Thursday, September 19, 2013
Oregon Tax Court Issues Split Property Tax Exemption Decisions for Substance Abuse Treatment Facilities
On August 30th, the Oregon Tax Court issued two opinions that reached opposite results regarding whether a particular substance abuse treatment facility qualified for exemption from property tax. In each case the key question was whether the facility met the "gift or giving" requirement for exemption under applicable case law.
In Hazelden Foundation v. Yamhill County Assessor, the court concluded the facility did not qualify for exemption. It held that the "gift or giving" requirement incorporated a "doors are open to rich and poor alike" element, and that the Hazelden Foundation failed to satisfy this element. More specifically, the court found that the Foundation limited financial assistance to patients unable to afford the Foundation's normal, relatively high fees and refused to accept payment from Medicare or Medicaid , suggesting "that taxpayer's services are specifically targeted at the more affluent segments of our society."
In contrast, in Serenity Lane Inc. v. Lane County Assessor, the court concluded that the facility did qualify for exemption. While the court found that the record was somewhat mixed on whether Serenity Lane met the gift or giving requirement, the combination of the facility's acceptance of patients on Medicaid, its charging of below market rates for its detox services and certain other services, the offering of scholarships to some financial needy patients, and its internship program led the court to conclude that the facility did satisfy that requirement.
These decisions underline the fact-sensitive nature of such property tax exemption inquiries, and high litigation costs for both sides of litigating these disputes. Given the current pressures on both nonprofit budgets and state and local treasuries, such disputes are unlikely to become any less frequent, however.