OUR THOUGHTS ON:

PA Senate Bill 4 - Redefining the Institution of Purely Public Charity

Not-for-Profit

By Debra Ries

On February 5, 2013, Pennsylvania State Senator Mike Brubaker, R-Lancaster, reintroduced a proposal to amend the Pennsylvania Constitution to give the General Assembly the sole authority to clearly define an “Institution of Purely Public Charity.” Senate Bill 4, Session of 2013, is a joint resolution proposing an amendment to the Constitution of the Commonwealth of Pennsylvania to allow the General Assembly to determine what criteria must be satisfied in order to qualify for real estate tax exemption as an Institution of Purely Public Charity, thereby effectively limiting the ability of local governments to challenge real estate tax exemption for Institutions of Purely Public Charities.

Specifically, this proposal provides that the Constitution be amended by adding a clause to provide that the General Assembly may, by law, establish uniform standards and qualifications that would be the criteria to determine qualification as an Institution of Purely Public Charity. The Senate Finance Committee approved the legislation on February 13, 2013.

The Senator stated his intention to introduce Senate Bill 4 on January 28, 2013, in a memorandum to the members of the Pennsylvania Senate. In the correspondence, the Senator indicated that such legislation is necessary due to a Pennsylvania Supreme court decision (Mesivtah Eitz Chaim of Bobov, Inc. v. Pike Cty. Bd. of Assessment Appeals, 44 A.3d 3, (April 25, 2012)). In that case, the Court denied real estate tax exemption to an organization, even though it met all of the criteria outlined in the statute under the Institutions of Purely Public Charity Act (Act 55 of 1997). In its ruling, the court determined that a charitable organization cannot qualify as an Institution of Purely Public Charity unless it first satisfies the five part test as set forth in the Hospital Utilization Projection v. Commonwealth, 487 A.2d 1306, (February 13, 1985).

In his letter to the Senate, Brubaker also called attention to a number of charities that have lost their real estate tax exemption since last year’s Pennsylvania Supreme Court decision. The Senator expressed alarm, particularly with the decision to revoke the real estate tax exemption of Warren General Hospital that provides more than $4 million of charity care annually, since the revocation of real estate tax exemption might affect the hospital’s ability to remain an independent community hospital.

An amendment to the Pennsylvania Constitution requires passage by the General Assembly in two consecutive legislative sessions before going to Pennsylvania voters in a public referendum. Similar legislation to amend the Pennsylvania Constitution was introduced last year, Senate Bill 161, Session 2012. Senate Bill 161 was not acted upon by the House before the General Assembly adjourned for the year.

The Schneider Downs Nonprofit Tax team will continue to monitor the proposed amendment. If you have any questions, please do not hesitate to contact Susan M. Kirsch or Debra A. Ries.

© 2013 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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