The Connecticut Supreme Court recently reviewed a nonprofit tax exemption case in which the trial court held that the nonprofit provider was not entitled to property tax exemption as a charitable organization because it provided care to private pay patients, was reimbursed by the state and federal governments for Medicaid and Medicare patients, and did not lose money during the tax years in question.

The Connecticut Supreme Court rejected the trial court's unusual holdings, and held that the chapel within the provider's facility was exempt, as a religious house of worship. However, the Connecticut Supreme Court then held that the provider was not otherwise entitled to property tax exemption because its property was not "used exclusively for carrying out [the corporate entity's] charitable purposes." The court held that the "charitable organization ... [must] use its property in such a manner that its activities are entirely dedicated to serving its stated charitable purpose." The Connecticut Tax Code exempts the real property of an entity "organized exclusively for scientific, educational, literary, historical or charitable purposes ... and used exclusively for carrying out one or more of such purposes."

In this case, the Connecticut Supreme Court held that because (1) the provider rendered short-term rehabilitative care in its facility to the general public and such services were not within the scope of the provider's charitable purpose of operating and maintaining a chronic and convalescent nursing home, as set forth in its charter documents, and (2) the services were "not necessary for the accomplishment of the [provider's] charitable purpose," that the provider was not entitled to exemption.

While the Connecticut statute is somewhat unique in relying so heavily on the language of an exempt organization's charter for property tax exemption, the case serves as a reminder that charter documents should be reviewed from time to time to assure an organization's operations are consistent with its purposes. Had the provider's charter encompassed the provision of short-term rehabilitative care to the public, the provider likely would have received a property tax exemption. St. Joseph's Living Center v. Town of Windham, slip op. at 17916 (Conn. Sup. Ct. Mar. 24, 2009).