ATTORNEY FOR PETITIONERS: ATTORNEYS FOR RESPONDENT:
ROBERT A. HICKS STEVE CARTER
HALL, RENDER, KILLIAN, ATTORNEY GENERAL OF INDIANA
HEATH & LYMAN, P.S.C. Indianapolis, IN
ANDREW W. SWAIN
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
INDIANAPOLIS OSTEOPATHIC HOSPITAL, )
INC., d/b/a WESTVIEW HOSPITAL and )
HEALTH INSTITUTE OF INDIANA, INC., )
v. ) Cause No. 49T10-0012-TA-127
DEPARTMENT OF LOCAL )
ON APPEAL FROM THREE FINAL DETERMINATIONS OF
THE STATE BOARD OF TAX COMMISSIONERS
December 9, 2004
Indianapolis Osteopathic Hospital, Inc., d/b/a Westview Hospital (Westview), and Health Institute of Indiana,
Inc. (HII) (collectively, the Petitioners) appeal the final determinations of the State Board
of Tax Commissioners (State Board) assessing their real and personal property for the
1999 and 2000 tax years (the years at issue). The issue for
the Court to decide is whether the Petitioners property qualifies for the charitable
purposes exemption as provided in Indiana Code § 6-1.1-10-16.
Westview is an Indiana not-for-profit corporation that owns and operates Westview Hospital in
Indianapolis, Indiana. It is recognized by the Internal Revenue Service as a
HII, also an Indiana not-for-profit corporation with 501(c)(3) status, owns
and operates a 158,000 square foot sports club and medical pavilion (facility) on
Westviews campus. During the years at issue, Westview owned a 70% share
of HII, as well as the land on which HIIs improvement is constructed.
Of the facilitys 158,000 square feet, 74% is devoted to use
as a sports club (Healthplex). The other 26% is devoted to use
as the medical pavilion (MP).
1. The Healthplex
The Healthplex is approximately 117,000 square feet in size. It contains:
six tennis courts; racquetball and squash courts; one basketball court; a therapy pool;
a one-eighth mile running track; a six lane, 25-yard lap pool; two aerobics
rooms; a cardiovascular training/conditioning area (complete with treadmills and exercise bicycles); a strength
training/conditioning area (complete with weight and strength machines); a childrens gym; a childcare
area; locker rooms; a health food deli; a pro shop and an administrative
The Petitioners state that the Healthplex is used 59% of the time as
a community-oriented fitness facility. (See Petrs Br. at 9.) Accordingly, the
Healthplex offers memberships to the public: for an initial, one-time fee of
$209.00, plus a monthly fee of $69.50, individuals have unlimited access to the
As part of its membership program, the Healthplex requires a member to receive
a comprehensive health risk assessment, similar to a mini-physical.
The member then
meets with an on-staff exercise physiologist to develop and implement an exercise
program consistent with the members goals
and health risk assessment results.See footnote 2. The MP
The Petitioners state that the Healthplex is used the remaining 41% of the
time to provide outpatient rehabilitation services, research, and community education. (Petrs Br.
at 9.) More specifically, Westviews outpatients use the Healthplex for cardiac rehabilitation,
physical and occupational therapy, arthritis therapy, and medically-supervised obesity reduction.
to community education, the Healthplex typically offers to the public at least one
free program per week. The programs cover various health and wellness topics
such as cholesterol education, first aid, stress management, and healthy cooking.
The MP portion of the facility is approximately 41,000 square feet
in size. During the years at issue, an average
of approximately 11%
of the MP was leased to physicians on staff at Westview, 37% of
the space was used by various Westview Hospital departments (physical and occupational therapy,
MRI, mammography, integrated medicine, and patient registration), and 44% of the facility was
In addition, approximately 7% of the MP served as a public/community education meeting
room for use by HII and various other nonprofit community groups. Finally,
approximately 1% of the MP was devoted to use as a boardroom.
The boardroom was used 1% - 2% of the time by the private
physicians/tenants of the MP, and 98% of the time by Westview and another
hospital for administrative purposes, as well as other various nonprofit community groups.
Both the public meeting room and the boardroom were available for use free
1. The 1999 Appeal
HII timely applied for a charitable purposes exemption, pursuant to Indiana Code §
6-1.1-10-16, for the 1999 tax year. More specifically, HII requested that the
Healthplex portion of the improvement receive a 100% exemption; the MP portion of
the improvement receive a 91% exemption; and all personal property receive a 100%
exemption. The Marion County Property Tax Assessment Board of Appeals (PTABOA), however,
only allowed a 9% exemption on the entire improvement.
The PTABOA did
not address the personal property exemption sought by HII.
HII subsequently filed an appeal with the State Board of Tax Commissioners (State
Board). The State Board held a hearing on the matter on February
17 and March 2, 2000. In a final determination dated October 11,
2000, the State Board upheld the PTABOAs determination. The State Board also
determined that HIIs personal property was entitled to a 9% exemption.
On October 26, 2000, HII sought a rehearing with the State Board.
On November 21, 2000, the State Board issued a second final determination in
which it removed the 9% exemption entirely. On December 20, 2000, HII
initiated an original tax appeal.
2. The 2000 Appeals
On May 15, 2000, HII applied for the charitable purposes exemption for
its improvement and personal property for the 2000 tax year. That same
day, Westview also requested that 100% of its land (on which the HII
improvement sat) receive the charitable purposes exemption for the 2000 tax year.
On June 26, 2000, the PTABOA allowed HII a 9% exemption on its
improvement. The PTABOA denied the exemption for HIIs personal property and Westviews
Both HII and Westview filed appeals with the State Board. The State
Board held a hearing on the two appeals on February 5, 2001.
In a final determination dated September 17, 2001, the State Board denied both
HII and Westviews requests for exemptions. HII and Westview initiated an original
tax appeal on October 31, 2001.
This Court consolidated the 1999 and 2000 appeals on December 31, 2001.
The Court heard the parties oral arguments on July 28, 2003. Additional
facts will be supplied as necessary.
STANDARD OF REVIEW
This Court gives great deference to the final determinations of the State Board
when it acts within the scope of its authority. Hamstra Builders, Inc.
v. Dept of Local Govt Fin., 783 N.E.2d 387, 390 (Ind. Tax Ct.
2003). Thus, this Court will reverse a final determination of the State
Board only when its findings are unsupported by substantial evidence, arbitrary, capricious, constitute
an abuse of discretion, or exceed statutory authority. Id.
An exemption releases property from the obligation of bearing its fair share of
the cost of government and serves to disturb the equality and distribution of
the common burden of government upon all property. See St. Marys Med.
Ctr. of Evansville, Inc. v. State Bd. of Tax Commrs, 534 N.E.2d
277, 280 (Ind. Tax Ct. 1989), affd, 571 N.E.2d 1247 (Ind. 1991).
Consequently, an exemption is strictly construed against the taxpayer and in favor of
the State. Id.
DISCUSSION AND ANALYSIS
In Indiana, all tangible property is subject to taxation. See Ind. Code
Ann. § 6-1.1-2-1 (West 2004). Nevertheless, the Indiana Constitution provides that the
legislature may exempt certain categories of property. See Ind. Const. art. X,
§ 1. The legislature exercised that constitutional power by enacting Indiana Code
§ 6-1.1-10-16(a), which provides that [a]ll or part of a building is exempt
from property taxation if it is owned, occupied, and used  for .
. . charitable purposes. See Ind. Code Ann. § 6-1.1-10-16(a) (West 2004).
This exemption also generally extends to the land on which the exempt
building is situated, as well as personal property that is contained therein.
See A.I.C. § 6-1.1-10-16(c), (e).
The taxpayer bears the burden of proof in showing that it is entitled
to the exemption it seeks. See State Bd. of Tax Commrs v.
New Castle Lodge #147, Loyal Order of the Moose, Inc., 765 N.E.2d 1257,
1259 (Ind. 2002). Thus, when seeking a charitable purposes exemption, the taxpayer
must not only demonstrate that it owns, occupies, and uses its property for
a charitable purpose, but also that the charitable purpose is the propertys predominant
use. See State Bd. of Tax Commrs v. Fort Wayne Sports Club,
Inc., 258 N.E.2d 874, 881 (Ind. Ct. App. 1970) (stating that it is
the dominant use of the property which determines whether such property is tax
What constitutes a charitable purpose?
A charitable purposes exemption is granted when there is an expectation of a
benefit that will inure to the public by reason of the exemption.
"The rationale justifying a tax exemption is that there is a present benefit
to the general public from the operation of the charitable institution sufficient to
justify the loss of tax revenue." Foursquare Tabernacle Church of God in
Christ v. State Bd. of Tax Commrs, 550 N.E.2d 850, 854 (Ind. Tax
Ct. 1990) (internal citation omitted).
Charity, as used in Indianas property tax exemption statutes, is favored with the
broadest constitutional definition allowable. See Indianapolis Elks Bldg. Corp. v. State Bd.
of Tax Commrs, 251 N.E.2d 673, 682 (Ind. Ct. App. 1969). Indeed:
charity such as will justify an exemption is more than a seal, a
charter, and social activities common to all of society. There must be
evidence of relief of human want, and although the relief of such human
want may alone be confined to [an] organizations membership, it must be manifested
by obviously charitable acts different from the everyday purposes and activities of man
Id. at 683 (emphases added). What constitutes predominant use?
Generally, [h]ospitals maintained, not for pecuniary profit, but to relieve the destitute and
deserving, are  classed as  charit[able]. St. Vincents Hosp. v. Stine,
144 N.E. 537, 539 (Ind. 1924), revd in part on other grounds by
237 N.E.2d 242 (Ind. 1968). It is important to note, however, that
if an exempt hospital owns other property, that other property does not automatically
receive a charitable purposes exemption. Indeed, the charitable purposes exemption does not
apply to other property owned by a hospital that is not substantially related
to or supportive of [its] inpatient facility[.] A.I.C. § 6-1.1-10-16(h).
In 1983 the [Indiana] legislature adopted a predominant use test for determining whether
property qualifies for [a charitable purposes] exemption under Ind[iana ]Code [§] 6-1.1-10.
New Castle Lodge #147, 765 N.E.2d at 1259 (citing 1983 Ind. Acts 66).
To that end, Indiana Code § 6-1.1-10-36.3 provides in relevant part:
(a) For purposes of this section, property is predominantly used or occupied for
[a charitable purpose] if it is used or occupied for [a charitable] purpose
during more than fifty percent (50%) of the time that it is used
or occupied in the year that ends on the assessment date of the
(b) If a section of this chapter states one (1) or more purposes
for which property must be used or occupied in order to qualify for
an exemption, then the exemption applies as follows:
Property that is exclusively used or occupied for [a charitable] purpose is totally
Property that is predominantly used or occupied for [a charitable] purpose by a
church, religious society, or not-for-profit school is totally exempt[;]
Property that is predominantly used or occupied for [a charitable] purpose by a
person other than a church, religious society, or not-for-profit school is exempt .
. . on the part of the assessment . . .
that bears the same proportion to the total assessment of the property
as the amount of time that the property was used or occupied for
[the charitable] purpose[;]
Property that is predominantly used or occupied for a purpose other than one
(1) of the stated purposes is not exempt from any part of the
Ind. Code Ann. § 6-1.1-10-36.3(a), (b) (West 1999) (amended 2003).
The Parties Arguments
The Petitioners argue that the Healthplex portion of its facility is entitled
to a 100% charitable purposes exemption because its use for the promotion of
health through physical activity provides a public benefit sufficient to justify the loss
in tax revenue. (See Petrs Br. at 29.) More specifically, during
the administrative hearing process, the Petitioners entered into evidence the 1996 United States
Surgeon Generals published report entitled Physical Activity and Health. (See 2nd Cert.
Admin. R. at 801-1080.) The report links various health problems with sedentary
lifestyle, recognizes that approximately 98% of annual health care costs are spent on
diagnosing and treating illness as opposed to preventing illness, and calls physical activity
an essential objective for the nation that should be given the same level
of attention as other important public health practices. (See Petrs Br. at
10.) Thus, the Petitioners maintain that [t]he purpose of the Healthplex is
to respond to the Surgeon Generals Report by encouraging people to become regularly
physically active so that the health benefits documented by the Surgeon General can
be realized and so that the high cost of diagnosis and treatment can
be reduced. (Petrs Br. at 10, 15-16.) (See also 2nd Cert.
Admin. R. at 1138.)
Furthermore, the Petitioners explain that Indiana courts have long recognized the charitable nature
of hospitals because such institutions care for the sick, infirmed and aged, and
in turn, relieve burdens that government would otherwise bear. (Petrs Br. at
29 (internal citations omitted).) In turn, the Petitioners argue that there should
be no legal difference between the delivery of health care in the traditional
sense (i.e., to treat an existing disease, illness or condition) and the activities
. . . aimed at preventing disease in the first instance. (Petrs
Br. at 31.) Consequently, [e]ducating the public about the benefits of physical
activity, providing an appropriate place to engage in physical activity and customizing exercise
programs to meet the individual needs of Healthplex users are all charitable purposes
because the clear aim of such activities is to prevent the known maladies
documented by the Surgeon Generals Report[.] (Petrs Br. at 31.) To
this end, the Healthplex is affordable and accessible to the public at large.
(Petrs Br. at 25, 39.)
With respect to the MP portion of the facility, the Petitioners argue that
they are entitled to a 91% exemption. More specifically, while the Petitioners
concede that the portion of the MP leased to physicians is not exempt
from property taxation, (Petrs Br. at 47), they maintain that the remainder of
the MP is exempt. As they explain, the portion of the MP
used by various Westview Hospital departments is clearly exempt, and both the boardroom
and public meeting rooms are exempt because their use is reasonably necessary to
and supportive of the charitable activities  carried on in the [overall b]uilding.
(Petrs Br. at 47.) Furthermore, with respect to the 44% of
the space in the MP that is vacant, because it is not being
used for non-charitable purposes, and because the overwhelming majority of the remainder of
the [b]uilding is used for exempt purposes, the vacant space should also be
exempt. (Petrs Br. at 47.)
The State Board argues, on the other hand, that the facility is essentially
a commercial health club that is neither affordable nor accessible. (See 1st
Cert. Admin. R. at 68-71; 2nd Cert. Admin. R. at 193-97.) In
turn, the State Board determined that the use of the facility as a
health club does not constitute a charitable purpose: [r]egardless of the Surgeon
Generals [r]eport . . . care for the sick or injured is a
substantially different purpose from promoting exercise and general physical fitness. (Respt Br.
at 16.) (See also 1st Cert. Admin. R. at 68-71; 2nd Cert.
Admin. R. at 193-97.) In other words, [t]he Healthplex does not provide
relief of human want or suffering in any manner that is different from
the everyday purposes and activities of man in general. (Respt Br. at
25.) Thus, there simply is not enough public benefit . . .
to justify tax exemption. (Respt Br. at 24.)
In the alternative, the State Board claims that [a]ssuming arguendo that the Healthplex
would qualify for exemption for the percentage of time used for rehabilitation [and
indigent use through the special populations program], such use does not fall within
the perimeters of predominant and, thus, [it] does not qualify for exemption on
this basis. (1st Cert. Admin. R. at 72; 2nd Cert. Admin. R.
at 198.) Likewise, the State Board determined that the only portion of
the MP eligible to receive an exemption was the portion used by various
Westview Hospital departments. That portion, too, did not meet the predominant use
test. (1st Cert. Admin. R. at 72; 2nd Cert. Admin. R. at
The Courts Holding
1. The Healthplex
The issue with respect to the Healthplex portion of the facility - whether
the promotion of health through physical activity constitutes a charitable purpose - is
one of first impression in this state. Nevertheless, the issue has been
much debated in other jurisdictions across the country.
Several jurisdictions have upheld the application of a charitable purposes exemption to a
community sports/athletic facility. See, e.g., Clubs of California for Fair Competition v.
Kroger, 7 Cal. App. 4th 709 (Cal. Ct. App. 1992); Decatur Sports Found.
v. Illinois Dept of Revenue, 532 N.E.2d 576 (Ill. App. Ct. 1988); Coeur
dAlene Pub. Golf Club, Inc. v. Kootenai Bd. of Equalization, 675 P.2d 819
(Idaho 1984). For the most part, the holdings in these cases have
turned on whether the community sports/athletic facility has relieved a governmental burden or
otherwise overwhelmingly provided a general public benefit. In contrast, several other jurisdictions
have specifically held that a hospitals operation of a public fitness facility is,
more often than not, used only for purposes incidental to the operation of
the hospital and therefore not exempt. See Bethesda Healthcare, Inc. v. Wilkins,
806 N.E.2d 142 (Ohio 2004); Hillcrest Health Serv. Sys., Inc. v. Hackensack City,
18 N.J. Tax 38 (N.J. Tax Ct. 1998).
Although these holdings are by no means binding on this Court, their logic
is both instructive and persuasive. See USAir, Inc. v. Indiana Dep't of
State Revenue, 623 N.E.2d 466, 469 n.4 (Ind. Tax Ct. 1993). In particular,
the Court finds one especially persuasive a 1994 Tennessee Court of Appeals
case with facts very similar to the case at bar.
At the outset, the Tennessee court recognized the emerging trend in the hospital
industry: the creation of so-called wellness centers to promote exercise and healthy life
styles. Middle Tennessee Medical Cntr. v. Assessment Appeals Commn of the State
of Tennessee, 1994 WL 32584, at *4 (Tenn. Ct. App. 1994), review denied.
And while the court acknowledged that such centers often have strong medical
philosophies, employing physicians and exercise physiologists and offering programs tailored expressly for hospital
inpatients and outpatients, they are, nonetheless, not limited to use by those requiring
traditional medical care. Id.
Indeed, the court found that members of these fitness centers include people from
all walks of life who pay membership costs comparable to those charged by
private for-profit health spas for the use of similar exercise facilities. Id.
Furthermore, these members may choose from a great variety of programs, all
directed in one way or another towards the goal of health: the
entire menu of programs offered by the[se centers] is expressive of a growing
trend in healthcare to look towards prevention rather than waiting until a patient
requires treatment. Id.
In determining whether the subject hospitals exercise center was eligible for Tennessees charitable
, however, the court explained that
[w]hile we find this trend towards healthful activity and prevention a promising development,
we note that tax-paying enterprises in the [area] offer many of the same
programs that th[is c]enter does. Competition with for-profit businesses is not dispositive
of a petition for a charitable tax exemption, but the presence of such
competition is a relevant factor.
Th[is c]enter . . . advertises its programs to the general public, who
are free to choose between [it] and other exercise facilities in the same
area. We have mentioned the three categories of hospital patients whose participation
in the programs of the [c]enter is required by their physicians, but the
great majority of those who use the [c]enter are not under a doctors
care. They have chosen the [c]enter over competing health spas for reasons
of their own, and it is not the role of this court to
encourage that choice by according the [c]enter a more favorable tax treatment than
that permitted to its competitors.
We feel it would be a misuse of the tax exemption granted to
charitable hospitals if every revenue-generating venture they embarked upon automatically benefited from the
exemption, so long as that venture could be characterized as in some way
promoting health. We are conscious, however, that medicine is a rapidly changing
discipline, and that hospitals must be responsive to new developments in medical practice.
We therefore will not attempt to create some hard and fast rule
to fix forever the tax status of wellness centers owned by charitable hospitals.
Each case must stand on its own facts.
Id. 2. The MP
This Court adopts, as its own, the holding in the Tennessee case.
As a result, the State Board did not err when it determined that
the Healthplex portion of the facility did not qualify for the charitable purposes
The State Boards final determination with respect to the application of
the charitable purposes exemption to the Healthplex is therefore AFFIRMED.
This Courts holding with respect to the MP portion of the facility is,
however, somewhat different. Indeed, the Court finds that the State Board abused
its discretion in determining that none of the MP qualified for the charitable
As stated supra, the charitable purposes exemption may apply to all or part
of another building owned by a hospital if it is substantially related to
or supportive of [its] inpatient facility[.] A.I.C. § 6-1.1-10-16(h). It is
clear from the record that 37% of the space in the MP is
used 100% of the time by various Westview Hospital departments. Such use
is substantially related to or supportive of Westviews inpatient facility. Likewise, the
record clearly indicates that the boardroom is predominantly used (i.e., 98% of the
time) for hospital administrative meetings, which is also substantially related to Westviews inpatient
facility. Accordingly, the MP portion of the facility is entitled to a
The State Boards final determination with respect the MP portion
of the facility is, therefore, REVERSED.
The Petitioners claim that in denying them the charitable purposes exemption for the
Healthplex, the State Board has violated Article 1, § 23 of the Indiana
Constitution, which provides: The General Assembly shall not grant to any citizen,
or class of citizens, privileges or immunities, which, upon the same terms, shall
not equally belong to all citizens. Ind. Const. art. I, § 23.
According to the Petitioners, the State Board granted a charitable purposes exemption to
the Jewish Community Center (JCC), which owns a building in Indianapolis.
the Petitioners claim that this treatment provides the JCC with a privilege not
equally shared by members of the same class (i.e., the facility) because
[f]rom a physical standpoint, the Healthplex and the JCC fitness facility are almost
identical. The difference is that [the Healthplex offers more than the JCC:
]the JCC fitness facility lacks the health care programs present at the
Healthplex. The JCC fitness facility operates like the Healthplex with respect to
healthy members, but has no special programs for seniors, special populations or people
with special health care needs. The JCC has no medical director.
The JCC has a small physical therapy area run by Community Hospital that
is not integrated into the JCCs facility as in the case of the
Healthplex. The JCC conducts no educational programs related to health care.
Unlike the Healthplex, the JCC performs no screening or health risk assessment.
(Petrs Br. at 22-23 (internal citations omitted).) [T]he State Board ha[s not]
proffered a rational basis for distinguishing between JCC and HII in this regard.
(Petrs Br. at 27 (footnote added).) CONCLUSION
In order to survive constitutional scrutiny, claims asserted under Article 1, § 23
must pass the two-part test enunciated in Collins v. Day, 644 N.E.2d 72
(Ind. 1994). First, the disparate treatment accorded by the legislation must be
reasonably related to inherent characteristics which distinguish the unequally treated classes. Id.
at 78-79. In other words, [t]here must be some inherent and substantial
difference germane to the subject and purpose of the legislation [creating the distinction]
between those included within the class and those excluded. Id. at 78
(quoting School City of Elwood v. State, 180 N.E. 471, 474 (Ind. 1932)).
Second, the preferential treatment accorded by the legislation must be uniformly applicable
and equally available to all persons similarly situated. Id. at 79.
The Petitioners claim that the first prong of the Collins test is not
at issue in this case. (See Petrs Br. at 52.) Rather,
they focus their argument on the second prong of the Collins test.
Consequently, in its analysis, this Court must ensure that the preferential treatment provided
by the charitable purposes exemption is uniformly applicable to all similarly situated persons.
See Collins, 644 N.E.2d at 79. The Petitioners argue that it
is not: [b]oth [the JCC and the Petitioners] applied for exemptions for
the same use of that portion of their buildings devoted to fitness purposes.
. . . There is no rational basis for exempting JCCs fitness facility
and taxing the Healthplexs fitness facility. (Petrs Br. at 53.)
To support its claim, the Petitioners submitted, at the administrative hearing, JCCs exemption
applications filed for the 1996 and 2000 tax years. (See 2nd Cert.
Admin. R. at 766-83.) In addition, the Petitioners relied on the testimony
of Stephen Robbins (Robbins), the president of Pennsylvania Health Clubs.
evidence, however, fails to support the Petitioners claim for several reasons.
First, JCCs exemption applications state that it uses its property for the following
charitable purposes: community meeting places, education of children and social services, religious
education[,] nursing home[,] group home[,] fundraising. (2nd Cert. Admin. R. at 770,
774.) JCC makes no mention, however, of its fitness facility. Consequently,
there is no evidence in the record indicating the actual basis of JCCs
exemption, let alone whether it received the exemption on the basis of its
In light of this, Robbins testimony comparing the JCC to the Healthplex is
of little help.
Indeed, Robbins stated that the JCC is
operating very similar to the Healthplex. It has three primary functions as
I saw it. Number 1, it operates as a Jewish Cultural Center.
They have a garden there thats dedicated to the Holocaust. Its
very nice. Its kind of a passive type operation thats just operating
for that purpose. Then there is a daycare type facility[.] And
then finally is the Fitness Center which really is the dominant theme there.
(2nd Cert. Admin. R. at 1125-26.) Nevertheless, Robbins testimony does not indicate
how those three functions break out in terms of the JCCs overall use.
Thus, there is no way to determine how predominant use may have
figured into JCCs exemption allowance. For instance, if each of the three
functions accounted for 33% of the use, and the State Board determined that
both the cultural center and the daycare constituted charitable purposes, then the JCC,
as a religious society, may have received the exemption in its entirety because
it was predominantly used (66% of the time) for charitable purposes. See
A.I.C. § 6-1.1-10-36.3(b)(2).
Given the evidence in the record, this Court is not convinced that
the JCC and Healthplex/MP are similarly situated. Consequently, the Petitioners have not
met the second prong of the Collins test, and therefore have not shown
that Indiana Code § 6-1.1-10-16, as applied, violates Article 1, § 23 of
the Indiana Constitution.
For the foregoing reasons, this Court AFFIRMS the State Boards final determinations in
part and REVERSES them in part. The final determinations are therefore REMANDED
to the Indiana Board of Tax Review for action consistent with this opinion.
The State Board of Tax Commissioners (State Board) was originally the Respondent
in this appeal. However, the legislature abolished the State Board as of
December 31, 2001. 2001 Ind. Acts 198 § 119(b)(2). Effective January
1, 2002, the legislature created the Department of Local Government Finance (DLGF),
Indiana Code § 6-1.1-30-1.1 (West Supp. 2004)(eff. 1-1-02); 2001 Ind. Acts 198 §
66, and the Indiana Board of Tax Review (Indiana Board). Ind. Code
Ann. § 6-1.5-1-3 (West Supp. 2004)(eff. 1-1-02); 2001 Ind. Acts 198 § 95.
Pursuant to Indiana Code § 6-1.5-5-8, the DLGF is substituted for the
State Board in appeals from final determinations of the State Board that were
issued before January 1, 2002. Ind. Code Ann. § 6-1.5-5-8 (West Supp.
2004)(eff. 1-1-02); 2001 Ind. Acts 198 § 95. Nevertheless, the law in
effect prior to January 1, 2002 applies to these appeals. A.I.C. §
6-1.5-5-8. See also 2001 Ind. Acts 198 § 117. Although the
DLGF has been substituted as the Respondent, this Court will still reference the
State Board throughout this opinion.
In their initial complaints filed with the Court, the Petitioners also
claim that their property is exempt from taxation because it is used for
educational purposes. (
See Petrs Pet. for Original Tax Appeal (filed Dec. 20,
2000) at 15-17; Petrs Pet. for Original Tax Appeal (filed Oct. 31, 2001)
at 17-18.) Barring about three sentences in their reply brief, however, the
Petitioners presentation to this Court (both written and oral) has focused solely on
how they are entitled to the charitable purposes exemption. (Cf. Petrs Reply
Br. at 8 with Petrs Br. and Oral Argument Tr.) Consequently, the
Court deems the Petitioners claim for the educational purposes exemption waived.
Internal Revenue Code § 501(c)(3) exempts from federal income taxes those
corporations that meet specified criteria.
Footnote: Westview leased this land to HII; it is part of Westviews
Footnote: The Healthplex also offers a variety of discounted memberships. For
instance, spouses of current members may join for a discounted rate of $49.50
per month; monthly memberships for children range from $1.25 (for children between the
ages of one and five) to $15.00 (for teens between 15 and 19);
senior citizens pay monthly fees of only $59.50, and their spouses pay $39.50.
Finally, the Healthplex allows special populations to use its facilities for little
or no charge: residents of several area nursing homes/assisted living facilities are
provided free transportation to and from the Healthplex to use the therapy pool
for a nominal charge; members of Special Olympics teams may use the facilities
for daily rates of $2.00 to $4.00; and several organizations conduct summer camps
for inner city youth at the Healthplex for free.
Footnote: The health assessment includes a fifteen-page health/family history questionnaire, a blood
profile (measuring cholesterol and glucose levels), and tests measuring flexibility, muscular strength and
endurance, and body composition.
Footnote: In addition to providing these personalized services, the exercise physiologists are
trained to supervise all exercise that occurs at the Healthplex, intervening when members
are at risk of injuring themselves.
The Healthplex also employs a physician
as its medical director.
Those who use the Healthplex for rehabilitative purposes are not required
to be members of the Healthplex: they pay no fees whatsoever for
utilizing the Healthplex during their rehabilitative term. Those costs are typically passed
through to, and covered by, the outpatients insurance company. Once an outpatient
has completed his or her rehabilitative term, they are free to continue to
utilize the Healthplex by paying the monthly fee or by paying $4.00 per
scheduled visit. The length of an outpatients rehabilitative term is typically dictated
by his or her doctors recommendation as well as insurance coverage. (1
Cert. Admin. R. at 428-29, 497.) In any event, the Healthplex waives
the $209 initiation fee for people who wish to continue their rehabilitation after
insurance coverage stops.
The Court averaged the figures from both the 1999 and 2000
Footnote: This award was based on the fact that only
the total facility was used by various departments of Westview Hospital.
Tennessees statute provides, in pertinent part:
There shall be exempt from property taxation the real and personal property, or
any part thereof, owned by any religious, charitable, scientific or educational institution which
is occupied and used by such institution or its officers purely and exclusively
for carrying out thereupon one (1) or more of the purposes for which
said institution was created or exists[.]
Tenn. Code Ann. § 67-5-212 (1994).
Because the Court has determined that the Petitioners have not shown
that the Healthplex portion of the facility is used for a charitable purpose,
it is unnecessary to address predominant use.
Footnote: As the Petitioners have conceded, the portion of the MP leased
to physicians is not exempt. (Petrs Br. at 47.) Furthermore, the
State Board did not err in determining that the exemption did not apply
to the portion of the MP that is vacant. Indiana Code §
6-1.1-10-16 clearly provides that the exemption applies only to that portion of the
building that is
owned, occupied, and used for charitable purposes. Ind. Code
Ann. § 6-1.1-10-16(a) (West 2004) (emphasis added). An exempt use will not
be imputed to vacant space.
The JCC building houses a day care facility and fitness center
with indoor tennis and racquetball courts, a basketball court, an indoor running track,
cardiovascular equipment, free-weight and strength equipment, whirlpool, swimming pool, locker rooms, and a
Footnote: In other words, the Petitioners are not challenging the constitutionality of
Indiana Code § 6-1.1-10-16
per se, but rather on an as applied basis.
Robbins testified that Pennsylvania Health Clubs was engaged to provide contract
management services to the Healthplex facility. (
See 2nd Cert. Admin. R. at
hermore, during the administrative hearing, David Dyar, HIIs board chairman, indicated
that while it appeared from the Indianapolis Business Journal that the JCC received
the exemption, I havent done that research to look into exactly what thats
all about[.] (2nd Cert. Admin. R. at 760.) In other words,
Dyar admitted that he had neither seen [JCCs] case for their exemption nor
had he reviewed its application or programming. (2nd Cert. Admin. R. at
Robbins testimony was based on two visits he made to the
st Cert. Admin. R. at 1125.)
All cases that would have previously been remanded to the State
Board are now remanded to the Indiana Board of Tax Review (Indiana Board).
Ind. Code Ann. § 6-1.1-15-8 (West 2004). Final determinations made by the
Indiana Board are subject to review by this Court pursuant to Indiana Code
§ 6-1.1-15. Ind. Code Ann. §§ 6-1.5-5-7; 33-26-3-1 (West 2004).