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Southern Jersey Family Medical Centers, Inc. v. City of Pleasantville

May 30, 2002


Before Judges King, *fn1 Cuff and Winkelstein.

The opinion of the court was delivered by: Winkelstein, J.A.D.


Argued April 17, 2002

Plaintiff appeals the Tax Court's grant of summary judgment in favor of defendant City of Pleasantville, holding that plaintiff was not entitled to an exemption from local property taxes for the 1999 tax year for its property located at 932 South Main Street, Pleasantville. The Tax Court found that plaintiff was organized exclusively for a tax-exempt purpose and that the use and operation of the property was not conducted for profit, but because the property was not actually used for charitable purposes, plaintiff did not qualify for a tax exemption. The Tax Court reasoned that the property was not used for charitable purposes because plaintiff received substantial government funding and virtually no voluntary charitable contributions. We disagree with the judge's conclusion and reverse.


Southern Jersey Family Medical Centers, Inc. (Southern Jersey) is a non-profit corporation organized pursuant to N.J.S.A. 15A:1-1 to -15-2. It is a community health care facility that provides health and dental care irrespective of a patient's ability to pay. Its primary patient population "is medically underserved or indigent." Southern Jersey has four locations in South Jersey, with one center located in Pleasantville.

Southern Jersey was formed on March 11, 1977 as "Sa-Lantic Health Services, Inc." On October 8, 1998, the corporation filed an amended certificate of incorporation, changing its name to "Southern Jersey Family Medical Centers, Inc." and adding Article Eight, which provides, in pertinent part: "The purposes for which this Corporation is formed are exclusively charitable . . . ." According to Southern Jersey's bylaws, adopted May 9, 1994 and amended April 13, 2000, its objectives are:

A. To provide and promote effective, high quality, primary and preventive health and dental care services for residents and migrant/seasonal farm workers within the service area, regardless of their ability to pay.

B. To increase the availability and accessibility of high quality, primary heath and dental care services by reducing financial and cultural barriers to such services.

C. To promote the utilization, expansion, and integration of already existing federal, state, county, and private health services in order to deliver high quality, efficient, and economic health care.

D. To meet the primary care needs of the community that is served.

E. To assure the continuity of care of the patients that are served throughout the complex health care system.

Southern Jersey provides preventative care and treats existing medical conditions. It also conducts educational programs to inform the community about different health concerns. None of Southern Jersey's centers treat "exclusively indigent people;" rather, the centers "treat anyone." Southern Jersey charges patients who do not have health insurance according to a sliding fee scale that is based upon each patient's income.

The Pleasantville center takes care of "anyone who presents [himself or herself] for treatment. The majority of patients who present for treatment . . . are patients who are . . . either indigent or low income, or have no insurance and low income." Some of these patients have "poor insurance," meaning that they have insurance, but "they're not paying for the services on an out-patient basis. So they don't have any other resource, any place to go . . . ." While migrant farm workers comprise approximately ten percent of all Southern Jersey's patient base, "hardly any" migrant workers are treated at the Pleasantville center.

According to its chief executive officer, Southern Jersey provides "primary health care services to a population that is medically underserved or indigent. That's our mission. That's what we do in Pleasantville . . . . We do immunizations for children. If you are sick we take care of you." For pregnant mothers, Southern Jersey provides "not only an obstetrician [OB], but also an OB coordinator, nutritionalist, [and] social service counselor."

The six doctors at Southern Jersey each make an average annual salary of $110,721. The executive director earns a salary of $106,730. The medical director earns $50,600 for part-time employment. The nutritionist earns $44,500 each year, the social worker earns $28,500, nurses average $26,000 a year and medical assistants earn $24,500.

In 1999, Southern Jersey had a patient base of 13,856 patients. Sixty-three percent of that base -- 8,730 patients -- were at or below the poverty level. Forty-four percent were uninsured; thirty-nine percent used Medicaid; and four percent used Medicare. Approximately thirteen percent of the patient base had private insurance. During a recent twelve-month period, Southern Jersey collected only $120,859 of its total $1,928,414 billed to self-paying customers on the sliding fee scale, representing six percent of the amount billed.

Southern Jersey has been designated as a community health center pursuant to 42 U.S.C.A. 254c. As such, it provides primary health services for all residents in the area it serves. It services medically underserved populations, defined as "the population of an urban or rural area designated by the Secretary [of Health and Human Services] as an area with a shortage of personal health services . . . . " 42 U.S.C.A. 254c(b)(3). As a community health center, it is entitled to grants to enable it to "plan and develop the provision of health services on a prepaid basis to all of the individuals" which the centers serve. 42 U.S.C.A. 254c(d)(C). Federal regulations require community health centers to prepare "a schedule of fees or payments for the provision of its services designated to cover its reasonable costs of operation and a corresponding schedule of discounts adjusted on the basis of the patient's ability to pay." 42 C.F.R. §51c .303(f). The centers are also required to "provide for a full discount to individuals and families with annual incomes at or below" poverty income guidelines and "for no discounts to individuals and families with annual incomes greater than twice" those guidelines. Ibid. They are to be operated in a manner "such that no person shall be denied service by reason of his inability to pay . . . ." 42 C.F.R. §51c.303(u).

For calendar year 1999, Southern Jersey's taxes were assessed as follows: $102,400 (Land) $245,200 (Improvement) = $347,600. According to its tax returns, Southern Jersey's meaningful revenues *fn2 were allocated as follows:

1) For the fiscal year ending February 28, 1997:

Federal Grants (24.4% of total revenue) $898,788

Program Service Revenues *fn3 (74.4% of total revenue) $2,194,795

Medicaid Managed Care ($1,403,463)

Medicare/Medicaid Payments ...

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