A recent Pennsylvania Supreme Court decision ruled that a religious camp, Mesivtah Eitz Chaim of Bobov, Inc. (Mesivtah), failed to qualify as a purely public charity because it did not meet the constitutional criteria established under the “HUP test” for charities in Pennsylvania. This five-prong test was established in the 1985 Hospital Utilization Project v. Commonwealth of Pennsylvania decision rendered by the Pennsylvania Supreme Court, which stated that in order for an entity to qualify as a purely public charity within the parameters of the Pennsylvania Constitution, it must possess the following 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 private profit motive.
In its appeal to receive a property tax exemption, Mesivtah argued that it did, in fact, meet the criteria of a purely public charity under Act 55, which was passed by the Pennsylvania General Assembly in 1997 in an effort to eliminate inconsistent application of eligibility standards for charitable tax exemptions. Act 55 also contained a presumption that if the Pennsylvania Department of Revenue determined that an organization was a purely public charity for sales and use tax purposes, it was presumed to be a purely public charity for real estate tax purposes as well.
Mesivtah argued that the Commonwealth Court erred in requiring it to meet the HUP test, since Article VIII, §2(a)(v) authorizes the General Assembly to define what qualifies as a purely public charity. Mesivtah claimed that the HUP test was merely a “stopgap measure” displaced legislatively by the General Assembly, which has broad power over taxation.
However, the appellee, Pike County Board of Assessment Appeals, maintained that the Court has consistently applied the HUP test even after the enactment of Act 55.
In its conclusion, the Court held that in order to receive an exemption without violating the Constitution, Mesivtah must first meet the definition of a purely public charity as measured by the test in HUP. Only then would Act 55 be applied as a second-prong test, but not as an alternative test.
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