Preview:

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2003 Term

FILED
February 27, 2003
RORY L. PERRY II, CLERK SUPREME COURT OF APPEALS OF WEST VIRGINIA

__________ No. 30682 __________ PRESTON MEMORIAL HOSPITAL, Petitioner Below, Appellee, v. JOSEPH M. PALMER,
STATE TAX COMMISSIONER,
Respondent Below, Appellant


RELEASED
February 28, 2003
RORY L. PERRY II, CLERK SUPREME COURT OF APPEALS OF WEST VIRGINIA

__________________________________________________ Appeal from the Circuit Court of Preston County The Honorable Lawrance S. Miller, Jr., Judge Civil Action No. 99-C-87 AFFIRMED __________________________________________________

Submitted: January 21, 2003 Filed: February 27, 2003

John A. Mairs
Jackson & Kelly, P.L.L.C.
Charleston, West Virginia
Attorney for the Appellee


Darrell V. McGraw, Jr.
Attorney General
Stephen B. Stockton
Senior Assistant Attorney General
Charleston, West Virginia
Attorneys for the Appellant


The Opinion of the Court was delivered PER CURIAM.
JUSTICE DAVIS concurs and reserves the right to file a concurring opinion.


SYLLABUS


1. "The same standard set out in the State Administrative Procedures Act, W.Va. Code, 29A-1-1, et seq., is the standard of review applicable to review of the Tax Commissioner's decisions under W.Va. Code, 11-10-10(e) (1986)." Paige, 193 W.Va. 687, 458 S.E.2d 780 (1995). Syl. Pt. 3, in part, Frymier-Halloran v.

2. "Once a full record is developed, both the circuit court and this Court will review the findings and conclusions of the Tax Commissioner under a clearly erroneous and abuse of discretion standard unless the incorrect legal standard was applied." Halloran v. Paige, 193 W.Va. 687, 458 S.E.2d 780 (1995). Syl. Pt. 5, Frymier-

Per Curiam: This case presents the appeal of the West Virginia Tax Commissioner1 (hereinafter "the tax commissioner") to the November 1, 2001, final order of the Circuit Court of Preston County ruling that, contrary to the decision of the tax commissioner, amounts paid by Preston Memorial Hospital (hereinafter "the hospital") to Quorum Health Services (hereinafter "Quorum") as reimbursement of compensation of a chief executive officer and a chief financial officer2 were exempt from use tax. This case was filed in the circuit court by the hospital as an administrative appeal of the relevant portion of use tax assessed against the hospital. Based upon our review of the petition, briefs, record, arguments of counsel and

applicable law, we affirm the ruling of the lower court.

I. Factual and Procedural Background The hospital, incorporated as a non-profit community hospital,3 is located in Preston County , West Virginia, at Kingwood. The hospital is an acute care medical facility

whose stated mission is "to provide a modern community healthcare facility, convenient to and at a cost affordable to county residents."
1

Joseph M. Palmer was the Tax Commissioner at the time this case was initiated and has since been succeeded by current Tax Commissioner Rebecca Melton Craig. The chief executive officer and chief financial officer will be referred to collectively in this opinion as "key personnel." According to the record, the hospital was originally built by the citizens of Preston County in 1955. The hospital changed from being a county hospital to a non-profit, charitable corporation in 1984. 1
3 2

As explained during oral argument, the hospital's board of directors (hereinafter "the Board") sought to improve the management expertise at the hospital but had some difficulty in locating qualified individuals for the key personnel positions. In 1996, the Board

addressed this problem by entering into an agreement with Quorum whereby the hospital purchased from Quorum the services of key personnel to manage the affairs of the hospital under the supervision of the Board as well as other management and consulting services. According to the provisions of the portion of the agreement involving the key personnel, the hospital was obligated to reimburse the wages and employee benefits paid by Quorum to the key personnel. The record reflects that the billing, payment and accounting of these payroll

expenses were handled separately from the other management and consulting obligations the hospital incurred with Quorum.

Following its audit of the hospital, the State Tax Division of the Department of Tax and Revenue issued a Notice of Assessment on October 23, 1997, against the hospital for tax deficiencies which resulted from the agency finding that all services provided under the agreement between the hospital and Quorum were purchases subject to use tax. The hospital objected to that portion of the assessment which involved reimbursed compensation for the key personnel and filed a petition for reassessment with the tax commissioner pursuant to West Virginia Code

Download 30682.pdf

West Virginia Law