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THERE IS no provision in the state Constitution generally exempting charities from taxation, an upstate judge has ruled in determining that a tax imposed last year on gross receipts of nursing homes applies to not-for-profit charitable facilities. Justice Robert F. Julian’s ruling from Utica, N.Y., on the 6-percent tax on nursing homes’ gross receipts was awaited with interest because Governor George E. Pataki has proposed a similar 0.7-percent tax on hospitals gross receipts, dubbed the “sick tax,” as part of his plan to close a $12 billion gap in this year’s state budget. Five nursing homes in Oneida County unsuccessfully argued that the imposition of the assessment as part of the Health Care Work Force Recruitment Act of 2002 unconstitutionally repealed exemptions from taxation that had been granted to charitable organizations. In Charles T. Sitrin Health Care Center Inc. v. State of New York, 2002-708, Justice Julian on Thursday rejected the plaintiffs’ argument that New York has a public policy favoring the exemption of charitable organizations from taxation. “There is no constitutional provision which provides a general exemption for charities from taxation,” he wrote. The state Constitution, however, in Article 16, §1 bars the Legislature from repealing any exemption from a tax that had been granted previously to a charitable, religious or educational organization. “What plaintiffs must demonstrate is the existence of a statute by which an exemption from this specific tax is granted by the Legislature,” the judge said. The plaintiffs failed to do so, he added. New York laws exempt charitable organizations from sales, corporate, real property and franchise taxes, but not a tax on gross receipts, he said. “The tax herein is not a franchise tax: it does not tax corporate profits. It is not a sales tax: it does not tax the purchaser of a good or service on the purchase. It is not an income tax: it does not tax ‘income.’ . . . It is a tax that the plaintiffs paid without protest in a lesser amount in various percentages from 1990 through expiration prior to the adoption of this statute,” the judge noted. In fact, a tax of a similar nature beginning at 0.6 of 1 percent was imposed on nursing homes’ receipts in 1990, and gradually increased until it expired about 1999. The current 6 percent assessment on gross receipts was imposed April 1, 2002, as part of a program that was announced by Mr. Pataki to increase the salaries of health care workers. However, within a few weeks of the governor’s signing of the bill, upstate nursing homes complained that the money to retain and recruit workers — which was to be paid in Medicaid reimbursements — was more than offset by the assessment on gross receipts. Homes that had smaller percentages of patients funded by Medicaid complained that the assessments did not affect all nursing homes equally. David A. Ruffo of Tobin and Dempf in Albany, who represented the Oneida County nursing homes, said his clients had not yet decided whether to appeal Justice Julian’s ruling granting the defendants’ motion for summary judgment. A companion suit involving another not-for-profit nursing home is pending in neighboring Herkimer County. Assistant Attorney General Lisa Ullman handled the motion for the state’s commissioner of health, the director of the budget and the comptroller.

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