Government, Law, and Nonprofits

Township drops assessment against nonprofit

Attorney expects other organizations will file for tax-exempt status after Baruch’s success.

September 29, 2017
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Baruch Senior Ministries is celebrating its newly affirmed tax-exempt status in at least one Michigan township and possibly several more.

The Grand Rapids-based adult foster care provider with 23 locations was party to an almost seven-year-long legal challenge against Saginaw County’s Tittabawassee Township that has been resolved.

Baruch sought real and personal property tax exemptions as a charitable institution for its Stone Crest Assisted Living facility in the township. The township argued by limiting the availability of its income-based subsidy, Baruch did not meet the requirement for nondiscriminatory services and, thus, did not qualify as a charitable institution.

As the Business Journal reported in August, the Michigan Supreme Court issued an opinion in the case clarifying one of the factors defining charitable organizations, saying charities may use reasonable criteria for who is eligible to receive services if it is related to the mission of the charity.

The Supreme Court then remanded the case to the Michigan Tax Tribunal, which set a hearing for Sept. 19.

Terry Zabel, a tax attorney at Grand Rapids-based Rhoades McKee law firm, represented Baruch in its case against Tittabawassee Township. He said the hearing did not end up being necessary.

“The (Tax Tribunal) hearing was scheduled for Sept. 19, but prior to that, in late August, Tittabawassee Township conceded Baruch was entitled to the exemption,” Zabel said.

There were 14 Tax Tribunal cases pending involving other municipalities in which Baruch has locations. Zabel said more municipalities are expected to follow suit in conceding Baruch’s tax-exempt status.

“At this point, I believe there have been orders entered in two of those in which they have conceded Baruch is entitled to the exemption, and there are others in which the negotiation is in process for that,” he said.

Zabel said this case is likely to be used as precedent for other nonprofits that have been taxed for real and personal property by municipalities looking for loopholes to fill revenue gaps.

“The new standard is different than the tribunal and the assessors have been using in the past,” Zabel said. “So, the charitable organizations will look to see whether any restrictions they have on the distribution of their charity to the needy party will meet the guidelines.”

He said it’s likely nonprofits’ legal challenges regarding their exempt status will trickle in after February, which is when municipalities will send bills for the coming year.

“At that point, they will know whether the municipality will decide to treat them as exempt or not exempt,” Zabel said. “I don’t think this will happen until the municipalities have reviewed their position given the Tittabawassee case.”

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