Request By:
Mr. John C. LaVelle
Deters, Benzinger & LaVelle
P.O. Box 972
210 Garrard Street
Covington, Kentucky 41012
Opinion
Opinion By: Robert F. Stephens, Attorney General; By William S. Riley, Assistant Attorney General
In your recent letter to the Attorney General, it is stated that St. Elizabeth Medical Center of Covington, Kentucky is a non-stock, non-profit general hospital. The hospital leases various kinds of equipment from out-of-state lessors such as X-ray, respiratory therapy, cardiac monitoring, etc. The lease agreements generally provide that the lessee-hospital is responsible for any taxes on the equipment being leased. The lessor has billed the hospital for property tax due on leased television sets. The question is whether television sets and other equipment leased by a hospital from an out-of-state lessor is subject to ad valorem property tax in the hands of the lessee-hospital.
Section 170 of the Kentucky Constitution exempts institutions of purely public charity from taxation. KRS 132.190 provides that all real and personal property is subject to taxation, unless exempted by the Constitution.
KRS 134.060 states that the holder of the legal title, the holder of the equitable title and the claimant or bailee in possession of property on the assessment date is liable for the taxes thereon. As between themselves, the holder of the equitable title shall list the property and pay the taxes thereon, whether the property is in his possession or not at the time of payment.
The Kentucky Supreme Court has held in
City of Paris v. Burley Tobacco Society, 154 Ky. 320, 157 S.W. 705 (1913); and
John Ross & Co. v. Board of Supervisors of Daviess County, 186 Ky. 589, 217 S.W. 677 (1920), that the party in possession of property on the assessment date is liable for the taxes due.
In
City of Louisville v. Presbyterian Orphans Home Society of Louisville, 299 Ky. 566, 186 S.W.2d 194 (1945), the Court of Appeals decided in an exhaustive opinion, that income-producing realty of charitable institutions is exempt from taxation under Section 170 of the Constitution.
A recent case,
Montana Deaconess Hospital v. Cascade County, Mont., 521 P.2d 203 (1974), held that personal property in the form of X-ray equipment leased by a non-profit hospital and used exclusively for hospital purposes, was exempt from taxation even though the lessor, a private-profit corporation, received a profit from the lease. The case was an interpretation of Section 84-202 of the Statutes of Montana. That statute exempts property that is used exclusively by hospitals and was passed pursuant to the authority of Article 8, Section 5, of the 1972 Montana Constitution.
The Cascade County, Montana, case turned on the fact that the property was leased by a non-profit hospital and used for hospital purposes. The Kentucky Constitution and statutes do not appear to go that far. Under Section 170 of the Kentucky Constitution there is exempt from property tax institutions of purely public charity and the income derived from any property owned by such institutions where the income is used in the furtherance of the charitable institution's objectives.
Since the property in question is not owned by the hospital but is merely leased, it would appear the property would be liable for ad valorem property tax.