Indiana Tax Court Affirms 81% Charitable Purposes Exemption for Mental Health Facility

by Faegre Baker Daniels
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On December 8th, the Indiana Tax Court in Starke County Assessor v. Porter-Starke Services, Inc. upheld a charitable purposes exemption applied to a medical building as of the March 1, 2015 assessment date.  Taxpayer operated a community mental health center (CMHC), which was certified by the Indiana Family and Social Services Administration, in the building.  It administered a variety of programs that provided medical and psychiatric care, including addiction treatment, to long- and short-term patients of all ages.  Services were overseen by an unpaid board of directors and both volunteers and paid employees.  Taxpayer received subsidies and financial assistance from several governmental sources. 

The County Board rejected Taxpayer’s exemption claim.  The Indiana Board of Tax Review, following a hearing, granted an 81% exemption for the building.  The Indiana Board concluded that Taxpayer provided a public benefit by fulfilling an essential government obligation.  The Assessor agreed that “providing mental health services constitutes good and noble deeds,” but she nevertheless appealed.  The Assessor claimed that the CMHC was not entitled to a “per se” charitable purposes exemption.  The Court observed that its prior rulings “evaluate whether property is entitled to a charitable purposes exemption by analyzing whether the taxpayer’s acts both relieve human want and provide a public benefit sufficient to justify the loss of tax revenue.”  Different results in those cases were due to the differences in evidence presented and arguments made therein.  A non-profit certified as a CMHC is not automatically exempt from property tax.  Here, the Indiana Board had weighed all the evidence in concluding the exemption was warranted.  It did not find the property was “per se” exempt.

The Court further noted that Indiana has “taken on the burden of providing mental health care for the indigent.”  Once an organization is certified as a CMHC, it is entitled to county and state funding.  Starke County had high rates of drug and alcohol abuse but limited access to mental health services for residents.  Taxpayer charged fees on a sliding scale based on a patient’s ability to pay, and it provided free treatment to the indigent.  And Taxpayer worked with local law enforcement, assuming some of the County’s burden to fight abuse and addiction and the treatment of mental illness.  Thus, the record evidence supported the Indiana Board’s determination.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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