Are Non-profit Religious Corporations Qualified for Real Estate Tax Exempt Status?

Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, et. al, 2012 Pa. LEXIS 964 (2012)

Frank Kosir, Jr., Esquire

fk@muslaw.com

This matter addressed the issue of whether a religious camp qualified for real estate tax exempt status as a “purely public charity.”  Mesivtah Eitz Chaim of Bobov, Inc. (“Applicant”) is a non-profit religious corporation associated with the Bobov Orthodox Jewish community in Brooklyn.  The Applicant owns certain real property (“Property”) situated in Delaware Township, Pike County, Pennsylvania, on which Property it operates a summer camp comprised primarily of lectures and classes on its faith.  This camp supplies its campers with food and recreational activities, and is financed through tuition, donations, and rental income from property owned in New York City.  The camp, which is also open to members of the public, provides financial aid to some of its campers, some of who come from as far away as Europe and Israel.

In 2009, the Applicant applied for a real estate tax exemption for the Property on the basis that it was a purely public charity and was entitled to such an exemption pursuant to the five prong test established in HUP v. Commonwealth, 507 Pa. 1, 487 A.2d 1306 (1985) (“The HUP Test”), which provides that an entity qualifies as a purely public charity if it (a) Advances a charitable purpose; (b) Donates or renders gratuitously a substantial portion of its services; (c) Benefits a substantial and indefinite class of persons who are legitimate subjects of charity; (d) Relieves the government of some of its burden; and (e) Operates entirely free from private profit motive.  The Applicant’s application was denied by the Pike County Board of Assessment (“Board”), which concluded that the Applicant did not satisfy the HUP Test.  On appeal, the trial court affirmed.  The Applicant then appealed to our Commonwealth Court arguing inter alia that, as the Institutions of Purely Public Charity Act, (10 P.S. §§ 371-385) (“Act 55”) was enacted subsequent to the establishment of the HUP Test, the Applicant was not required to meet the elements of the HUP Test, but was entitled to a real estate tax exemption if it satisfied the broader requirements set forth in Act 55. The Commonwealth Court affirmed the trial court, and our Supreme Court allowed appeal on the sole issue of whether Pennsylvania courts must defer to the broader definition of “institution of a purely public charity” set forth in Act 55.

On appeal, Our Supreme Court affirmed.  In issuing its ruling, the court noted that the General Assembly is not permitted to alter or amend the phrase “purely public charity” as it sees fit.  Rather, the ultimate authority to interpret statutes and the Pennsylvania Constitution lies with the courts and, as Pennsylvania courts have established the HUP Test as the basis for determining whether an entity qualifies as a “purely public charity,” the legislature is not permitted to alter the standard through a broadening of the definition of “institution of a purely public charity,” as it attempted to do through its enactment of Act 55.  For these reasons, the HUP Test continues to be viable despite the enactment of Act 55, and any entity applying for a real estate tax exemption must first satisfy the HUP Test before its application can be reviewed under Act 55.

For additional information please contact Frank Kosir at fk@muslaw.com.