Board of Supervisors v. Group Health Ass'n ( 1992 )

JUSTICE LACY

delivered the opinion of the Court.

This appeal involves a determination by Fairfax County that Group Health Association, Inc. does not qualify for an exemption from the Fairfax County Business, Professional, and Occupational License (BPOL) tax under Fairfax County Code § 4-7-1 (a)(3).

Group Health Association, Inc. (GHA) is a health maintenance organization certified under the District of Columbia Non-profit Corporation Act with its principal place of business in Washington, D.C. GHA has approximately 157,000 members. Presently, it has four health care centers in Fairfax County which, “[i]n terms of staffing and equipment, . . . rank somewhere between a hospital emergency room and a private physician’s office.”

In 1982, GHA applied for an exemption from the Fairfax County BPOL and personal property taxes. The exemption was granted for the BPOL tax, but the County denied the request for exemption from the personal property taxes.

On October 30, 1989, GHA received a letter from the Fairfax County tax assessment office revoking the exemption from the BPOL taxes because GHA “is a membership organization and services are provided to members only.” GHA filed a declaratory judgment action seeking a determination that the County’s revocation of GHA’s exemption from the BPOL tax was improper. After an ore tenus hearing, the trial court ruled that GHA was operating its “facilities for the welfare of the residents of the area” and that it qualified for the exemption from the BPOL tax under the Fairfax County Code. We awarded the County an appeal.

The Fairfax County Code defines the persons covered by the BPOL tax and then grants the exemptions by the definition:

Such terms shall not include a volunteer fire department, a volunteer rescue squad or a nonprofit organization operating a community center . . . and facilities for the welfare of the residents of the area.

Fairfax County Code § 4-7-1 (a)(3).

The County asserts that the trial court erred when it admitted evidence of GHA’s activities benefitting people who were not residents of Fairfax County. The error was compounded, the County argues, when the trial court applied an erroneous legal standard by interpreting the phrase “residents of the area” to include “the general area of Northern Virginia.” The County points out that it is illogical to conclude that the Fairfax County Board of Supervisors would authorize exemption of an entity from the Fairfax County BPOL tax based on activities that benefitted residents of another county or city. We agree.

The Code contains no definition of “the area,” but it is well established that exemptions to taxation provisions must be strictly construed against the taxpayer. Commonwealth v. Manzer, 207 Va. 996, 1000, 154 S.E.2d 185, 189 (1967). Certainly nonprofit organizations can and do engage in activities which benefit residents of more than one jurisdiction. To qualify for the exemption in issue here, however, an entity must show activities which benefit the residents of Fairfax County.

The trial court identified a number of GHA’s activities as activities qualifying GHA for the exemption. These included assistance of low income families with health care needs, training programs, medical research, and sharing of medical rounds with pediatricians at a Fairfax hospital. Assuming, without deciding, that these activities are appropriate indicia for determining whether the exemption applies, the evidence in this record as to the specific enhancement of the welfare of Fairfax County residents resulting from these activities is lacking.^* For example, medical services provided to non-members through teaching assignments and pediatric rounds are required to maintain GHA’s admitting privileges in local hospitals. GHA takes no Medicaid patients and has no emergency room. GHA participates in the Fairfax County children’s program, along with 250 private physicians and dentists who are subject to the BPOL. There is no evidence of how many residents of Fairfax'County are beneficiaries of GHA’s special assistance fund, designed to assist GHA members in paying premiums for a six-month period and to supplement expenses incurred for medical conditions the plan does not cover.

The taxpayer has the burden of proving that it qualifies for an exemption. Id. at 1000, 154 S.E.2d at 189. We cannot say that GHA has met that burden. When there is any doubt, the doubt must be resolved against the one claiming the exemption. Golden Skillet Corp. v. Commonwealth, 214 Va. 276, 278, 199 S.E.2d 511, 513 (1973).

Accordingly, we will reverse the judgment of the trial court and enter final judgment in favor of Fairfax County.

Reversed and final judgment.

* Whether these activities came within the requirement of “operating . . . facilities for the welfare of the residents” (emphasis added), as stated in the ordinance, was not addressed by the parties or by the trial court, and we express no opinion on the question here.