Legislature seeks to clarify law on ‘purely public charities’
The House of Representatives late last month approved a Senate bill that aims to clarify the authority and criteria for charitable institutions in the commonwealth, but one Washington County official does not see a huge impact here.
Because Senate Bill 4 requires amending the Pennsylvania Constitution, the measure must receive approval by the General Assembly in two consecutive legislative sessions, followed by voters’ approval in a referendum, so even if these things take place, any change won’t be happening soon.
There is a five-pronged test to qualify as a nonprofit organization for purposes of property tax exemption.
An institution must:
1.) Advance a charitable purpose
2.) Operate entirely free from the private profit motive
3.) Donate or render gratuitously a substantial portion of its service
4.) Benefit a substantial and indefinite class of persons who are the legitimate subject of charity
5.) Relieve the government of some of its burden
Washington Mayor Brenda Davis said that because of the large number of tax-exempt properties in the city, she’s interested in the topic, but her preference would be to have more land on the tax rolls. Davis said when she attended the Local Government Academy, she was told, “Your city, right there, was the reason the law became what it was.”
City officials long maintained that Washington & Jefferson College failed to meet the five criteria, and Washington County Judge Thomas Terputac agreed, ruling in Washington’s favor when the case first went to court in 1993.
The college appealed, and Commonwealth Court ruled that Terputac erred. Then the city appealed to the state Supreme Court, and the state’s highest court upheld Commonwealth Court in 1997. That same year, Gov. Tom Ridge signed the Purely Public Charity Act into law.
Just as W&J prompted the 1997 law, the latest effort in the Legislature was spurred by a court ruling in the case of a camp for Hasidic Jews.
In Mestivah Eitz Haim of Bobov Inc. vs. Pike County Board of Assessment Appeals, the state Supreme Court last year ruled a charitable organization must first satisfy a set of criteria outlined in the court’s opinion in order to qualify for tax-exempt status.
“I don’t think a summer (religious) camp can relieve the government of some of its burden, so they were shot down,” said Bradley Boni, Washington County chief assessor.
“Maybe this was just the final straw that broke the camel’s back. So who better to decide than the people? The court has demonstrated everything is handled on a case-by-case basis, and that’s not fair to anybody. That’s not fair to a taxpayer, that’s not fair to an assessment official, that’s not fair to a taxing district. Nobody knows where they stand, because you never know what the Supreme Court is going to do.”
Speaking off the cuff, Boni said “half of the city is exempt because of the hospital and Washington & Jefferson College,” not to mention government buildings, like the courthouse, jail, city hall and Courthouse Square office building, where Boni was interviewed last week. Houses of worship also are exempt from property tax.
“An amendment to the constitution means the Legislature is the sole decider,” Boni said. “If this passes, it certainly wouldn’t be to anyone’s detriment.”
Senate Bill 4 would amend the state constitution to clearly define what is known as a “purely public charity” and ensure these organizations, such as hospitals, are eligible for an exemption from paying property taxes.
“The Senate took the first step of passing this important measure in March, and I commend the House for furthering the effort by advancing this legislation,” Senate President Pro Tempore Joe Scarnati said in a news release.
“It is vital that we make sure that essential charitable organizations within our local communities are able to continue to receive the status of public charities.”
Due to the Supreme Court decision in the Mestivah case, a number of charities have seen their property tax exemptions revoked by local taxing bodies. Other nonprofits statewide may be affected, because some local governments plan countywide reviews, resulting in widespread uncertainty and costly litigation as the criteria for purely public charity status is, again, left to the courts.
Scarnati said, “Since the Supreme Court ruling, tax-exempt status for organizations in my senatorial district and across the state such as Warren Hospital and Warren County YMCA, Habitat for Humanity and other nonprofit organizations have already been revoked.”
The topic is a complicated one, and Davis said, “When I see my representatives, I’ll be sure to ask them a few questions about where we’re at with it. (If) it gets to point that it gets passed, we need to evaluate the nonprofit status and need to determine if they fall within the guidelines.”