SBC Health Midwest, Inc. v. City of Kentwood
Docket No. 151524
Trial-lawyers’ bottom line: For-profit schools are eligible for tax exemption under MCL 211.9(1).
SBC Health Midwest ran Sanford-Brown College Grand Rapids, a for-profit school located (oddly) in Kentwood, Michigan. SBC requested a tax exemption for the school under MCL 211.9(1). The City of Kentwood denied it. SBC appealed the decision to the Michigan Tax Tribunal, which also denied the exemption, holding that the statute provides an exemption for nonprofit schools only. SBC appealed again, finally winning in the Court of Appeals, which reversed the tax tribunal’s decision. The Supreme Court granted leave to appeal; the question was whether a for-profit school could avail itself of the property exemption in MCL 211.9(1)(a).
Justize Zahra, writing for a unanimous court, held that the statute provides an exemption for for-profit schools in addition to non-profit schools. As usual, the Court looked to the plain meaning of the statute’s text. MCL 211.9(1)(a) states that the following property is exempt from taxation: “The personal property of charitable, educational, and scientific institutions incorporated under the laws of this state.” As Justice Zahra wrote, “Conspicuously absent from the statute is any language indicating that the tax exemption applies only to nonprofit entities.”
The Court dismissed the tax tribunal’s in pari materia analysis. The in-pari-materia canon provides that “laws dealing with the same subject . . . should if possible be interpreted harmoniously.” In dismissing the tax tribunal’s analysis, the Court also went out of its way, in a footnote, to clarify that the Court of Appeals erred by requiring ambiguity before applying the canon. Much of the Court’s opinion was dismissing the arguments put forth by the City of Kentwood, including a constitutional argument and a precedential argument based on Wexford Medical Group v. City of Cadillac, 713 N.W.2d 734 (Mich. 2006). To dismiss the Wexford argument, the Court clarified that there is a difference between a “charitable” organization and an “educational” organization for the purpose of interpreting tax statutes. Wexford, Justice Zahra wrote, was about what makes an organization a “charitable” organization, not about what makes an “educational” one.
In sum, the Court treated this as a fairly straightforward question of statutory interpretation.
Full opinion here.