bible Conference Assn, supra.

 Auditor General v R B Smith Memorial Hospital Assn, 293 Mich 36, 38; 291 NW 213 (1940).

 MCLA 211.7c; MSA 7.7(4), repealed by 1973 PA 20, § 2.

 See MCLA 206.522; MSA 7.557(1522).

 See the White House Conference on Aging Act, 72 Stat 1746, Public Law 85-908 (Sept 2, 1958).

 See generally Anno: Homes for the Aged as Exempt from Property Taxation, 37 ALR3d 565-604.

 United States Cold Storage Corp v Detroit Board of Assessors, 349 Mich 81, 91; 84 NW2d 487 (1957). See, also, Const 1963, art 9, § 4, which exempts "[pjroperty owned and occupied by nonprofit religious or educational organizations and used exclusively for religious or educational purposes, as defined by law * * * ”,

 12 use 1701q.