Unity Health-White County Medical Center was ruled to be exempt from county property taxes earlier this week, with White Country Circuit Judge Craig Hannah overturning County Judge Michael Lincoln’s earlier decisions against the hospital.
Hannah made the decision that “each of the 13 parcels at issue as set forth in the Petitions filed herein are entitled to exemption from county property taxes for the applicable years pursuant to ACA [Arkansas Code Annotated] 26-3-301.” Unity Health had filed for the relief against Gail Snyder, in her official capacity as the White County tax assessor, after she had denied its tax-exempt status for several years and Lincoln had upheld her decisions. A bench trial before Hannah was held Dec. 9.
“We appreciate Judge Hannah for recognizing Unity Health meets the test under Arkansas law to be exempt from paying property taxes,” Unity Health President and Chief Executive Officer Steven Webb said in a statement following Hannah’s ruling.
The test Webb was referring to was referenced by Hannah in an order issued with the judgment Tuesday morning.
“Most recently, the Court of Appeals has set forth a three-part test of the proof required for a charitable hospitable to be entitled to the public charity tax exemption: Tax-exempt status for charitable hospitals has been recognized in Arkansas for over 100 years. ... [A] benevolent and charitable organization’s property used as a hospital may be constitutionally exempt from taxation (1) if it is open to the general public, (2) if no one may be refused services on account of inability to pay, and (3) if all profits from paying patients are applied to maintaining the hospital and extending and enlarging its charity.”
Lincoln laughed when he first heard Hannah’s ruling and said that it really didn’t surprise him. In a text message to The Daily Citizen later after a statement was requested, he said, “I really have no comment about Judge Hannah’s ruling.”
Unity Health’s attorney, David Wilson of Little Rock, said “White County Medical Center was pleased with the result. We believe it was the right result and we are glad to see that the judge agreed.
White County’s attorney, Justin Owens of Conway, had yet to return a call at deadline with his reaction to the judgment.
At the end of the bench trial, Hannah had told lawyers for both sides that they had until Dec. 18 to submit to him their findings of fact and conclusion of law before he would make a ruling.
In his order, Hannah referenced the Arkansas Constitution, Article 16, Section 5(b), “the following property shall be exempt from taxation … buildings and grounds and materials used exclusively for public charity.” He also referenced ACA 26-3-301, “All property described in this section, to the extent limited, shall be exempt from taxation … (7) all buildings belonging to institutions of purely public charity, together with the land actually occupied by these institutions, not leased or otherwise used with a view to a profit, and all monies and credits appropriated solely to sustaining, and belonging exclusively to, those institutions.”
The factual findings that were presented show the timeline of events in this case.
“White County Medical Center, doing business as Unity Health (‘WCMC’) filed 11 applications for public charity tax exemption in 2017, and 13 applications in both 2018 and 2019. The White County assessor denied all those applications. In issuing the denials, the assessor did not evaluate the individual parcels and did not apply the applicable law. The denials were appealed to the White County Court, and for each of these years and for each of these parcels, the denial of the exemption was affirmed. WCMC appealed to this court.”
Hannah wrote that “WCMC presented proof that it has been a nonprofit corporation since 1994, it operates a health care organization, it has had a federal 501(c)(3) tax designation since 1995 and has as its charitable mission the providing of medical care to people in need of that care, regardless of their ability to pay. This proof was unrefuted, conceded and not disputed by the assessor.”
It was noted by Hannah under “factual findings” that “the assessor pointed out that WCMC offers medical services that can sometime be considered ‘elective or not medically necessary,’ depending upon what the medical provider determines under the particular circumstances. If the medical provider deems the service to not be medically necessary, the service will not be provided as charity, but will be provided if the patient chooses to pay for it.
“The assessor argued that this is a denial of services based upon ability to pay. However, the clearly stated charitable mission of WCMC is to provide medically necessary care as charity, not free elective procedures, and the law allows the revenue from paying patients to be used to fund the overall operation and further the charitable mission.”
He wrote that it was also pointed out by Snyder “that patients who do not pay their bills, do not qualify for charity or make other arrangements for payment may have their delinquent accounts turned over to collection agencies where collection is pursued. However, the evidence was unrefuted that these payment collection efforts only occur after medical services have been provided (so none of these people have been denied care based upon inability to pay) and does not occur if a patient requests charity and falls within the criteria of the Financial Assistance Policy. The parameters, function and purpose of the Financial Assistance Policy were not questioned or criticized by the Assessor.”
Also in factual findings, Hannah referenced Snyder calling a witness who testified that at the Unity Health-Clarity Health and Wellness Center, one of the 13 parcels, “there had previously been a sign posted stating generally, or giving the impression that if payment was not made at the time of service or other arrangements made, the patient could not see the doctor.”
“The witness had previously testified to a different description of the sign at an earlier hearing, omitting the part about not being able to see the doctor,” Hannah wrote. “A witness called by WCMC testified that she had taken her parents to that same clinic regularly over the past three years and has never seen such a sign. WCMC’s director of clinics testified she has been in that clinic regularly over the course of the years in question and has never seen such a sign.”
Regarding surplus revenue or profit, Hannah wrote that “WCMC presented proof that in years where revenue from its overall operations, as well as from its operations specifically at each of the 13 parcels, resulted in revenue in excess of expenses, those funds were applied to maintaining WCMC and extending and enlarging its charity.”
Another area that came up in the court hearing, pointed out by Snyder, was bonuses paid out to WCMC employees as part of their compensation, specifically in 2018 and 2019.
“The Assessor argued that since these payments were discretionary and not contractually required, WCMC was using ‘surplus revenue’ in a way that was not maintaining WCMC and extending and enlarging its charity,” Hannah wrote. “WCMC presented unrefuted evidence that both bonuses and salaries are an expense of employee compensation (not paid out of ‘surplus revenue’), and that bonuses are used as a basis to increase employee satisfaction and improve employee retention without committing to higher fixed salaries with no flexibility in subsequent years.
“WCMC presented unrefuted evidence that it is the business judgment of the administration that managing expenses by having a flexibility to be able to strike a balance between salaries and bonuses is a necessary part of successfully maintaining the ongoing operation and mission of WCMC. WCMC also presented unrefuted proof that the average wages and salaries paid by WCMC, even with the bonuses added in, are in every category below the Arkansas average for similar medical care facilities.”
In the final part of the factual findings, Hannah wrote that “upon application of the law to the evidence and these finds of fact, the Court concludes that WCMC has met its burden of proof beyond a reasonable doubt. WCMC is entitled to exemption from county property taxes pursuant to ACA 26-3-301 as to each of the 13 parcels identified in the applications and as set forth in Plaintiff’s Exhibits 5, 7 and 9 and as set forth in the applications that are filed as part of the record in this matter.”