Universal Health Realty v. William J. Fluty, Jr., in his official capacity as Vanderburgh County Assessor

ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
PAUL M. JONES, JR. CURTIS T. HILL, JR.
PAUL JONES LAW, LLC ATTORNEY GENERAL OF INDIANA
Greenwood, IN MEREDITH B. MCCUTCHEON
WINSTON LIN
REBECCA L. MCCLAIN
DEPUTY ATTORNEYS GENERAL
Indianapolis, IN
FILED
IN THE Mar 10 2020, 4:01 pm
INDIANA TAX COURT
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
UNIVERSAL HEALTH REALTY, )
)
Petitioner, )
)
v. ) Cause No. 19T-TA-00012
)
WILLIAM J. FLUTY, JR., in his official )
capacity as VANDERBURGH COUNTY )
ASSESSOR, )
)
Respondent. )
ON APPEAL FROM A FINAL DETERMINATION OF
THE INDIANA BOARD OF TAX REVIEW
FOR PUBLICATION
March 10, 2020
WENTWORTH, J.
In March of 2019, the Indiana Board of Tax Review issued a final determination
that found that Universal Health Realty’s real property tax liability was required to be
computed using the 3% property tax cap for the 2011 through 2015 tax years. The
Court affirms the Indiana Board’s final determination.
FACTS AND PROCEDURAL HISTORY
During the years at issue, Universal Health owned property in Evansville, Indiana
that was used as an inpatient rehabilitative hospital (Hospital). (See, e.g., Cert. Admin.
R. at 123-35, 358-60.) The 85-bed Hospital was operated by Encompass Health
pursuant to a license issued by the Indiana State Department of Health under Indiana
Code § 16-21. (See, e.g., Cert. Admin. R. at 128-35, 358-60.)
The Hospital provided rehabilitative services to patients who, after being
discharged from acute care hospitals, were still not ready to return home. (See Cert.
Admin. R. at 358-60.) While the average length of stay by a patient at the Hospital was
only 2 weeks, some patients stayed as long as two or three months depending on the
extent of their injuries or illnesses. (Cert. Admin. R. at 358.) Upon discharge from the
Hospital, 80% of the patients returned home. (Cert. Admin. R. at 361.) The remaining
20% of patients were admitted to either a nursing home, another acute care hospital, or
hospice upon discharge. (Cert. Admin. R. at 361.)
For each of the tax years at issue, Universal Health’s property tax liability on the
Hospital was computed using the 3% property tax cap applicable to nonresidential
property. (See, e.g., Cert. Admin. R. at 2-5, 18-21, 36-39, 54-57, 72-75.) Universal
Health subsequently appealed those computations, first to the Vanderburgh County
Property Tax Assessment Board of Appeals and then to the Indiana Board. (See, e.g.,
Cert. Admin. R. at 2-5, 18-21, 36-39, 54-57, 72-75.) Throughout those appeals,
Universal Health argued that Indiana Code § 6-1.1-20.6-7.5 required its property tax
liability to be computed using a 2% property tax cap because its property was either 1) a
hospital, 2) a long term care property, or 3) a residential property. (See, e.g., Cert.
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Admin. R. at 2-5, 18-21, 36-39, 54-57, 72-75, 355-56.) On March 11, 2019, after
conducting a hearing on the matter, the Indiana Board issued a final determination
rejecting each of Universal Health’s three arguments. (See Cert. Admin. R. at 344-51.)
Universal Health initiated an original tax appeal on April 24, 2019. The Court
heard the parties’ oral arguments on October 24, 2019. 1 Additional facts will be
supplied when necessary.
STANDARD OF REVIEW
The party seeking to overturn an Indiana Board final determination bears the
burden of demonstrating its invalidity. Osolo Twp. Assessor v. Elkhart Maple Lane
Assocs., 789 N.E.2d 109, 111 (Ind. Tax Ct. 2003). Accordingly, Universal Health must
demonstrate to the Court that the Indiana Board’s final determination in this matter is
arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
contrary to constitutional right, power, privilege, or immunity; in excess of or short of
statutory jurisdiction, authority, or limitations; without observance of the procedure
required by law; or unsupported by substantial or reliable evidence. See IND. CODE §
33-26-6-6(e)(1)-(5) (2020).
LAW
Indiana Code § 6-1.1-20.6 governs the computation and allocation of Indiana’s
property tax caps. See generally IND. CODE §§ 6-1.1-20.6-0.3 to -13 (2020) (the “Tax
Cap Statutes”). Specifically, a property’s annual tax liability is capped (i.e., it cannot
exceed) a certain percentage of its gross assessed value under Indiana Code § 6-1.1-
1
The Court conducted its oral argument at the Indiana University Maurer School of Law
in Bloomington, Indiana. The Court thanks Maurer for its hospitality and the parties and their
counsel for traveling to Bloomington and their able advocacy. The Court also wishes to thank
Mr. Steve Paul, adjunct professor at Maurer, for coordinating and scheduling the argument.
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20.6-7.5. See IND. CODE § 6-1.1-20.6-7.5 (2011). The cap is accomplished by applying
a credit in
the amount by which the person’s property tax liability attributable to
the person’s:
(1) homestead exceeds one percent (1%);
(2) residential property exceeds two percent (2%);
(3) long term care property exceeds two percent (2%);
(4) agricultural land exceeds two percent (2%);
(5) nonresidential real property exceeds three percent
(3%); or
(6) personal property exceeds three percent (3%);
of the gross assessed value of the property that is the basis for
determination of property taxes for that calendar year.
I.C. § 6-1.1-20.6-7.5(a). For purposes of this computation, the Legislature has defined
the terms “residential property” and “long term care property.” Indiana Code § 6-1.1-
20.6-4 defines “residential property” as “[r]eal property that consists of: (A) a building
that includes two or more dwelling units; (B) any common areas shared by the dwelling
units; and (C) the land, not exceeding the area of the building footprint, on which the
building is located.” IND. CODE § 6-1.1-20.6-4 (2011) (amended 2013). Indiana Code §
6-1.1-20.6-2.3 defines “long term care property” as property that
(1) is used for the long term care of an impaired individual;
and
(2) is one (1) of the following:
(A) A health facility licensed under IC 16-28.
(B) A housing with services establishment (as
defined in IC 12-10-15-3) that is allowed to use
the term “assisted living” to describe [its]
housing with services establishment’s services
and operations to the public.
(C) An independent living home that, under
contractual agreement, serves not more than
eight (8) individuals who:
(i) have a mental illness or
developmental disability;
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(ii) require regular but limited
supervision; and
(iii) reside independently of their
families.
IND. CODE § 6-1.1-20.6-2.3 (2011).
ANALYSIS
On appeal, Universal Health contends that the Indiana Board’s final
determination must be reversed because it is contrary to law and constitutes an abuse
of discretion. (Pet’r Br. at 4, 6, 8-9.) More specifically, Universal Health argues that its
property tax liability should have been computed using the 2%, not the 3%, tax cap
because its property constitutes 1) a hospital, 2) a long term care property, or 3)
residential property. (Pet’r Br. at 4-11.)
1) Hospital
Universal Health first argues that because its property is a hospital, it was entitled
to have its property tax liability computed during the years at issue using the 2% cap.
Universal Health acknowledges that Indiana Code § 6-1.1-20.6-7.5 does not explicitly
refer to hospitals, but claims two memoranda issued by the Department of Local
Government Finance (“DLGF”) to local assessing officials in 2008 assigns the 2% cap
to hospitals. (See Pet’r Br. at 4-6; Oral Arg. Tr. at 4-6.) The memoranda provided a
general list of property class types along with corresponding cost codes and property
tax cap assignments. (See Cert. Admin. R. at 136, 139, 143-45.) Universal Health
points out that the memoranda assign commercial nursing homes and hospitals a code
of “412” and indicate that they are subject to the 2% property tax cap. (See Cert.
Admin. R. at 136, 139, 143-45.) Thus, Universal Health concludes the memoranda
required its property tax liability be computed using the 2% cap because its property
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was a hospital. (See Pet’r Br. at 5-6.) Universal Health’s reliance on the memoranda,
however, is misplaced.
First, the memoranda explicitly indicate that they are offering non-binding
guidance to local assessing officials. (See, e.g., Cert. Admin. R. at 136 (stating that
“[t]his [M]emorandum will answer [some] questions and suggest classification cap
assignments” (emphasis added)).) In fact, they provide the specific disclaimer that
“depending on the circumstances some propert[ies ] may have more than one possible
[property tax] cap. The ultimate decision on the most appropriate property class code
and [property tax cap] rests with the local assessing official.” (See Cert. Admin. R. at
136 (emphasis added).)
Second, and more importantly, the DLGF is authorized to adopt rules,
regulations, and advisory memoranda, like those at issue here, that enable it to
accomplish the purposes of Indiana’s property assessment statutes, but it is not
authorized to make any rules, regulations, or issue memoranda that are inconsistent
with the statutes it administers or that add to or detract from the law as enacted. See,
e.g., IND. CODE § 6-1.1-1-15 (2020) (indicating that the DLGF prescribes the standards
that are to be used in assessing real property); Austin v. Indiana Family & Soc. Servs.
Admin., 947 N.E.2d 979, 982 (Ind. Ct. App. 2011) (explaining that an administrative
agency’s interpretation of a statute is entitled to great weight unless it is inconsistent
with the law itself); Lowe’s Home Ctrs., LLC v. Indiana Dep’t of State Revenue, 23
N.E.3d 52, 59 (Ind. Tax Ct. 2014) (stating that an administrative agency “‘may not make
rules and regulations inconsistent with the statute[s] which it is administering, it may not
by its rules and regulations add to or detract from the law as enacted, nor may it by rule
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extend its powers beyond those conferred upon it by law’” (citations omitted)), review
denied. Indiana Code § 6-1.1-20.6-7.5(a) explicitly provides that the 2% cap applies to
just three types of property: residential property, long term care property, and
agricultural land. I.C. § 6-1.1-20.6-7.5(a). Thus, Universal Health’s property tax liability
cannot be computed using the 2% cap based on the memoranda because the
Legislature did not list hospital property as a type of property eligible for the 2% property
tax cap under the statute. Accordingly, the Court will not reverse the Indiana Board’s
determination on basis of the memoranda. 2
2) Long Term Care Property
Next, Universal Health argues that it was entitled to have its property tax liability
computed using the 2% cap because it is a “long term care property.” (See Pet’r Br. at
6-8.) “Long term care property” is property that “is used for the long term care of an
impaired individual[] and . . . [a] health facility licensed under IC 16-28.” 3 I.C. § 6-1.1-
20.6-2.3 (emphasis added).
In its final determination, the Indiana Board denied Universal Health’s request for
long term care status solely because the Hospital was not licensed under Indiana Code
§ 16-28, but was licensed instead under Indiana Code § 16-21. (See Cert. Admin. R. at
347-48 ¶¶ 13-14 (explaining that while the Hospital may be subject to certain provisions
of Indiana Code § 16-28, it was not licensed under Indiana Code § 16-28).) (See also
2
Given its resolution of this issue, Universal Health’s argument that the Assessor erroneously
assigned its property a code of “447,” applicable to 1 or 2-story commercial offices, and not the
“412” code applicable to commercial nursing homes and hospitals, (see Pet’r Br. at 4; Oral Arg.
Tr. at 7-11), is moot.
3
Under Indiana Code § 6-1.1-20.6-2.3, a facility can also qualify as a long term care property if
it is either a “housing with services establishment” or an “independent living home.” See supra
pp. 4-5. Universal Health does not seek long term care property status under either of those
definitions. (See Oral Arg. Tr. at 12.)
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Cert. Admin. R. at 128-35, 366; Pet’r Br. at 8 (where Universal Health admits the
Hospital was not licensed under Indiana Code § 16-28).) Universal Health argues
nonetheless that its property is used for the long term care of impaired individuals and is
a health facility, stating that
Indiana Code § 16-18-2-167 provides, in pertinent part, that the term
“health facility” means a building, a structure, an institution, or other
place for the reception, accommodation, board, care, or treatment
extending beyond a continuous twenty-four (24) hour period in a
week of more than four (4) individuals who need or desire such
services because of physical or mental illness, infirmity, or
impairment. . . . [A]t all times during the [y]ears in [i]ssue, the
Property was used to provide “accommodation, board, care, or
treatment extending beyond a continuous twenty-four (24) hour
period in a week of more than four (4) individuals who need or desire
such services because of physical or mental illness, infirmity, or
impairment.” Residents of the Property are admitted to the [H]ospital
due to physical and/or mental impairments. The residents at the
Property stay overnight and often stay several nights (average of
nearly two (2) weeks) as part of their rehabilitation. As a result, the
entire Property is used for “long term care” purposes, as defined in
the Indiana Code.
(Pet’r Br. at 7-8 (citations omitted).) Universal Health concludes, therefore, that its
property would have qualified as a long term care property but for the Indiana Board’s
arbitrary distinction “as to whether a hospital must be ‘subject to IC 16-28’ or ‘licensed
under IC-28[.]’” (Pet’r Br. at 8 (citation omitted).)
When construing a statute, the primary goal is to determine and apply the intent
of the Legislature in enacting that statute. See Hamilton Square Inv., LLC v. Hamilton
Cty. Assessor, 60 N.E.3d 313, 317 (Ind. Tax Ct. 2016), review denied. The best
evidence of this intent is found in the plain language of the statute itself, as chosen by
the Legislature. See id. Consequently, meaning must be given to each and every
word used in a statute because it will not be presumed that the Legislature intended to
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enact a statutory provision that is superfluous, meaningless, or a nullity. See id. In a
similar vein, when the language of a statute is clear and unambiguous, the meaning of
statute may not be expanded or contracted by reading into it language or words that
simply are not there or, alternatively, omitting from the statute language or words that
are there. See DeKalb Cty. E. Cmty. Sch. Dist. v. Dep’t of Local Gov’t Fin., 930 N.E.2d
1257, 1260 (Ind. Tax Ct. 2010).
The Indiana Board did not create or apply an arbitrary distinction when it
determined that Universal Health’s property did not qualify as a long term care property
because it was not a health facility licensed under Indiana Code § 16-28. Instead, the
Indiana Board applied the plain language of Indiana Code § 6-1.1-20.6-2.3 exactly as it
was written, giving meaning to the words intentionally chosen by the Legislature. As a
result, the Court will not reverse the Indiana Board’s final determination on this basis
either.
3) Residential Property
Finally, Universal Health claims it was entitled to have its property tax liability
computed during the years at issue using the 2% tax cap because its property was a
“residential property.” (See Pet’r Br. at 9-10.) To be considered a “residential property,”
Universal Health’s property must contain “two (2) or more dwelling units[.]” See I.C. §
6-1.1-20.6-4.
Universal Health argues that because “[its p]roperty is used as an 85-bed
hospital . . . it includes more than two (2) ‘dwelling units.’” (Pet’r Br. at 9 (emphasis and
citation omitted).) As support for this argument, Universal Health relies on Indiana Code
§ 32-31-5-3(a), a general provision in Indiana’s Landlord Tenant statutory scheme, that
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defines a “dwelling unit” as “a structure or part of a structure that is used as a home,
residence, or sleeping unit[.]” (See Pet’r Br. at 9 (quoting IND. CODE § 32-31-5-3(a)
(2011) (emphasis added)).) In other words, Universal Health maintains that under
Indiana Code § 32-31-5-3, each of its 85 beds constitutes a sleeping unit and, in turn, a
dwelling unit. (See Pet’r Br. at 10.) The Court, however, does not find this argument
persuasive.
As previously explained, the Court gives effect to the Legislature’s intent when
construing a statute, finding the best evidence of that intent in the plain language of the
statute itself. See Hamilton Square Inv., 60 N.E.3d at 317. Statutory words and
phrases are understood in their plain, ordinary, and usual sense. Johnson Cty. Farm
Bureau Co-op. Ass’n, Inc. v. Indiana Dep’t of State Revenue, 568 N.E.2d 578, 581 (Ind.
Tax Ct. 1991), aff’d, 585 N.E.2d 1336 (Ind. 1992). Moreover, the words of a statute are
read within the context of the whole statutory act of which they are a part as well as in
harmony with other statutes applicable to the same subject matter. Id. at 584.
Accordingly, Universal Health’s reliance on the definition of “dwelling unit” found in
Indiana’s Landlord Tenant statutory scheme is too remote to be reliable when the
meaning of the term “dwelling unit” can be ascertained from Indiana’s property tax
statutory scheme (i.e., Title 6, Article 1.1) itself.
Indiana Code § 6-1.1-12-37 defines “dwelling” as “[r]esidential real property
improvements that an individual uses as [her] residence, including a house or garage.”
IND. CODE § 6-1.1-12-37(a)(1) (2011). Under this definition, a residence is much more
than just a bed. See, e.g., Kellam v. Fountain Cty. Assessor, 999 N.E.2d 120, 122 (Ind.
Tax Ct. 2013) (explaining that one’s principal place of residence is “‘an individual’s true,
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fixed, permanent home to which the individual has the intention of returning after an
absence’” (quoting 50 IND. ADMIN. CODE 24–2–5 (2009))), review denied; Brookover v.
Kase, 83 N.E. 524, 524 (Ind. Ct. App. 1908) (stating that “[r]esidence, as used in our tax
laws, means a permanent abode, as distinguished from a temporary sojourn” (citation
omitted)). See also WEBSTER’S THIRD NEW INT’L DICTIONARY 1931 (2002) (defining
“residence” as a “dwelling place, abode, or habitation to which one intends to return as
distinguished from a place of temporary sojourn or transient visit”).
The evidence in this case reveals that patients who stayed at Universal Health’s
property during the years at issue did so temporarily. (See Cert. Admin. R. at 358, 361
(indicating that patients stayed at the property for a short period of time before either
returning home, being admitted to an assisted/skilled living facility, or being admitted to
hospice).) As a result, Universal Health’s 85 beds did not constitute 85 individual
dwelling units. Because Universal Health’s property was not comprised of multiple
dwelling units, it did not qualify as a “residential property” for purposes of the 2%
property tax cap under Indiana Code § 6-1.1-20.6-7.5(a). Therefore, the Court will not
reverse the Indiana Board’s final determination on this basis either.
CONCLUSION
Universal Health has not demonstrated that the Indiana Board’s final
determination is contrary to law or constitutes an abuse of discretion. Accordingly, the
Indiana Board’s final determination in this matter is AFFIRMED.
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