Sturdy Memorial Foundation, Inc. v. Board of Assessors of the Town of North Attleborough (April 22, 2002)

COMMONWEALTH OF MASSACHUSETTS

APPELLATE TAX BOARD


STURDY MEMORIAL FOUNDATION,   v.   BOARD OF ASSESSORS
INC.						     OF THE TOWN OF 
     NORTH ATTLEBOROUGH

Docket Nos. F232985			     Promulgated:
	       F239883			     April 22, 2002


	These revised Findings of Fact and Report are promulgated simultaneously with the Board's reaffirmed decision on remand pursuant to G.L. c. 58A, § 13 and 831 CMR 1.32.  These appeals were originally filed under the formal procedure pursuant to G.L. c. 59, §§ 64 and 65 from the refusal of the appellee to abate taxes on certain real estate in the Town of North Attleborough assessed under G.L. c. 59, § 38 for fiscal years 1996 and 1997.
	Commissioner Scharaffa heard the appeals and was joined in the original decision for the appellee by Commissioners Lomans and Burns.  The appellant, Sturdy Memorial Foundation, Inc. ("the Foundation"), appealed the original decision to the Appeals Court, which remanded the appeals to the Appellate Tax Board ("Board") for a reconsideration of the issues raised in the appeals.  Sturdy Memorial Foundation, Inc. v. Board of Assessors of North Attleborough, 47 Mass. App. Ct. 519 (1999).
	Commissioner Scharaffa was joined in this reaffirmed decision on remand for the appellee by Chairman Burns and Commissioners Gorton, Egan and Rose.  
	Max Volterra, Esq., for the appellant.
	Robert C. Bliss, Esq., for the appellee.


REVISED FINDINGS OF FACT AND REPORT
Introduction
The Board made its original decision in these appeals on July 24, 1997 and promulgated its original Findings of Fact and Report on November 17, 1997.  See Sturdy Memorial Foundation, Inc. v. Board of Assessors of the Town of North Attleborough, 23 Mass. App. Tax Bd. Rep. 77 (1997) ("Sturdy I").  The Board ruled that Sturdy Memorial Associates ("Associates"), the actual user of the property at issue, was not a charitable organization occupying the property for a charitable purpose within the meaning of G.L. c. 59, § 5, Third.  Accordingly, the Board issued a decision for the appellee, the Board of Assessors of the Town of North Attleborough ("the Assessors").    

The Appeals Court Decision
While not overturning any of the Board's subsidiary findings detailed in Sturdy I, the Appeals Court ruled that the Board's ultimate finding could be overturned if not supported by subsidiary findings.  Sturdy Memorial, 47 Mass. App. Ct. at 519-20.  The Appeals Court then ruled that it was an abuse of the Board's discretion to deny without written explanation the Foundation's motion for additional subsidiary findings filed after the Board's decision and after the promulgation of the Findings of Fact and Report in Sturdy I.  The Court reasoned that Rule 29 of the Board's Rules of Practice and Procedure "expressly contemplates" a late request for findings of fact and that the requested findings, "if supported by the 'uncontradicted evidence' as alleged," would be important in determining whether there was an absence of private inurement and whether Associates' practice served a large and indefinite class of persons in the service area of the Hospital."  Sturdy Memorial, 47 Mass. App. Ct. at 524.  The Court allowed, however, that if the late-requested findings were "not supported by the uncontradicted evidence, then the foundation may not have carried its burden of proof."  Id.  The Appeals Court thus remanded the appeals to the Board "for the purpose of reconsidering its denial of the foundation's motion for additional findings of fact, and issuing its opinion thereon."  Id.  The Board reaffirmed its decision simultaneously with the promulgation of these revised Findings of Fact and Report.

Sturdy Memorial Foundation and 
Sturdy Memorial Associates
The Board hereby adopts and reaffirms its original findings of fact detailed in Sturdy I and makes the additional findings described below.  
As the result of a corporate reorganization in 1982, the Foundation emerged as the successor corporation to the Attleborough Hospital, and remaining assets other than endowments funded the creation of a new hospital corporation, Sturdy Memorial Hospital (the "Hospital").  The Foundation was qualified as a non-profit organization exempt from federal taxes under § 501(c)(3) of the Internal Revenue Code ("Code").  Its corporate purpose according to its Restated Articles of Organization was "[t]o support the advancement of the knowledge and practice of, and education and research in, medicine, surgery, nursing and all other subjects relating to the care, treatment and healing of humans . . . and provided further, that it shall operate exclusively for the benefit of Sturdy Memorial Hospital, Inc. and its affiliated organizations . . . ."  
At all times relevant to these appeals, the Foundation supported the Hospital by raising funds, creating and enhancing an endowment fund, and owning real property to be operated for the medical care and treatment of citizens in the Hospital's service area.  The Foundation also aimed to provide medical services in the area of the Hospital so as to meet a perceived need for medical services in this area.  The Foundation members, directors and officers received no money or other property from the Foundation as compensation for their work on behalf of the Foundation.
The Foundation owned property which was occupied by various medical service centers in Southeastern Massachusetts, namely in Attleboro, Rehoboth, Mansfield and North Attleborough.  During the years at issue, Associates primarily occupied the subject property in North Attleborough for the conduct of a medical service center.  
Associates qualified as a charitable organization under federal law pursuant to Code Section 501(c)(3).  Associates' corporate purpose, according to its Restated Articles of Organization, was as follows:

The corporation is organized and shall be operated exclusively for the benefit of the Sturdy Memorial Hospital, Inc., and its affiliated organizations . . . and in furtherance hereof shall render medical services and provide health education to persons in the Hospital's service area.


At the time of these appeals, Associates employed six physicians who, pursuant to their contracts, were required to be on staff at the Hospital.  Five of the physicians were full-time and were paid a salary and the sixth was part-time and paid on an hourly basis.  The employee physicians were not members of the board of directors or corporate officers of Associates.  Associates' board of directors was comprised of seven members, which included four physicians and three non-physicians.  Associates' members, directors, and officers received no money or other property as compensation for their services to Associates.  The compensation committee, which set the physician employees' salaries, was comprised solely of the non-physician directors. 

At the hearing of these appeals, Joseph Clark, the Vice President of Administration at the Foundation, testified that the reason for forming Associates was primarily competitive in nature.  He asserted that Associates was an endeavor aimed at recruiting physicians to the Hospital's service area in order to ensure a patient base for the Hospital.  Although he testified that he believed that this recruitment would better serve the community, he also asserted that it served the goal of competing with area hospitals, such as those in Taunton and Norwood.  The decision to form Associates was, as Mr. Clark testified, a matter of "survival" in a "competitive" and "aggressive" service area.  "It's really a turf war between hospitals in some way."
Mr. Clark testified that the salaries of the employee physicians "compare[d] favorably with those of either the solo practitioner or the group practitioner" in the area and that physicians' salaries in Southeastern Massachusetts were "in the 50th percentile" for physician salaries overall.  Additionally, an Incentive Compensation Plan provided for bonus payments based on the amount of revenue that the physicians generated for Associates in their individual practices.
Moreover, as the Board found in Sturdy I:
In addition to receiving a salary from Associates, all of the physicians' expenses, including malpractice insurance, staff, medical supplies and equipment, were also paid by Associates.  Associates also leased space from the Foundation to provide Associates' physicians with office space to see and treat patients and to perform other related activities consistent with the operation of a medical office.  In effect, doctors who were employed by Associates, entered into a "turn-key" private medical practice operation.  Associates assumed responsibility for all start-up expenditures and for paying all monthly bills in a timely manner, including rent payments to the Foundation.
Associates' physicians saw patients on an appointment only basis.  They did not provide "walk-in" service to individuals.  Thus, the member physicians were allowed to choose how many and which patients were to be seen, in the same manner as a typical private practice.  According to Mr. Clark, even established patients who needed to be seen on a particular day were required to call "in advance" to see "if [they] could get in and at what time."  During 1996, there were approximately 18,000 patient visits.  Mr. Clark testified that Associates generated approximately $1.2 million in income for the fiscal year ended September 30, 1996, and that although he did not have the figures for 1997, he believed it was greater.  According to internal bookkeeping records, Associates provided $11,663 of "free care," less than 1% of its income, in fiscal year 1996.  Mr. Clark testified that an amount was listed as "free care" if Associates charged a certain amount but did not collect that amount.  Lastly, there was no evidence presented to demonstrate that there was any type of medical education or research being conducted by Associates at the subject property, as stated in its corporate purpose.

Sturdy I, 23 Mass. App. Tax Bd. Rep. at 79-80.
The Board makes the following additional findings of fact based on testimony from the hearing of these appeals.  First, Mr. Clark admitted in his testimony that the 18,000 "patient visits" recorded in 1996 would include multiple visits by the same patient.  Accordingly, the 18,000 "patient visits" cannot support a finding that 18,000 members of the community were served by Associates.  Second, John Kraskouskas, a member of the Assessors, testified that non-established patients had been turned away by Associates because of the inability to schedule an appointment with the physicians who were busy treating their established patients.  Third, Mr. Clark testified that "the major reason" for Associates' operating deficit was its assumption of all start-up costs of its employee physicians and that Associates tended to lose money on the newly recruited physicians during their first and second years of practice in the field of medicine.  Fourth, an Incentive Compensation Plan submitted into evidence outlined details of the physician employees' salary.  This Incentive Compensation Plan documented that, in setting individual physician's salaries, the Associates' Compensation Committee considered the physicians' compliance with the requirements of membership on the Hospital's staff.  Additionally, the Committee "shall consider"  the "extent to which the net collections for professional services rendered by the Physician exceed the budgeted net collections for the Physician's services," and that "[t]he Physician shall be eligible to receive incentive compensation payments in an amount equal to 50% of the excess of actual net collections for the Physician's services over the anticipated net collections for such services shown on the Budget," subject to an overall cap.  Finally, Mr. Clark testified that Associates conducted the operation of the practice independently of the Foundation and the Hospital.  Associates had the power to hire and fire the employee physicians, and Associates operated the practices conducted within the facility. 
The Foundation's motion for further findings requested that the Board find the following facts: (1) that Associates operated at a deficit and that the Foundation was required to contribute the funds needed to meet that deficit; (2) that the salaries of the physician employees were less than the salaries of comparable physicians; and (3) that twenty-five percent of the patients of Associates were high-risk patients who were referred to the Hospital, the balance being "undifferentiated" patients.
For reasons stated in the Opinion which follows, the Board reaffirmed its denial of the Foundation's motion.  The Board also found that the requested findings were insufficient to meet the appellant's burden of proving its entitlement to a charitable exemption for Associates' occupation of the property.  First, a major contributing factor to Associates' operating deficit was its assumption of start-up costs for new physicians, a cost that was not expected to continue indefinitely.  Moreover, this deficit was similar to a for-profit corporation's deficits in its early years of operation.  Secondly, the salaries paid to the physicians were not less but actually, in effect, more than those of comparable physicians in private practice.  The physicians' base salaries were mid-range for physicians in comparable private practices.  Additionally, Associates paid the physicians' rent and other expenses, which increased the competitiveness of the physicians' overall salary packages.  Third, the Foundation failed to advance any evidence to support its bare assertion that seventy-five percent of Associates' patients were "undifferentiated."  In fact, the Board found that the need for appointments, the turning away of non-established patients, and the lack of free or reduced-cost care actually contradicted this assertion.  
Finally, the Board found that the Associates' occupation of the subject property was in furtherance of a commercial enterprise, not a charitable interest.  The operation of Associates' practice primarily benefited a limited class of established patients of Associates and the employee physicians.  Therefore, the Board's original decision is not altered even with careful consideration of each of the additional requests for findings by the Foundation in its motion.  Accordingly, the Board reaffirmed its decision for the Assessors in these appeals.  

OPINION
 "While reasonable exemptions based upon various grounds of public policy are permissible, yet taxation is the general rule . . . . It is for this reason that statutes granting exemptions from taxation are strictly construed.  A taxpayer is not entitled to an exemption unless he shows that he comes within either the express words or the necessary implication of some statute conferring this privilege upon him."  Milton Hospital & Convalescent Home v. Board of Assessors of Milton, 360 Mass. 63, 67 (1971) (quoting Boston v. Quincy Mkt. Cold Storage & Warehouse Co., 312 Mass. 638, 654 (1942)) (other citations omitted).  Moreover, an organization's Code Section 501(c)(3) status is not dispositive in determining whether it is charitable for purposes of the Massachusetts property tax exemption.  See H-C Health Services v. Board of Assessors of South Hadley, 42 Mass. App. Ct. 596, rev. denied, 425 Mass. 1104 (1997).  Instead, the organization bears the burden of proving that it is a charitable organization and that it occupies the property in furtherance of the charitable purposes for which it was organized.  See Board of Assessors of Hamilton v. Iron Rail Fund of Girls Club of America, Inc., 367 Mass. 301, 306 (1975).   Cases addressing charitable exemptions for health care corporations have emphasized that the organization must occupy the property in furtherance of its charitable purpose.  See Harvard Community Health Plan, Inc. v. Assessors of Cambridge, 384 Mass. 536, 541 (1981) ("Exemption is extended to the real property of a corporation with charitable purposes, provided it is occupied by the corporation for such purposes.")  See also, Children's Hospital Medical Center v Board of Assessors of Boston, 388 Mass. 832, 838 (1983).
The Board, upon reexamination of the appeals, makes the following rulings: (1) Rule 29 of the Board's Rules of Practice and Procedure does not provide a post-decisional remedy to litigants dissatisfied with the Board's findings of fact; (2) the additional requested findings did not enable the Foundation to meet its burden of proving its entitlement to a charitable exemption for Associates' occupation of the subject property; and (3) the Foundation failed to meet its burden of proving that the subject property was occupied in furtherance of the charitable purpose for which Associates was organized.  Therefore, the Board affirmed its original decision denying the charitable exemption to the Foundation for the property leased to and occupied by Associates for the conduct of Associates' private medical practice.

In the absence of a timely request for specific findings of fact and preservation of a record supporting its desired findings, the appellant cannot argue that the Board's findings are not supported by substantial evidence.
	
The Appeals Court remanded the appeals to the Board for a reconsideration of its denial of the appellant's motion, finding that Board Rule 29, at 831 CMR 1.29, "provides that requests for findings of fact and rulings of law may be filed after argument if leave to do so is given by the board."  Sturdy Memorial, 47 Mass. Ct. App. at 524, n. 6.  However, nothing in Board Rule 29 suggests that it may be used as a post-decisional procedure.  In fact, the Foundation itself never invoked Board Rule 29 in support of its motion for further findings, citing no statutory, regulatory or other authority for its request.  The plain language of Board Rule 29 requires that requests for findings of fact and rulings of law must be filed "before or at the time of hearing, or after the hearing within a time to be fixed by the Board."  The clear implication of this language is that any additional time after the hearing which the Board may allow for the filing of requests for findings of fact and rulings of law must be "fixed" by the Board at the hearing, and certainly before a decision is entered.
	In an analogous situation, the Supreme Judicial Court found it "most unusual" for a litigant to request additional findings of fact and rulings of law after a decision had been entered.  In Calimlim v. Foreign Car Center, Inc. 392 Mass. 228, 232 (1984), the losing party in a civil action filed a motion for a new trial and additional requests for findings of fact and rulings of law after judgment was entered against it.  The Court observed that: 
[t]he submission of requests for findings of fact and rulings of law on motion for a new trial is most unusual.  Although parties in District Court proceedings are not entitled as of right to findings and rulings, Dist. Mun. Cts. R. Civ. P. 52(a), any party requesting such rulings must do so in a timely manner, generally before the commencement of closing argument, unless leave of court is obtained for a later filing.  Untimely filings need not be considered by the court.  See J.R. Nolan, Civil Practice § 732 (1975).

Calimlim, 392 Mass. at 228-9, n. 3.
	In contrast to Board Rule 29 and Rule 52 of the Massachusetts Rules of Civil Procedure, there are explicit statutory and regulatory provisions which allow litigants, after a decision, to request the Board to issue "findings of fact and report."  See G.L. c. 58A, § 13; 831 CMR 1.32.  Such a request must be made within 10 days of the Board's decision. Id.  In fact, the Foundation made such a request, and the Board responded by promulgating Findings of Fact and Report in Sturdy I.  However, there is no provision which authorizes further findings where a party may be dissatisfied with the contents of the Board's Findings of Fact and Report promulgated pursuant to § 13 and Board Rule 32.  The proper remedy in such a case is to file a notice of appeal.
	Further, a reading of Board Rule 29 which authorizes further findings after the Board's decision is final would create confusion regarding appellate rights.  Where, as here, a party timely files a request under § 13 and Board Rule 32 for the Board to issue Findings of Fact and Report, the time for filing an appeal begins when these Findings are promulgated. See Forte Investment Fund v. State Tax Commission, 369 Mass. 786, 787, n.1 (1976).  Allowing parties to file requests for further findings after the Board's Findings of Fact and Report are promulgated would, in effect, "plac[e] in the hands of the litigant taxpayer the power to extend" the deadline for filing appeals in contravention of "the policy of time limits on appeals implied and stated in" the then-applicable version of § 13.  William Rodman & Sons, Inc. v. State Tax Commission, 364 Mass. 557, 560 (1974) (ruling that the time for appeal began on the date the Board's Findings of Fact and Report were promulgated, not the later date when the Board denied the taxpayer's motion to "correct" Findings of Fact and Report).  The Board promulgated Board Rule 29 pursuant to its statutorily granted powers under G.L. c. 58A, § 8, and under established standards for appellate review, "[c]ourts grant considerable leeway to an agency's interpretation of its own regulations . . . ."  Barnhart v. Walton, 122 S.Ct. 1265, 1266-67 (2002).  
Furthermore, "[t]he board's decision is final as to findings of fact."  Syms Corp. v. Commissioner of Revenue, SJC-08513 (April 10, 2002) at 4 (citation omitted).  The Supreme Judicial Court recognizes that an appellate court's "review of the sufficiency of the evidence is limited to 'whether a contrary conclusion is not merely a possible but a necessary inference from the findings.'"  Id. (quoting Olympia & York State St. Co. v. Assessors of Boston, 428 Mass. 236, 240 (1998) (quoting Kennametal, Inc. v. Commissioner of Revenue, 426 Mass. 39, 43 (1997), cert. denied, 523 U.S. 1059 (1998))).  Accordingly, "[i]f supported by sufficient evidence, we will not reverse a decision of the board unless it is based on an incorrect application of the law."  Id. (citing Koch v. Commissioner of Revenue, 416 Mass. 540, 555 (1993).  
Additionally, the appellant here waived its right to challenge the comprehensiveness of the Board's factual findings when it failed to request an official transcript of the hearing.  G.L. c. 58A, § 10, provides that: 

[i]f no party requests that the proceedings be reported, all parties shall be deemed to have waived all rights of appeal to appeals court or the supreme judicial court upon questions as to the admission or exclusion of evidence, or as to whether a finding was warranted by the evidence.  

The Foundation is thus precluded from appealing whether particular findings, including the Board's ultimate finding, were warranted by the evidence or were incomplete.  Commissioner of Revenue v. Wells Yachts S., Inc., 406 Mass. 661, 663 (1990), New Bedford Gas & Edison Light Co. v. Assessors of Dartmouth, 368 Mass. 745, 749-51 (1975), Coomey v. Board of Assessors of Sandwich, 367 Mass. 836, 839 (1975).  An appellant cannot challenge the completeness or even the accuracy of factual findings where no transcript has been provided because a reviewing court can only consider whether, as a matter of law, the Board's ruling was warranted by the findings that were made, as presented in the Board's Findings of Fact and Report.  See New Bedford Gas, 368 Mass. at 749-50 ("It seems axiomatic that one who challenges a factual finding of the board on the ground that it is not supported by substantial evidence must supply at least the relevant portion of the transcript of the hearing.").  
In these appeals, the Appeals Court found that the Board should have reviewed its original finding that the subject property was not occupied in furtherance of a charitable purpose in light of additional findings requested by the appellant.  While recognizing that the appellant had failed to provide a copy of the transcript, the Appeals Court ruled that "[u]ltimate findings of the board may be set aside, nevertheless, if they are not supported by the board's subsidiary findings."  Sturdy Memorial, 47 Mass. App. Ct. at 519-20 (citing Children's Hospital Medical Center v. Board of Assessors of Boston, 353 Mass. 35, 39 (1967)).  Although the Board's ultimate findings must be based on substantial evidence and must be supported by the Board's subsidiary findings, the appellant cannot now complain that the Board did not make specific findings which it would have liked the Board to have found because the appellant did not preserve the issue of whether the requested findings were supported by evidence advanced during the hearing.  See G.L. c. 58A, § 10; see also Wells Yachts South, 406 Mass. at 663 ("This court will not alter a decision of the board unless that decision is based on an error of law or is not supported by substantial evidence.") (citation omitted).  Since neither party to this appeal made a timely request for a stenographic record, they are both 'deemed to have waived all rights . . . as to whether a finding was warranted by the evidence.'" (quoting G.L. c. 58A, § 10)).
No law or procedural rule allows a motion for additional findings, where the motion was filed after the Board's decision and promulgation of its Findings of Fact and Report, and where both parties failed to provide the reviewing court with a transcript of the Board's proceedings.  Accordingly, the Board found and ruled that in the absence of a timely request for specific findings and preservation of a record supporting its desired findings, the Foundation was precluded from arguing that the Board's findings "[were] warranted by the evidence."  G.L. c. 58A, § 10. 

The Foundation failed to demonstrate that its requested findings would have enabled it to meet its burden of proving that Associates' occupation of the subject property was for a charitable purpose.

"A corporation claiming that its property is exempt under § 5, Third, has the burden of proving that it comes within the exemption, and that it is in fact operated as a public charity."  Town of Norwood v. Norwood Civic Association, 340 Mass. 518, 525 (1960) (citing, American Inst. For Economic Research v. Assessors of Great Barrington, 324 Mass. 509, 512-14 (1949)).  Therefore, "[a]ny doubt must operate against the one claiming tax exemption, because the burden of proof is upon the one claiming an exemption from taxation to show clearly and unequivocally that he comes within the terms of the exemption."  Boston Symphony Orchestra v. Board of Assessors of City of Boston, 294 Mass. 248, 257 (1936) (citations omitted).  The Board found and ruled that the additional findings would not have enabled the Foundation to meet its burden of proving that Associates occupied the subject property in furtherance of its charitable purpose.  Accordingly, careful consideration of each of the requested findings does not alter the decision in these appeals.  
In its attempt to establish the lack of private inurement, the Foundation requested the following two additional findings: (1) Associates operated at a deficit, and the Foundation was required to contribute the funds needed to meet that deficit; and (2) the salaries of the physicians employed by Associates were less than the salaries of comparable physicians.  However, the Foundation failed to meet its burden of proving that these requested findings established a lack of private inurement.  
Although Associates' books indicated an operating deficit, the Foundation failed to meet its burden of proving that this deficit entitled it to an exemption for the subject property.  First, a lack of profit is not persuasive evidence of an organization's charitable nature.  See, e.g., Brockton Knights of Columbus Bldg. Ass'n Inc. v. Assessors of Brockton, 321 Mass. 110, 115 (1947) (in finding an organization's operation not to be in furtherance of a charitable purpose, the court found that "[t]he fact that no profit was derived by the taxpayer from the operation of the property does not change the result.").  
Moreover, the reason that Associates operated at a deficit was because it provided a "turn-key" private medical operation in which it absorbed physicians' expenses for rent and other operating expenses such as malpractice insurance, medical supplies, equipment and staff.  Mr. Clark testified that the "major reason" for Associates' operating deficit was its assumption of all start-up costs for new physicians.  The Board found that it is reasonable to infer that these start-up costs would not continue indefinitely as the employee physicians developed their practices, especially given the incentive for profitability built into their employment contracts through the Incentive Compensation Plan.
Associates' deficit was thus particularly unpersuasive because of its voluntary assumption of these additional expenses, which were not reasonably expected to continue indefinitely.  Furthermore, the Incentive Compensation Plan demonstrated that physicians were able to earn profits from conducting their individual practices, measured by the extent to which their collections exceeded their allocated portion of their expenses.  Accordingly, the Board found and ruled that the Foundation failed to meet its burden of proving that the deficit reported by Associates entitled the Foundation to an exemption for the property occupied by Associates. 
The Foundation failed to prove its second requested finding that the physician salaries were lower than those paid to comparable physicians.  The Foundation offered no evidence that the total compensation packages offered to the physicians were less than those offered to physicians in comparable private practices.  To the contrary, Mr. Clark testified that Associates' salaries were competitive with those of other sole and group practitioners in the Southeastern Massachusetts area and were in the 50th percentile for physician salaries overall.  Moreover, the Board considered the Associates' assumption of the physicians' expenses to be part of the physicians' total compensation packages, thereby increasing the competitiveness of their total salaries.  
In addition, as outlined in the Incentive Compensation Plan, the physicians' salaries were based, at least in part, on the amount of business generated by the physicians.  The Board found and ruled that tying the physicians' salaries to the amount of revenue that they collected further demonstrated the commercial, as opposed to charitable, nature of the physicians' practices.  See Chisago Health Services v. Commissioner of Revenue, 462 N.W.2d 386, 390 (Minn. 1990) (finding that where "the CHS physicians' salaries take into account an individual doctor's productivity measured by the services he or she generates," that "there is a substantial nonpublic aspect to the way in which the physicians practice in the medical clinic facilities").  Accordingly, the Board found and ruled that not only did the appellant fail to meet its burden of proving that Associates' physicians were paid a lower salary than comparable physicians, but also, it failed to meet its burden of proving that this finding could have altered the Board's denial of the charitable exemption, where Associates was conducted as a commercial enterprise.   
Moreover, the payment of the Incentive Compensation Plan bonuses violated G.L. c. 59, § 5, Third, which provides in paragraph (a) that: 

If any of the income or profits of the business of the charitable organization is divided among the stockholders, the trustees or the members, or is used or appropriated for other than literary, benevolent, charitable, scientific or temperance purposes . . . its property shall not be exempt;

Regardless of whether Associates generated a deficit for its operation of the clinic, its physicians produced profits on an individual basis, as measured by the extent to which their collections exceeded their allocated share of expenses.  The Board found that the distribution of these profits to the individual physicians achieved the purpose of encouraging the physicians to increase their net collections.  Additionally, the payments benefited the physicians economically.  Accordingly, the Board found and ruled that the profits distributed under the physicians' compensation plans were not appropriated for a charitable purpose, but rather for an entrepreneurial purpose.  Therefore, the distribution of profits was in violation of G.L. c. 59, § 5, Third (a).  See Assessors of Lancaster v. Perkins School, 323 Mass. 418, 422 (1948), Boston Symphony Orchestra, 294 Mass. at 254, Franklin Square House v. City of Boston, 188 Mass. 409, 410-11 (1905).  
The Foundation also failed to meet its burden of proving its third requested finding that twenty-five percent of the patients of Associates were high-risk patients who were referred to the Hospital, but that Associates treated the balance of "undifferentiated" patients.  Moreover, the Board found and ruled that the Foundation failed to meet its burden of proving that this fact would have demonstrated that Associates served a sufficiently large and "indefinite class of persons."  
First, the Foundation failed to prove the actual number of patients reflected in the 18,000 "patient visits," which Mr. Clark admitted would include multiple visits by the same patient.  Second, the Foundation failed to prove how many of the "patient visits" treated were "undifferentiated" members of the general community, as opposed to established patients of Associates' medical practice.  As testified to at the hearing, non-established patients had been turned away from Associates because of an inability to schedule an appointment with physicians who were busy treating established patients.  Yet the provision of health to the established patients of Associates or to a limited portion of the community was not sufficient to demonstrate that Associates' practice was charitable.  See Massachusetts Medical Society v. Assessors of Boston, 340 Mass. 327, 332 (1960)("But if the dominant purpose of [an organization's] work is to benefit its members or a limited class of persons it will not be so classed [as a charitable organization], even though the public will derive an incidental benefit from such work."); see also Marshfield Rod & Gun Club, Inc. v. Board of Assessors of the Town of Marshfield, 25 Mass. App. Tax Bd. Rep. 338 (1998).  The Board thus found and ruled that the Foundation failed to prove that Associates serviced 18,000 undifferentiated members of the community, as opposed to a smaller number of repeat, established patients.   
The lack of evidence establishing how many of the "patient visits" actually represented "undifferentiated" patients, together with the findings that Associates required appointments, did not accept walk-in patients, and its "free care" amounted to less than one percent of its total income and merely represented uncollected bills, all weighed against the Foundation's ability to establish its benefit to the community at large.  Accordingly, the Board found and ruled that the Foundation did not meet its "grave burden" of proving that Associates "serv[ed] a large enough segment of the population."  Harvard Community Health Plan, 384 Mass. at 543 (citing Meadowbrooke Day Care Center, Inc. v. Assessors of Lowell, 374 Mass. 509, 513 (1978)).  
Finally, even if the Board were to find that the Foundation supported its claim that twenty-five percent of Associates' patients were referred to the Hospital, this evidence would not have advanced the charitable nature of Associates' occupation of the property.  A charitable purpose under G.L. c. 59, § 5, Third, might include financially aiding or otherwise assisting a public charitable hospital.  See Assessors of Boston v. The Vincent Club, 351 Mass. 10 (1966) (finding that fundraising activities to support a hospital were a charitable purpose).  However, the Board found and ruled that feeding patients to a charitable hospital so that it may better wage "a turf war between hospitals" in an "aggressive" health care market could not transform an otherwise commercial enterprise into a charitable practice.  Moreover, the Board found that Associates' competition with other physician-employers, including private employers, was inconsistent with a charitable purpose.  See Children's Hospital Medical Center, 353 Mass. at 42 (recognizing that "competition with commercial industry" can frustrate an organization's charitable status).
Based on the evidence, Associates' occupation of the subject property was for the conduct of a private group practice rather than a charitable practice.  See Harvard Community Health Plan, 384 Mass. at 541 (finding that the Supreme Judicial Court "would deny exemption to those group practices which are nevertheless engaged in the practice of medicine for profit." (citation omitted)).  Accordingly, the Board found and ruled that, even if the Foundation could have proven each of the three requested findings, these findings would not have enabled the Foundation to meet its burden of proving that Associates occupied the subject property in furtherance of a charitable purpose.  

On the basis of all evidence offered, the Foundation failed to meet its burden of proving that Associates' occupation of the property was in furtherance of a charitable, and not a commercial, purpose. 

G.L. c. 59, § 5, Third, exempts from taxation the following:
real estate owned by . . . a charitable organization and occupied by . . . another charitable organization or organizations . . . for the purposes of such other charitable organization or organizations;

Pursuant to this provision, the Foundation needed to establish two criteria: (1) that Associates, as the occupant of its property, was a charitable organization, and (2) that Associates' occupation was in furtherance of the charitable purposes for which Associates was organized.  See Board of Assessors of Hamilton v. Iron Rail Fund of Girls Club of America, Inc., 367 Mass. 301, 306 (1975).  The occupation could not simply be in furtherance of the interests of the organization's physician employees or a limited class of established patients.  See Jacob's Pillow Dance Festival, Inc. v. Assessors of Becket, 320 Mass. 311, 313 (1946) (citing Little v. Newburyport, 210 Mass. 414, 415 (1912)); see also The Vincent Club, 351 Mass. at 14.  
Citing Harvard Community Health Plan v. Board of Assessors of Cambridge, 384 Mass. 536, 543 (1981) (citing Children's Hospital Medical Center, 353 Mass. at 44 (other citations omitted)), the Appeals Court found that for a group practice of medicine to be considered charitable for property tax purposes it must satisfy two requirements: (1) there must be an absolute prohibition against "private inurement," and (2) "the persons who are to benefit are of a sufficiently large or indefinite class so that the community is benefited by its operations."  See also Massachusetts Medical Society, 340 Mass. at 332 (finding that an institution will not be classified as charitable if "the dominant purpose of its work is to benefit its members or a limited class of persons . . . even though the public will derive an incidental benefit from such work").
	 However, these cited requirements alone are not decisive in the granting of the charitable exemption.  As the Court in Harvard Community Health Plan acknowledged, a commercial purpose will preclude an organization from qualifying for a charitable use property tax exemption.  See Harvard Community Health Plan, 384 Mass. at 543 (finding that a health care organization providing benefits to a sufficiently large class of individuals may qualify for an exemption only "[a]bsent proscribed inurements or commercial purpose, see G.L. c. 59, § 5, Third . . . .") (emphasis added).  To the extent that an organization is simply conducting a business for profit, it is not engaging in a charitable endeavor but a commercial enterprise.  See Hairenik Association, Inc. v. City of Boston, 313 Mass. 274, 279 (1943).  Therefore, the key to deciding these appeals is an overall analysis of whether Associates was conducted as a charitable endeavor, or instead as a commercial enterprise.
The facts of Milton Hospital & Convalescent Home v. Board of Assessors of Milton, 360 Mass. 63 (1971), strongly similar to the facts of these appeals, serve to illustrate that Associates' North Attleborough practice was, in fact, a commercial enterprise that was occupying the property for the conduct of a private medical practice.  In that case, Milton Hospital & Convalescent Home ("Milton Hospital"), a charitable organization, added a five-story wing to its existing building.  Eighty percent of the first floor of the new wing housed six suites with a total of twelve offices to be rented to physicians who were members of Milton Hospital's staff.  Milton Hospital, 360 Mass. at 64.  Milton Hospital sought to extend its property tax exemption for this eighty-percent portion of the new wing, citing "the hospital's many problems and difficulties with respect to or resulting from the unavailability of physicians at the hospital when needed before it built and leased offices to them, and about the great improvement in conditions and advantages to the hospital, its patients and to the lessee-physicians after the offices were leased to the physicians."  Id. at 66.  Therefore, Milton Hospital argued that the occupancy of the wing by the physicians on its staff was occupancy by itself for the charitable purposes for which it was organized.  Id.  
It was uncontested that Milton Hospital was an incorporated "charitable organization" within the meaning of G.L. c. 59, § 5, Third.  Id.  Furthermore, "[i]t [was] undisputed that the hospital became a better hospital by reason of the proximity of the offices rented to physicians and the greater availability of the doctors, particularly when needed in emergencies."  Id. at 66.  Nonetheless, the Supreme Judicial Court upheld the Board's denial of the charitable use property tax exemption, finding that the occupancy of the suites by the physicians did not constitute occupancy "by the hospital for the charitable purposes for which it was organized."  Id. at 70.  Instead, the Court found that the occupation of the premises was by private physicians who "were free to conduct their private practices therein as they saw fit, treating whatever patients and as many patients as they wished, and charging them for professional services whatever sum the physicians determined, all without any supervision, control or limitation by the hospital."  Id. at 65-66.  Therefore, even though the proximity of the doctors improved Milton Hospital's performance, and that "[t]here [was] no question that the officers of the hospital exercised sound judgment and acted in good faith and in the best interests of the hospital" and "there [was] likewise no question that they were not motivated by any desire to realize a financial profit from the rental of the suites," the Court found that these factors did not alter the fact that the physicians' offices operated privately and independently from Milton Hospital.  Accordingly, the Court affirmed the Board's finding that the occupancy and use of the property by the physicians was "for the conduct of their private medical practices for profit," rather than "by the hospital for the charitable purposes for which it was organized."  Id. at 70.  
	The operation of a private business is not charitable, no matter how noble its pursuits.  See Massachusetts Med. Society, 340 Mass. at 333 (denying exemption to professional association despite "most laudable" goal of improving the medical profession).  Private organizations are charitable only when they perform activities which advance the public good, thereby relieving the burdens of government to do so.  See, e.g., Molly Varnum Chapter DAR v. City of Lowell, 204 Mass. 487 (1909).  However, to the extent that a health care organization is conducting a business for profit, it is not relieving government of a burden and, accordingly, its business is not charitable.  See Hairenik Association, 313 Mass. at 279.  Instead, it is simply providing a private benefit to a limited class of established patients and to the physician employees.  See id.  Therefore, notwithstanding that the provision of health care services may be a charitable purpose (Harvard Community Health Plan, 384 Mass. at 543), if Associates was operating a commercial medical practice in North Attleborough, this practice would not be in furtherance of a charitable purpose.  See Milton Hospital, 360 Mass. at 69 ("The hospital is not incorporated for the purpose of engaging in the practice of medicine for profit, and if it were it would not be a 'charitable organization' under the statute.").    
In reviewing the facts of these appeals, the Board found that Associates' North Attleborough clinic operated like an independent commercial practice like the private practices in Milton Hospital.  The Board noted that the physicians in Milton Hospital operated independently from each other, while the physicians at issue were employees of Associates, a subsidiary of the Foundation.  However, the Board found this distinction to be one without significance to the outcome of these appeals, because the commercial aspects of Associates' practice, as separate from the Hospital's practice, was no less apparent.  As in Milton Hospital, the physicians conducted their practices independently from the Hospital.  Mr. Clark testified that only Associates operated the practices conducted on the premises.  Associates as the lessee of the subject property was the rightful occupant and had rights arising from its lease.  See Milton Hospital, 360 Mass. at 65.  Associates alone had the power to hire and fire the employee physicians.  Moreover, although all the physicians employed by Associates were on staff at the Hospital, the employee physicians' exact responsibilities to the Hospital in conjunction with their staffing privileges, as recorded on the Incentive Compensation Plan, were vague.  See id. at 65 (denying charitable exemption for physicians' practices conducted on hospital property where the physicians' leases "did not require the physicians to perform any services of any kind on behalf of the hospital").  All of these factors indicated that the Hospital exerted little control over the day-to-day operations of Associates' physicians' practices, and accordingly, Associates as the employer was "free to conduct [its] private practice[] therein as [it] saw fit, treating whatever patients and as many patients as [it] wished, and charging them for professional services whatever sum [it] determined, all without any supervision, control or limitation by the hospital."  Id.  
The recent appeals of Harvard Student Agencies, Inc. v. Board of Assessors of Cambridge, 2000 ATB Adv. Sh. 925 demonstrate that the Foundation could not claim a charitable exemption for the property Associates occupied in furtherance of its private business merely on the basis of Associates' relationship to the Hospital.  In those appeals, the taxpayer, Harvard Student Agencies ("HSA") was an affiliate of Harvard University, a non-profit organization, which organized and managed student-staffed businesses "where goods and services were provided to purchasers at market prices."  Id. at 939.  The Board found many commercial aspects of HSA's endeavors, including the facts that Harvard students, a limited class of beneficiaries, were paid for their efforts and gained no greater educational benefit other than a generalized employment experience "in a manner no different from innumerable part-time employment opportunities available to college students."  Id. at 940.  Moreover, "[t]he general public received no benefit except goods or services for which they paid market prices."  Id.  The Board thus found that HSA was a commercial organization which occupied the premises for the conduct of its commercial endeavors.  Id. at 940-41.  
Likewise, the Board here found that Associates was also conducting a private business whereby patients received medical treatment "for which they paid market prices," in a manner no different than the patients of the private physicians in Milton Hospital.  Moreover, the operation of Associates' turn-key practice primarily benefited the employee physicians, a limited class of beneficiaries.  Accordingly, the Board found and ruled that the similar facts in Harvard Student Agencies warranted a denial of charitable exemption in these appeals.
Associates' treatment of patients further established the commercial nature of its group practice.  As stated in the Board's original Findings of Fact and Report, "Associates' physicians saw patients on an appointment only basis.  They did not provide 'walk-in' service to individuals. The Board thus found that Associates' physicians were allowed to choose how many and which patients were to be seen, in the same manner as a typical private practice."  Sturdy I, 23 Mass. App. Tax Bd. Rep. at 80.  The testimony of Mr. Kraskouskas further revealed that that Associates had turned away non-member patients because the physicians were busy treating established patients.  The Board's original decision also found a critical lack of evidence that any services by Associates were provided at less than average cost to patients.  In fact, "the so-called 'free care' provided by Associates amounted to less than 1% of the gross income and apparently was only 'free' because the charges for services had not been paid.  As such, the 'free care' was in the nature of a bad debt write-off unrelated to any largess on the part of Associates."  Sturdy I, 23 Mass. App. Tax Bd. Rep. at 80.  
Charging fees for services will not necessarily frustrate charitable status. See New England Sanitarium v. Inhabitants of Stoneham, 205 Mass. 335, 342 (1910).  However, in addition to charging market rate fees, the requirement for scheduled appointments and the scarcity of free or reduced-cost care indicated barriers to the provision of services to patients in need, and thus raised serious questions about whether Associates was treating people "of a sufficiently large or indefinite class so that the community [was] benefited by its operations."  Harvard Community Health Plan, 384 Mass. at 543 (citing Children's Hospital Medical Center, 353 Mass. at 44, Assessors of Boston v. Garland School of Home Making, 296 Mass. 378, 388-89 (1937)); see also Western Massachusetts Lifecare Corp. v. Board of Assessors of Springfield, 434 Mass. 96, 104 (2001)("Thus, selection requirements, financial or otherwise, that limit the potential beneficiaries of a purported charity will defeat the claim for exemption").  See Boston Symphony Orchestra, 294 Mass. at 255-256 (finding that the charitable exemption was properly denied where an educational organization charged substantial admission fees and gave seating preferences to season ticket holders). 
Regardless of the fact that Associates' group practice may have been providing medical services in a community with a great need for primary health care, the provision of health care is not a charitable purpose under G.L. c. 59, § 5, Third, if the practice is conducted as a commercial enterprise. See Milton Hospital, 360 Mass. at 70.  The Board found and ruled that Assessors properly denied the appellant's claim for charitable exemption, because Associates occupied the subject property for the conduct of a commercial practice rather than a charitable endeavor.  The additional requested findings do not alter the Board's original decision because the record before the Board contained ample evidence establishing the proscribed commercial nature of Associates' group practice.

Conclusion.
"'The burden of proof is upon the petitioner to make out its right as [a] matter of law to [an] abatement of the tax.'"  Schlaiker v. Assessors of Great Barrington, 365 Mass. 243, 245 (1974) (quoting Judson Freight Forwarding Co. v. Commonwealth, 242 Mass. 47, 55 (1922)).  Based on the foregoing, the Board found and ruled that the appellant failed to meet its burden of proving that the subject property owned by the Foundation and occupied by Associates qualified for the property tax exemption for charitable organizations.  Accordingly, the Board issued a decision on remand for the appellee in these appeals.

					    APPELLATE TAX BOARD	
							
By:____________________________
					    Abigail A. Burns, Chairman



A true copy:



Attest: _____________________
	    Clerk of the Board
						

  Associates occupied 82% of the office space on the subject property.  The remaining 18% of office space was rented to two separate medical practices, and the Foundation does not challenge the taxability of this space.  The issue is whether the 82% of the subject property occupied by Associates was eligible for the property tax exemption for charitable use during the fiscal years at issue.  See Sturdy Memorial, 47 Mass. App. Ct. at 520, n.1.
   The Restated Articles of Organization indicate that Associates was formerly known as Sturdy Medical Associates, Inc.
   Mr. Clark here was referring to gross income collected by Associates before expenses.
   Mr. Clark testified that the Foundation advanced the payments for the start-up expenditures to Associates and Associates carries the costs on its books as debt to the Foundation.
 The last line of the Incentive Compensation Plan purportedly creates this cap.  However, the document submitted into evidence contains a dollar sign with no further notation.  
 Although there is no explicit statutory or regulatory procedure governing a request for clarification or further findings, the Board recognizes that in the appropriate circumstance, i.e. a clear error or omission in the Board's Findings of Fact and Report, a motion for a revised Findings of Fact and Report may be appropriate.  However, neither Board Rule 29 nor any other provision requires that the Board include findings of fact requested by a party after a decision is made or give a written explanation detailing the reasons it declines to do so.
  The Board notes that the payment of physicians' rent and start-up expenses, rather than prove the lack of private inurement, has in some contexts actually raised potential issues of private benefit to the physicians who were employees.  See Rev.Rul. 97-21 (analyzing tax consequences of physician recruitment incentives provided by nonprofit hospitals).  

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ATB 2002-202