Wisconsin Supreme Court Reverses Covenant
The Wisconsin Supreme Court has just issued its decision in Covenant Healthcare v. City of Wauwatosa, a key decision involving the availability of a property tax exemption for freestanding outpatient facilities. The Supreme Court has ruled in favor of Covenant and the exemption, rejecting every argument raised by the City of Wauwatosa and reversing the Court of Appeals. The Court concluded that the St. Joseph’s Outpatient Center involved in the case met the criteria for exemption under section 70.11(4m) of the Wisconsin Statutes insofar as it was (a) used for the primary purposes of a nonprofit hospital, (b) not a doctor’s office, and (c) not used for a commercial purpose. The Court also concluded that although earnings of St. Joseph’s might inure to the benefit of Covenant, this did not violate the prohibition in section 70.11(4m) against earnings inuring to the benefit of a “member” — the Court concluded that the term “member” was not intended to apply to a not-for-profit entity such as Covenant.
Chief Justice Shirley Abrahamson dissented. Justice Abrahamson concluded that the outpatient center was tantamount to a “doctor’s office” and therefore ineligible for exemption since the center was substantially similar to independent physician-owned outpatient clinics that would not meet exemption criteria under the statute. While acknowledging that loss of an exemption might have a significant impact on rural hospitals and other providers, Justice Abrahamson stated that it was the legislature, not the courts, that would need to address those concerns.
To access this opinion, click here.