Opinion
No. 1D21-2523.
12-20-2022
Ayesha SOLOMON, as Property Appraiser of Alachua County, Florida, and John Power, as Alachua County Tax Collector, Appellants/Cross-Appellees, v. SHANDS TEACHING HOSPITAL AND CLINICS, INC., a Florida Not-For-Profit Corporation, Florida Clinical Practice Association, Inc., a Florida not-for profit Corporation, and James Zingale, as Executive Director of the State of Florida Department of Revenue, Appellees/Cross-Appellants.
John C. Dent, Jr. , and Jennifer A. McClain of Dent & McClain, Chartered, Sarasota, for Appellant/Cross-Appellee, Ayesha Solomon; Robert C. Swain , Deputy County Attorney, Gainesville, for Appellant/Cross-Appellee, John Power. H. French Brown, IV of Dean Mead & Dunbar, Tallahassee; Christine R. Davis of Davis Appeals, PLLC, Tallahassee, for Appellees/Cross-Appellants, Shands Teaching Hospital and Clinics, Inc. and Florida Clinical Practice Association, Inc.
John C. Dent, Jr. , and Jennifer A. McClain of Dent & McClain, Chartered, Sarasota, for Appellant/Cross-Appellee, Ayesha Solomon; Robert C. Swain , Deputy County Attorney, Gainesville, for Appellant/Cross-Appellee, John Power.
H. French Brown, IV of Dean Mead & Dunbar, Tallahassee; Christine R. Davis of Davis Appeals, PLLC, Tallahassee, for Appellees/Cross-Appellants, Shands Teaching Hospital and Clinics, Inc. and Florida Clinical Practice Association, Inc. Lewis, J.
Appellants, Ayesha Solomon as Alachua County's Property Appraiser and John Power as Alachua County's Tax Collector, appeal a final summary judgment entered in favor of Appellees, Shands Teaching Hospital and Clinics, Inc. ("Shands") and Florida Clinical Practice Association, Inc. ("FCPA"), in which the trial court determined that the properties at issue that are legally owned by Appellees were immune from ad valorem taxation because they were equitably owned by the University of Florida ("UF"). For the following reasons, we agree and affirm the judgment. Given our disposition on this issue, we do not address the issues raised on cross-appeal.
Factual Background
As provided by law, and as stipulated by the parties, the Florida State University System is established by the Florida Constitution and governed by a Board of Governors, which is a body corporate responsible for operating, regulating, controlling and managing the State University System. A Board of Trustees administers each state university in the State University System pursuant to powers and duties established by the Board of Governors. Each Board of Trustees is a public body corporate and a public instrumentality, and the exercise of its powers is considered to be the performance of an essential public function. The UF Board of Trustees is responsible for setting UF policies in accordance with state law and Board of Governor regulations. UF Health is an academic medical center that fulfills part of UF's function as a state university. UF Health combines education, research and clinical care to teach, practice and develop cutting-edge healthcare services. UF Health is comprised of integrated medical facilities that serve UF's mission to provide medical education, training, research and services to patients. UF Health is predominantly a collaboration among the J. Hillis Health Center at UF, Shands, Shands Jacksonville Healthcare, Inc., Shands Jacksonville Medical Center, Inc., and related faculty practice plans, including FCPA.
Shands was created by the Florida Legislature in 1979 to lease, manage, and operate the teaching hospital and clinics on UF's Gainesville campus. Shands is organized "for the primary purpose of supporting [UF's] Board of Trustees' health affairs mission of community service and patient care, education and training of health professionals, and clinical research." See § 1004.41(4)(a), Fla. Stat. Shands is a major tertiary care teaching institution licensed to operate as an acute care hospital, and it provides clinical settings for UF medical education and training programs.
Board of Governor regulations authorize the establishment of faculty practice plans at state university academic health science centers, including UF's Health Center. FCPA is a faculty practice plan corporation formed to administer the UF College of Medicine's faculty practice plan. FCPA holds legal title to medical office buildings constructed on land owned by Shands and leased to FCPA, in which UF College of Medicine clinical faculty practice, teach, and conduct research in certain medical fields. FCPA provides clinical practice settings in which UF College of Medicine faculty members treat patients as an integral part of their academic activities and of their employment as UF College of Medicine faculty. FCPA also serves the UF College of Medicine as a fiscal agent by billing and collecting on behalf of the College of Medicine professional fees for healthcare services provided by College of Medicine clinical faculty members. FCPA has no employees of its own. Rather, its functions are performed by UF College of Medicine employees. The Legislature directs that Shands' board of directors be appointed, subject to removal, and chaired by UF's president and that UF's Vice President of Health Affairs be the Vice Chair of Shands' board. The UF Board of Trustees has adopted Governance Standards that apply to both Shands and FCPA. Faculty practice plans are supervised by the UF Board of Trustees under regulations issued by the Board of Governors. Both Shands and FCPA are identified as affiliated organizations required to be included in UF's financial statements for financial reporting purposes, due to the significance of their relationship with UF. UF's organization chart for its Office of the Senior Vice President for Health Affairs Academic Organization identifies UF's Senior Vice President for Health Affairs (as President of UF Health) as having responsibility for "UF Health Shands Teaching Hospital and Clinics." Shands' articles of incorporation are subject to approval by the UF Board of Trustees. FCPA's Amended and Restated Articles of Incorporation (12/8/08) were filed with the Florida Department of State by UF's Office of the Vice President and General Counsel. Agreements between UF and Shands provide that UF College of Medicine faculty physicians are on the medical staff of UF Health Shands Hospital and furnish patient care, including but not limited to emergency, hospitalist and clinical services. Patients served by UF College of Medicine faculty physicians, including at Shands' hospital facilities and FCPA's clinical facilities, are either actively participating in or eligible for consideration to participate in research activities conducted by UF. The UF Board of Trustees licenses to Shands the right to use the intellectual property "University of Florida Health" and "UF Health" owned by UF, for consideration.
After unsuccessfully requesting a refund of ad valorem taxes paid on the properties at issue, Appellees filed a Complaint for Declaratory Judgment and Related Relief against Alachua County's property appraiser and tax collector and the executive director of the Florida Department of Revenue. Appellees sought a declaration proclaiming: (1) their properties were immune from ad valorem taxation because they were instrumentalities of the State; (2) their properties were immune from taxation because they were equitably owned by the State; and (3) their properties were exempt from ad valorem taxation. Both sides subsequently filed motions for summary judgment. In its order granting final summary judgment as to the second count and denying summary judgment as to the first and third counts, the trial court set forth in part:
The summary judgment evidence establishes that both Plaintiffs are nonprofit corporations created by or through authority of the Florida Legislature and State University System Board of Governors to implement the University of Florida's health affairs mission. Both Plaintiffs are supervised, and their governance is controlled by the University of Florida for its benefit to fulfill essential roles and indispensable functions in UF's delivery of health education, training, and clinical research. Both Plaintiffs regularly provide financial support to UF's health affairs missions. Both Plaintiffs are recognized and relied upon by the State as virtually an arm of the University of Florida in fulfilling its health affairs mission. For these reasons, the Court determines that Plaintiffs' Alachua County real property is equitably owned by the State of Florida and is therefore entitled to immunity from ad valorem taxes.... The Court determines that the State (through the University of Florida)
"holds virtually all the benefits and burdens of ownership" of these parcels....
Because UF supervises, controls, and approves both Plaintiffs' governance and financial decision-making (e.g., operating and capital budgets and incurring debt) and operations, UF necessarily controls the key property rights regarding these parcels, enjoys the benefits of owning these properties, and bears the burdens of ownership. UF also controls Plaintiffs' specific rights in dealing with these properties, e.g., approving their purchase and sale of real estate, any long-term easement or lease, any lease of significant space, and any lease of a significant dollar amount. Any lease of real property by FCPA must be approved by UF's Office of General Counsel prior to execution. The reciprocal master lease between Shands and FCPA governing their use of each other's real property is for the UF College of Medicine's benefit and restricts use of the property to uses consistent with the College of Medicine's functions (e.g., the lessee may only use the premises for clinical/patient care, medical research, teaching, administrative purposes, and uses incidental thereto). Plaintiffs operate these properties under the umbrella of "UF Health" for UF's benefit; the properties are used by UF College of Medicine faculty to provide student instruction and patient care, enhance their practice skills, and conduct scientific research; the net revenues of each entity inure to UF to support UF's missions; neither Shands nor FCPA is operated for pecuniary profit; and upon dissolution (which UF can control), Shands' and FCPA's assets (including these properties) would revert to UF's benefit.
....
Accordingly, the State (through UF) holds virtually all of the benefits and burdens of ownership, regardless of the fact that legal title may be held in Shands or FCPA. The State is the equitable owner of these properties which are immune from ad valorem tax....
This appeal and cross-appeal followed.
Analysis
A party moving for summary judgment must conclusively show the absence of any genuine issue of material fact. Washington v. Fla. Dep't of Revenue, 337 So.3d 502, 508 (Fla. 1st DCA 2022). A trial court's summary judgment is reviewable on appeal de novo. Id.
Appellants challenge the trial court's determination that the properties at issue that are legally owned by Appellees are equitably owned by the State through UF and thereby immune from ad valorem taxation. See Cason v. Fla. Dep't of Mgmt. Servs., 944 So.2d 306, 309 (Fla. 2006) (noting that Florida law provides that the State is immune from taxation). The concept of immunity from taxation connotes the absence of power to tax while an exemption presupposes the existence of a power to tax. Dickinson v. City of Tallahassee, 325 So.2d 1, 3 (Fla. 1975). For purposes of ad valorem taxes, immunity for the State is limited to "counties, entities providing the public system of education, and agencies, departments, or branches of state government that perform the administration of the state government." Canaveral Port Auth. v. Dep't of Revenue, 690 So.2d 1226, 1228 (Fla. 1996). "[P]roperty need not be legally owned by an immune entity to be immune from taxation, but can instead be equitably owned." Crapo v. Provident Gr.-Continuum Props., L.L.C., 238 So.3d 869, 874 (Fla. 1st DCA 2018).
In Leon County Educational Facilities Authority v. Hartsfield, 698 So.2d 526, 527 (Fla. 1997), the Florida Supreme Court addressed the issue of equitable ownership, holding that the appellant, a public corporate body established by the Leon County Board of County Commissioners, was the equitable owner of the property at issue. The appellant, which was empowered to own, lease, and finance higher educational facilities, was determined to operate a dormitory and food service project for the purposes of serving local college students. Id. SRH, Inc., a nonprofit Florida corporation, was established solely for the purpose of facilitating the financing, acquisition, construction, and equipping of the project. Id. The appellant entered into a lease with an option-to-purchase agreement with SRH under which SRH as the lessor would acquire, construct, and equip the project and lease it to the appellant in exchange for rental payments. Id. The supreme court reasoned that it was unlikely that the Florida Legislature intended that property being used by the appellant for its authorized purpose should be denied a tax exemption solely because it did not hold bare legal title. Id. at 529.
In Crapo, the property appraiser appealed a declaratory judgment in which the trial court determined that property used for student housing that was legally owned by the appellee was equitably owned by UF and was thus immune from ad valorem taxation. 238 So. 3d at 870. We affirmed, while explaining that the property at issue was located near UF's campus and consisted of 350,000 square feet, most of which was dedicated for graduate and professional student housing. Id. The appellee's sole member was a nonprofit corporation that, as one of its charitable functions, assisted public universities to acquire, develop, and operate student housing. Id. In reaching our disposition, we relied upon UF's acknowledgment in a student housing agreement of its "direct and substantial benefit from the development, operation and management of the Facility" as a "much needed addition to the housing supply" as well as to further its "educational purposes and objectives." Id. at 875 (emphasis in original). We also relied upon UF's right to approve project plans, use, financing, operations, and rental terms for the project, UF's permission for the project to use its name and affiliation to attract tenants, and its provision of services on site. Id. Moreover, when the project's repayment obligations were satisfied, UF would be entitled to legal title without payment, UF would also be entitled to compensation in any condemnation proceedings once any remaining repayment obligations were paid, and the pertinent documents established the existence of a trust for UF's benefit. Id.; see also Russell v. Se. Housing, LLC, 162 So.3d 262, 269-73 (Fla. 3d DCA 2015) (noting that five military housing complexes were being improved and operated pursuant to a public-private partnership between the United States Navy and a private developer and affirming the judgment declaring that the property was not subject to ad valorem taxes because the record established that the Navy retained equitable and beneficial ownership of the property where: (1) the use of the improvements was limited to military housing, which was a Navy purpose; (2) the Navy oversaw the construction of improvements; (3) the Navy directed the rental of the housing units; (4) the Navy controlled access to the improvements; (5) the Navy supervised the operation of the improvements during the entire lease term; (6) the Navy benefitted from the revenues and received the lion's share of the profits; (7) the Navy would take back the improvements at the end of the lease; and (8) the transfer of title occurred in order to accomplish something other than the transfer of ownership). We reject Appellants' attempt to distinguish the case before us from the cited cases. Although they may not be factually identical to this case, each of the cited cases supports the trial court's decision here because each involved a situation where the immune entity held both the benefits and burdens of ownership of the property at issue. As found by the court in this case, and as stipulated by the parties, Appellees are both nonprofit corporations that implement UF's health affairs mission. The properties at issue are used by Shands or FCPA for the delivery of health care services, patient care, medical education, scientific research, and/or for charitable purposes in furtherance of that mission. Appellees are supervised by UF, and their governance is controlled by UF. Appellees both regularly provide financial support to UF's health affairs mission, and both are recognized and relied upon by the State as virtually an arm of UF. UF controls the key property rights regarding the properties at issue, including their sale, purchase, and lease. Moreover, the properties at issue are operated under the umbrella of "UF Health." In the event of dissolution of either Appellee, which UF controls, Appellees' assets, including the properties at issue, would revert to UF's benefit. As found by the trial court, because the State through UF holds virtually all of the benefits and burdens of ownership, it is the equitable owner of the properties at issue. The properties are therefore immune from ad valorem taxation.
Accordingly, we affirm the final summary judgment.
AFFIRMED.
Makar and Osterhaus, JJ., concur.