STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6408

December 17, 1986

TAXATION:

Use of tax-exempt property

The use of tax-exempt hospital property by physicians, physician groups, or physician professional corporations for emergency room, pathology, radiology, or anesthesiology purposes does not subject the users to taxation under MCL 211.181 et seq; MSA 7.7(5) et seq.

Honorable Paul Hillegonds

State Representative

The Capitol

Lansing, Michigan 48913

You have requested my opinion on a question relating to the taxation of lessees or users of exempt real property pursuant to MCL 211.181 et seq; MSA 7.7(5) et seq. Generally, you inquire if the lease or use of tax-exempt hospital property by physicians, physician groups, or physician professional corporations subjects them to taxation under MCL 211.181 et seq; MSA 7.7(5) et seq.

MCL 211.181(1); MSA 7.7(5)(1), provides:

In MCL 211.182; MSA 7.7(6), the Legislature has provided:

It must be initially observed that if the lessees or users of real property which is exempt from general ad valorem taxation become subject to taxation under MCL 211.181 et seq; MSA 7.7(5) et seq, the property itself remains exempt and its owners do not owe a tax. The lessees or users become liable for a specific tax, not an ad valorem tax. US v Detroit, 345 Mich 601, 608; 77 NW2d 79 (1956), aff'd, 355 US 466, 469-470; 78 S Ct 474; 2 L Ed 2d 424 (1958).

The Legislature imposed the tax to ensure that lessees of tax exempt property will not receive an unfair advantage over lessees of privately-owned property. Detroit v National Exposition Co, 142 Mich App 539; 370 NW2d 397, lv den sub nom, In re Acquisition of Land for the Central Industrial Park Project, 423 Mich 861 (1985).

The leading case on the question is Baker v State Tax Commission, 395 Mich 151; 235 NW2d 322 (1975), reh den sub nom, Baker v City of Ann Arbor, 395 Mich 923 (1976), where office space in a tax-exempt hospital was used by physicians to conduct all or part of their medical practices on the premises of the hospital. The physicians had exclusive dominion and control over these offices and used them to conduct their respective private practices. The court held that this use was a taxable use by persons carrying on a business for profit.

It is significant to note that the physicians in Baker were taxed only upon those portions of the tax-exempt hospital property over which the physicians had exclusive control. The physicians were not taxed for their use of general hospital facilities such as operating and emergency room facilities of the hospital over which they did not exercise exclusive control.

You inquire specifically whether the use of tax-exempt hospital property for such functions as emergency room, pathology, radiology and anesthesiology services by physicians, physician groups, or physical medical professional corporations would subject them to taxation under MCL 211.181 et seq; MSA 7.7(5) et seq.

Contrary to the exclusive private office use by physicians, physician groups, and professional physician corporations in Baker, tax-exempt hospital property devoted to emergency rooms, pathology labs, radiology, and anesthesiology services is not duplicated in physician offices in commercial structures outside a hospital. Such services are an integral party of necessary hospital operations.

The Legislature did not intend, and Baker does not require, that every portion of a tax-exempt hospital utilized by a physician or physician group be subject to the lessee-user tax imposed by MCL 211.181; MSA 7.7(5). Physicians visit their patients in the semi-private and private rooms of a tax exempt hospital on a daily basis, perform operations in the operating rooms and other facilities as need may require, and use such other facilities of the hospital as may be necessary to treat their patients admitted to the hospital. The premises for the provision of emergency room, pathology, radiology, and anesthesiology services by physicians or physician groups in facilities of the hospital are not under the exclusive control of the physician or physician groups ministering to their own patients.

While each of these medical practitioners is carrying on a business for profit, nevertheless, the use of the hospital premises does not subject the medical practitioner to the tax in the absence of a showing of exclusive occupancy of particular parts of the tax-exempt hospital premises.

In resolving the question whether MCL 211.181 et seq; MSA 7.7(5) et seq, impose a tax upon medical practitioners, it must be observed that the scope of statutes imposing taxes may not be extended by implication. If the language of imposition is doubtful, the doubt must be resolved in favor of the taxpayer. In re Dodge Brothers, 241 Mich 665; 217 NW 777 (1928). The imposition provisions of a taxing statute are to be construed narrowly and in favor of the taxpayer, just as exemption provisions must be strictly or narrowly construed in favor of the taxing authority. Evanston YMCA Camp v. State Tax Commission, 369 Mich 1, 7; 118 NW2d 818 (1962), app dis sub nom, Wabaningo Boy Scout Camp v Michigan Tax Commission, 375 US 19; 84 S Ct 63; 11 L Ed 2d 39 (1963).

It is my opinion, therefore, that the use of tax-exempt hospital property by physicians, physician groups, or physician professional corporations for emergency room, pathology, radiology, or anesthesiology purposes, does not subject the users to taxation under MCL 211.181 et seq; MSA 7.7(5) et seq.

Frank J. Kelley

Attorney General