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May 11, 2017

MSC holds tax exemption open to all educational institutions regardless of for-profit status

All charitable, educational, and scientific institutions--whether nonprofit or for-profit--are exempt from personal property tax under the General Property Tax Act, according to the Michigan Supreme Court's recent decision in SBC Health Midwest Inc. v. City Of Kentwood, No. 319428. Though a specific provision in the Act exempts real and personal property of a not-for-profit educational institution from tax, that provision does not negate the more general provision exempting from taxation the personal property of all educational institutions, regardless of nonprofit or for-profit status.
 
SBC Health, a for-profit corporation, had requested a tax exemption under MCL 211.9(1)(a) from Kentwood for personal property used to operate the Sanford-Brown College Grand Rapids. The tribunal determined that this exemption applied only to nonprofit educational institutions because the Legislature had limited the tax exemption for personal property to non-profit educational institutions in MCL 211.7n.  The MSC essentially held that the limitations in MCL 211.7n had no bearing on the scope of MCL 211.9(1)(a). If anything, MCL 211.7n shows the Legislature knows how to limit the exemption to nonprofit institutions if it desires to do so and is presumed to have intentionally omitted such a requirement from MCL 211.9(1)(a).
 
The Court further held that the tax exemption available under MCL 211.9(1)(a) does not conflict with the constitutional mandate that nonprofit educational organizations be exempt from real and personal property taxes. The constitutional mandate guarantees tax exemption for nonprofit educational institutions. It does not prevent the Legislature from passing laws that provide tax benefits for other organizations.

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