Last week approximately 2,800 letters were mailed to owners of tax-exempt properties whose properties are exempt under the Institutions of Purely Public Charity real estate tax exemption.
Allegheny County Ordinance No. 49-07 stipulates that all properties designated as tax exempt by the County’s Chief Assessment Officer under the provisions of the Institution of Purely Public Charities Act be subject to a parcel review at least every three years. This is the County’s first effort to implement the triennial review. (See Schneider Downs Insight dated January 25, 2013.)
Each Institution of Purely Public Charity with tax-exempt property in Allegheny County is required to complete the review application and submit the HUP cover sheet and application within 60 days. It is critical that each recipient organization accurately and completely describe how the organization’s use of property satisfies the “HUP criteria” to avoid jeopardizing the property’s tax exempt status.
Are you an Institution of Purely Public Charity?
The County’s Office of Property Assessments will evaluate an organization’s use of the property pursuant to legal precedent that was confirmed in Mesivtah Eitz Chaim of Bobov, Inc., v. Pike County Board of Assessment Appeals, et al., 44 A.3d 3 (Pa. 2012). More specifically the court ruled that an Institution of Purely Public Charity must meet the five prong “HUP Test” in order to qualify for real estate exemption.
The HUP criteria as set forth in Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. 1985) provides that an organization will only qualify as a purely public charity if it possesses the following five characteristics:
- Advances a charitable purpose;
- Donates or renders gratuitously a substantial portion of its services;
- Benefits a substantial and indefinite class of persons who are legitimate subjects of charity;
- Relieves the government of some of its burden; and,
- Operates entirely free from a private profit motive.
Each of these factors has been further developed through case law.
The 2013 Tax-Exempt Review Application appears to be simple on the surface as there are only five questions that must be answered. Question 5 is the most critical question on the application. It includes a request that the organization describe in detail how the property is being used.
An organization’s response to Question 5 is critical to demonstrating that the parcel qualifies for real estate tax exemption and advances the organization’s status as an Institution of Purely Public Charity. Property that is not in furtherance of the organization’s Institution of Purely Public Charity Status may face a tax challenge. The County’s 2013 Exempt Status Review: “HUP Test” Cover Sheet must be submitted with the review application.
Schneider Downs is prepared to assist organizations with the preparation or review of their 2013 Tax-Exempt Review Application. If you have questions or require assistance, please do not hesitate to contact Susan M. Kirsch or Debra A. Ries.
The Greater Pittsburgh Nonprofit Partnership is hosting a series of informational sessions regarding this matter. Please access their website at https://gpnp.memberclicks.net/ for further information.
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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.