The Problem

Rhoades McKee challenged the denial by 12 municipal tax authorities of real property and personal property tax exemptions regarding a charitable organization with 23 assisted living facilities in Michigan.

One of these matters (Baruch SLS v Township of Tittabawassee) was litigated before the Michigan Tax Tribunal, the Michigan Court of Appeals and ultimately the Michigan Supreme Court.

Our Approach

In a seven-year legal battle, we challenged the determinations by the municipal tax authorities that the non-profit organization had failed to satisfy the 6 factors set by the Michigan Supreme Court in Wexford Med Group v City of Cadillac, 474 Mich 192; 713 NW2d 734 (2006).  These six factors must be met for an organization to qualify as a charitable institution for entitlement to property tax exemptions under MCL 211.7o.

The 6 Wexford factors include:

• The institution must be a non-profit institution.
• The institution must be organized chiefly, if not soley, for charity.
• The institution does not offer charity on a discriminatory basis by choosing who among the group it purports to serve or deserves the services, but rather serves any person who needs the particular type of charity being offered.
• The institution brings people’s minds or hearts under the influence of education or religion; relieves people’s bodies from disease suffering or constraint; assists people to establish themselves for life; erects or maintains public buildings or works; or otherwise lessens the burden of government.
• The institution does not charge for its services more than what is needed for its successful maintenance.
• The institution need not meet any monetary threshold of charity if the overall nature of the institution is charitable.

The Result

The Michigan Supreme Court held that a charitable institution may place restrictions or conditions on who may receive its charity without disqualifying it from entitlement to an exemption from real and personal property taxes.  The restriction or condition must bear a reasonable relationship to the organization’s legitimate charitable goals.  This “reasonable relationship” test is to be construed “quite broadly to prevent unnecessarily limiting the restrictions a charity may choose to place on its services.”  Most of the municipal tax authorities have agreed that Baruch meets the 6 Wexford factors in light of the clarification in the Michigan Supreme Court Opinion.  Others are reviewing their positions.

To discuss whether your non-profit organization would qualify for the real property and personal property tax exemptions, contact Terry Zabel.

Additional coverage on the case:

Grand Rapids Business Journal | September 29, 2017
Township drops assessment against nonprofit

Crain’s Detroit Business | September 21, 2017
Ruling could let some Michigan nonprofits off the tax-bill hook

Grand Rapids Business Journal | August 4, 2017
Court clarifies tax rules for charities