Internal Policy Directive 2004-7

INTERNAL POLICY DIRECTIVE 2004-7

December 3, 2004

SALES & USE TAX

WHAT IS A "COUNTY LONG-TERM MEDICAL CARE FACILITY"

POLICY ISSUE

What is a "county long-term medical care facility" in the context of the General Sales Tax Act and Use Tax Act provisions defining what is a hospital, MCL 205.54w and MCL 205.94s respectively?

POLICY DETERMINATION

A sales and use tax exemption is available for a county long-term medical care facility only for that portion of a facility or building in which operations as a licensed nursing home are carried out pursuant to Michigan's Public Health Code (Act 368 of 1978).

DISCUSSION

Section 4w of the General Sales Tax Act and 4s of the Use Tax Act provide exemption to persons engaged in the business of constructing, altering, repairing, or improving real estate for others (Contractors) when purchasing tangible personal property and affixing it to and making it a structural part of a nonprofit hospital. The term "nonprofit hospital" is defined similarly in each of these statutory provisions. Both provisions list "a county long-term medical care facility built after December 31, 1995" as meeting the definition.

Neither the General Sales Tax Act nor the Use Tax Act define "county long-term medical care facility". However, Michigan's Public Health Code does define the term "county medical care facility" as "a nursing care facility, other than a hospital long-term care unit, which provides organized nursing care and medical treatment to 7 or more unrelated individuals who are suffering or recovering from illness, injury, or infirmity and which is owned by a county or counties." [MCL 333.20104(4)]

Additionally, the Public Health Code provides a definition of the term "nursing home" which provides, in part, "means a nursing care facility, including a county medical care facility, that provides organized nursing care and medical treatment to 7 or more unrelated individuals suffering or recovering from illness, injury, or infirmity. …" [MCL 333.20109(1)] Finally, the Public Health Code also defines the term "health facility or agency" to include both "a county medical care facility" and "a nursing home". [MCL 333.20106(1)]

Section 20141 of the Public Health Code provides "A person shall not establish or maintain and operate a health facility or agency without holding a license from the department." [MCL 333.20141(1)] The Public Health Code definition of "person" includes "a governmental entity". [MCL 333.20109(2)]

For purposes of sales and use tax exemption for Contractors purchasing tangible personal property that will be affixed to and made a structural part of a nonprofit hospital, a county long-term medical care facility will be interpreted to mean only that portion of a county owned facility licensed as a nursing home. Other qualified licenses provided for by the Public Health Code, such as those for a "home for the aged" or a "hospice", will not qualify the construction for exemption as a hospital. Similarly, operations not requiring licensure, such as "assisted living facilities", will also not qualify the construction for exemption as a hospital. This is true regardless of whether the new construction expands upon an existing structure within which a licensed county medical care facility (nursing home) operates.