Charitable Organizations
The Beechwood Independent School District has challenged the tax-exempt status of a cluster of properties on Dixie Highway in Fort Wright belonging to The Christ Hospital Network, according to court documents from the Kentucky Board of Tax Appeals.
The documents indicate the district’s desire to levy property taxes on the buildings, including medical facilities operated by Christ Hospital and several for-profit tenant businesses.
Following a series of conferences and appeals throughout the legal system, the state tax board upheld the properties’ tax-exempt status.
Christ Hospital’s main offices are in Cincinnati, but it operates other locations throughout the region. The healthcare network obtained the properties in 2020 and applied for property tax exemption from the Kenton County Property Valuation Administrator, or PVA, a year later.
Christ Hospital has federal 501(c)(3) nonprofit status, which exempts it from federal income tax. Property taxes are managed locally, and in its application to the valuation administrator’s office, the network categorized itself as a public charity.
Charities — as well as libraries, government buildings, educational institutions and religious institutions — are eligible for property tax exemption under the Kentucky Constitution.
The Kenton County PVA agreed with the hospital’s argument and granted the exemption in December 2021.
Early in 2022, the district learned about the exemption and began corresponding with the PVA about appealing the decision so that the district could levy taxes on the properties.
This would have the effect of generating a fresh revenue stream for the district.
LINK nky was not able to ascertain how much revenue such a tax would bring in.
In any case, under Kentucky law, taxpayers may challenge the valuation of a property by conferencing with the county PVA to discuss the office’s assessment. Following this statutory procedure, the district and PVA office held a conference on May 20, 2022.
The administrator’s office stood its ground, refusing to revoke the exemption it granted to the hospital’s properties. So, three days after the conference on May 23, the district appealed the case to the Kenton County Board of Assessment Appeals, which is responsible for handling challenges to the county valuation administrator’s assessments.
On June 15, 2022, the Board of Assessment Appeal issued a statement saying, “The Board does not have the authority of determine the charitable exemption of property.” It said that it would send the case to the State Board of Tax Appeals for further review.
In the meantime, Beechwood made its own appeal to the Kentucky Board of Tax Appeals.
In response, Christ Hospital filed a motion to dismiss the appeal, claiming that Beechwood failed to petition the PVA in the time allowed by Kentucky law. It also claimed that, as a public institution funded by tax dollars, Beechwood could not legally challenge the PVA’s evaluation because a taxpayer must file an appeal, according to state law.
On April 28, the Kentucky Board of Appeals sided with Christ Hospital, agreeing that Beechwood failed to follow statutory procedure, dismissing the district’s appeal.
“The government appropriately decided the matter,” said the The Christ Hospital Network in an email statement to LINK nky, “ensuring that we can continue to provide the residents of Northern Kentucky with world class and nationally recognized healthcare services.”
Beechwood Independent School District declined to speak on the record about the case.
A matter of grace
At first glance, the stakes of the case revolve around whether or not a large healthcare institution like Christ Hospital, which has nearly $1.5 billion in assets, according to the company’s most recent IRS documents, can be subject to local school taxes, even if it’s structured as a nonprofit.
Yet, the specifics of the case have less to do with whether or not the particular properties on Dixie Highway ought to be taxed and more to do with compliance with administrative procedures.
Although the Board of Tax Appeals’ opinion conceded that Beechwood followed the proper appeal procedures for taxpayers, it pointed out the district did not make its appeal in the time allowed by Kentucky law.
“As noted above, Beechwood filed it appeal on May 23, 2022,” the board wrote. “This was more than one work day after the inspection provided for in KRS 133.045… For its request to be timely, Beechwood had to submit it no later than May 20, 2022.”
To make its case, the board cited precedent from a 2007 Kentucky court case: Spencer County Preservation, Inc. vs. Beacon Hill, LLC.
“An appeal from an administrative decision is a matter of legislative grace and not a right, and thus the failure to strictly follow statutory guidelines for the appeal is fatal,” the cited court case said.
The board went on to say the failure of Beechwood to submit its appeal in the allowed time disqualified the Kenton County Board of Assessment Appeals from having jurisdiction over the matter at all, echoing the assessment board’s own reasoning. The assessment appeals board didn’t even have the power to escalate the case to the state, per the opinion.
“Because Beechwood’s request to the BAA was untimely, the BAA failed to acquire jurisdiction over the matter. Thus, its final decision is void and no appeal to the Board [of Tax Appeals] is permitted,” the board’s opinion stated.
Ultimately, the state board dismissed the appeal, vindicating Christ Hospital’s exemption status. If the district wishes to continue the case, it must appeal to the Kenton County Circuit Court.