Institutions of Purely Public Charity Qualifications
Last Updated: 5/9/2013
The Latest: Following the March passage of Senate Bill 4, HAP continues to work with a 15-member coalition of key stakeholder groups that is pushing for a House vote on the bill before the summer recess. In addition, HAP has created a member Task Force on Tax Exemption to guide advocacy related to protecting the tax-exempt status of not-for-profit hospitals. The first meeting of the task force, chaired by Alan Brechbill of Penn State Milton S. Hershey Medical Center, is scheduled for May 24.
Senate Bill 4 amends the Pennsylvania Constitution to give the General Assembly the sole authority to establish the definition of an institution of purely public charity. The legislation is in response to a 2012 Pennsylvania Supreme Court decision on public charity qualifications. The court denied public charity status to a camp in Pike County, even though it qualified as an institution of purely public charity under Pennsylvania's Institutions of Purely Public Charity Act (Act 55 of 1997). This decision will place the public charity status of other charitable organizations in question, and hospitals may be impacted by increased legal challenges.
Background: In 1985, five criteria were adopted by the Pennsylvania Supreme Court (Hospital Utilization Project v. Commonwealth, 507 Pa.1, 487 A.2d. 1306 ) to determine whether an institution is an “institution of purely public charity.” During the decade following the 1985 Supreme Court decision, there was a surge of litigation by local governments and school districts that believed the court had created new and quite narrow standards that would eliminate the exemption for certain previously exempt institutions. Instead of clarifying the situation, the litigation following the Supreme Court decision created confusion and costly confrontations between traditionally tax-exempt institutions and political subdivisions.
Act 55 of 1997 was passed to bring clarity to the criteria to determine an institution’s real property and sales tax exemption status. Act 55 uses the same five criteria established by the Supreme Court in 1985 as the framework for defining an “institution of purely public charity,” but elaborates how an entity must demonstrate satisfaction of each criterion. Pennsylvania is unique among the states in this matter. No other state has developed such comprehensive requirements for state tax exemption.
Supreme Court decisionin the case Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals