## Facts

- Intermountain Health Care, Inc. (IHC) operated a nonprofit hospital system in Utah, including Utah Valley Hospital and American Fork Hospital.
- IHC had no stock or dividends; its assets could not inure to private individuals; governance was by an unpaid board.
- The hospitals were funded almost entirely by patient fees, insurance reimbursements, and government programs, with little revenue from donations.
- The hospitals generally operated with income exceeding expenses, and uncompensated/free care was less than one percent of revenue.
- Utah County’s Board of Equalization denied IHC’s ad valorem property-tax exemption claim for the two hospitals.
- The Utah State Tax Commission reversed and granted the exemption under statutory nonprofit-hospital criteria.
- Utah County appealed, arguing the facilities were not “charitable institutions” under the Utah Constitution’s property-tax exemption.

## Issues

1. Whether nonprofit hospitals qualify as “charitable institutions” exempt from property taxation under Utah Constitution art. XIII, § 2 merely because they satisfy statutory nonprofit-hospital exemption criteria.
2. Whether the determination of “charitable institution” status is a constitutional question that limits legislative and administrative classifications.
3. If the hospitals are not constitutionally “charitable,” whether the court’s interpretation should apply retroactively or only prospectively.

## Decision

- The Utah Supreme Court held that a hospital may be nonprofit yet not constitutionally “charitable” for property-tax exemption purposes.
- The court concluded IHC’s hospitals at issue did not qualify as “charitable institutions” under art. XIII, § 2 based on their operations and financing.
- The court applied its interpretation prospectively only, with an effective date of January 1, 1986, due to long-standing reliance by nonprofit hospitals on tax-exempt treatment.

## Legal Principles

- A nonprofit corporate form or statutory “nonprofit hospital” classification does not, by itself, establish a constitutional entitlement to a property-tax exemption.
- Whether an institution is “charitable” is a constitutional inquiry; statutes and agency determinations may inform but cannot control the constitutional standard.
- In assessing “charitable institution” status, courts examine functional characteristics, including:
  - whether services are provided without expectation of material reward;
  - the extent of support from donations versus fees/third-party payers;
  - whether recipients are generally expected to pay;
  - the relationship between income and expenses, including persistent surpluses;
  - whether access is meaningfully available to those unable to pay; and
  - whether private financial benefit flows to persons connected with the institution (including through contractual arrangements).
- When a new constitutional interpretation would disrupt settled reliance interests, a court may limit the ruling to prospective application.

## Conclusion

The court rejected the view that nonprofit status and statutory compliance automatically confer a constitutional charitable property-tax exemption, held IHC’s hospitals were not “charitable institutions” under art. XIII, § 2 on the record presented, and limited the effect of its interpretation to periods beginning January 1, 1986.


Utah Cnty. v. Intermountain Health Care, Inc., 709 P.2d 265 (Utah 1985)