Request By:
Mr. Joseph B. Murphy
Assistant Fayette County Attorney
302 First Federal Plaza
Vine & Upper Streets
Lexington, Kentucky 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: William S. Riley, Assistant Attorney General
In your recent letter to the Attorney General, it is stated that Central Baptist Hospital is the owner of an office building on property adjacent to the hospital. Space in the office building is rented to doctors who are on the staff of the hospital.
Request is made for an opinion as to whether income producing property of Central Baptist Hospital is subject to ad valorem property tax.
Section 170 of the Kentucky Constitution provides in part that there shall be exempt from taxation ". . . institutions of purely public charity . . . ." The first question that must be answered in connection with Central Baptist Hospital is whether it is an institution of purely public charity. The first case which gave hospitals a preferred exemption was
City of Dayton v. Trustees of Speers Hospital, 165 Ky. 56, 176 S.W. 361 (1915). The facts there were that a testatrix gave property to three persons in trust for the establishment of a hospital. The hospital received private pay patients. Public patients were also taken. No patients were kept without charge. Some who came of their own accord did not pay. No one was turned away for inability to pay. Profit from private patients who paid for their care and treatment went into the general fund of the hospital, and was used to maintain it.
The Court of Appeals set up the following test for determining whether an institution was one of purely public charity:
"First. Whatever is done or given gratuitously in relief of the public burdens or for the advancement of public good is a public charity. Where the public is the beneficiary, the charity is public, and where no private or pecuniary return is reserved to the giver or to any particular person, but all the benefits resulting from the gift or act go to the public, is a purely public charity; the word 'purely' being equivalent to 'wholly.'"
"Third. An institution founded and endowed as a purely public charity does not lose its character as such, under the tax laws, if it receives a revenue from the recipients of its bounty sufficient to keep it in operation."
To the same effect see
Mason County v. Hayswood Hospital of Mayesville, 167 Ky. 17, 179 S.W. 1050 (1915). In that case a non-profit hospital was incorporated to provide treatment for the poor. Trustees served without compensation and found that no private pecuniary profit had ever been, or could ever be derived. Operating funds came from private donations and from patients who were able to pay. Whenever any surplus funds were available improvements were made.
There have, apparently, been no Kentucky cases in point since the question arose in 1915. The lack of litigation in the field could be viewed as an indication that the court is of the opinion the law on this issue is well settled.
If income derived from the office building owned by Central Baptist Hospital is used in the operation of the hospital and there is no private profit inuring to any individual such income producing property is exempt from ad valorem property taxes.