A proposed constitutional amendment regarding the standards and qualifications needed to be considered an “institution of purely public charity” passed the Senate yesterday by a vote of 30-20 and is now headed to the House of Representatives. The “institution of purely public charity” designation allows an organization to qualify for certain tax exemptions, including real estate taxes.
S.B. 4 (Brubaker, R-Lancaster) was introduced in response to a 2012 Pennsylvania Supreme Court decision in Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, which held that an organization must first meet criteria established by the Court in its 1985 decision in Hospital Utilization Project v. Commonwealth (HUP) before addressing requirements of a 1997 act (the “Institutions of Purely Public Charity Act”; Act 55) for being considered to be an “institution of purely public charity.” As a result, many organizations which meet the requirements of Act 55 but not those in the HUP decision will lose their tax-exempt status.
S.B. 4 amends the Pennsylvania Constitution to authorize the Legislature to determine what criteria will be used to determine qualifications for “institutions of purely public charity.” An identical bill passed the Senate during the 2011-2012 Session but was never considered by the House.
Based upon the Supreme Court ruling, local taxing authorities have called into question the tax-exempt status of many organizations. For example, Senator Brubaker said in a statement issued after the Senate vote that the tax-exempt status of Warren Hospital, Warren County YMCA, and four other non-profit organizations located in Warren County has already been revoked.
“Much to my dismay, this ruling will only continue to lead to new challenges pertaining to the charitable status of other institutions if we don’t act now,” said Brubaker. “Many other non-profits will be impacted as some local governments plan county-wide reviews and the criteria for purely public charity status is again left to the courts.”
Amending the Pennsylvania Constitution requires identical bills to pass the General Assembly in two consecutive legislative sessions followed by approval by the voters in a public referendum.