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decided: July 16, 1985.


Appeals from the Order of the Court of Common Pleas of Montgomery County in case of Appeal of the Episcopal Community Services of the Diocese of Pennsylvania (Trustees Philadelphia Protestant Episcopal City Mission of Pennsylvania) from the Real Estate Assessment and Exemption Denial for the year 1979, Nos. 76-17761, 77-20751, 78-16789 and 79-21547.


Michael J. O'Donoghue, with him, Thomas M. Garrity and Charles Potash, Wisler, Pearlstine, Talone, Craig & Garrity, for appellants.

William C. Bullitt, Drinker, Biddle & Reath, Of Counsel: Anthony J. Giangiulio and Edwin S. Heins, for appellee.

Judges Rogers, MacPhail and Palladino, sitting as a panel of three. Opinion by Judge MacPhail.

Author: Macphail

[ 90 Pa. Commw. Page 411]

In these consolidated appeals, the Springfield Township and Springfield Township School District (Appellant) appeal here an order of the Court of Common Pleas of Montgomery County which sustained the tax exemption claim of Episcopal Community Services of the Diocese of Pennsylvania (Appellee) with respect to its Springfield Retirement Residence (Springfield).*fn1 We affirm.

[ 90 Pa. Commw. Page 412]

Appellee, a non-profit corporation, owns and operates Springfield. Springfield consists of 122 residential apartments as well as a common kitchen, laundromat, meeting rooms, chapel, and other facilities for use by the residents. Springfield also houses a fully accredited nursing facility, doctor's office and examining room. Additional medical care is furnished by All Saints Hospital, a medical facility operated by Appellee on the same real estate as Springfield is situate, and Chestnut Hill Hospital.

To be eligible for admission into Springfield, the applicant must be at least 65 years of age and able to take care of his or her personal needs (i.e., bathing, dressing) with exceptions made for those who are blind, deaf or lame. Proof of this "independence" must be furnished in the form of a physician's report. The applicant is also required to submit a detailed financial statement. No one may be denied admission because of race, color, creed or national origin; nor is anyone refused admission because of the financial status of his or her assets.

Each resident of Springfield is charged an initial entrance fee.*fn2 Additionally, residents are subject to a monthly charge for care and service.*fn3 Each resident

[ 90 Pa. Commw. Page 413]

    signs a "life care" contract with Springfield which provides that a resident will be charged only the monthly fee, no matter what level of care the resident requires. This "Residence and Care Agreement" also provides that it is the "policy [of Springfield] that within the limits of [its] ability to furnish assistance, a resident shall not be dismissed nor his residence agreement terminated solely because of the resident's financial inability to continue to pay the monthly rent." This policy is subject to certain conditions, among them the right of Springfield to terminate the agreement in lieu of subsidization for failure to meet monthly charges.*fn4

[ 90 Pa. Commw. Page 414]

The basis for Appellee's claim of tax exemption is Section 204(a)(3) of The General County Assessment Law (Law), Act of May 22, 1933, P.L. 853, as amended, 72 P.S. ยง 5020-204(a)(3), which provides in pertinent part that:

(a) The following property shall be exempt from all county, borough, town, township, road, poor, and school tax, to wit:

(3) All hospitals, universities, colleges, seminaries, academies, associations and institutions of learning, benevolence or charity, including fire and rescue stations, with the grounds thereto annexed and necessary for the occupancy and enjoyment of the same, founded, endowed and maintained by public or private charity: Provided, That the entire revenue derived

[ 90 Pa. Commw. Page 415]

    by the same be applied to the support and to increase the efficiency and facilities thereof, the repair and the necessary increases of grounds and buildings thereof, and for no other purpose.

The question as to whether the Appellee is entitled to the exemption is a mixed question of law and fact. Hill School Tax Exemption Case, 370 Pa. 21, 87 A.2d 259 (1952); General Conference Mennonite Appeal, 72 Pa. Commonwealth Ct. 96, 455 A.2d 1274 (1983). The burden of proving that it falls within the ambit of the statute and is entitled to the exemption is upon Appellee. Presbyterian-University of Pennsylvania Medical Center v. Board of Revision of Taxes, 24 Pa. Commonwealth Ct. 461, 357 A.2d 696 (1976). Statutory provisions which exempt property from taxation are subject to strict construction. General Conference Mennonite Appeal.

Case law has established a three-pronged test to be applied when a claim is made for real estate tax exemption: "[T]o obtain the claimed exemption from taxation, [Appellee] must affirmatively show that the entire institution, (1) is one of 'purely public charity'; (2) was founded by public or private charity; (3) is maintained by public or private charity." Woods School Tax Exemption Case, 406 Pa. 579, 584, 178 A.2d 600, 602 (1962).

Although our Supreme Court has cautioned that prior cases have limited value as precedent in this area of the law, Presbyterian Homes Tax Exemption Case, 428 Pa. 145, 236 A.2d 776 (1968), we must, nevertheless, look to case law for guidance realizing that the factual background of each case is of utmost importance.

In Presbyterian Homes, our Supreme Court held that the retirement home there under consideration qualified for tax exemption, emphasizing that although

[ 90 Pa. Commw. Page 416]

    expenses were charged to most of its residents, it was not being operated in commercial competition with commercial homes for the aged. 428 Pa. at 151, 236 A.2d at 779. Even though many of the residents paid their own way completely and 80% of the operational costs were paid by the residents of Presbyterian Homes, the Court stressed that Presbyterian Homes was not a profit-making institution. The Supreme Court specifically declined to hold that "whenever a non-profit institution made a charge for its care or services to any resident or patient, the institution would be precluded from obtaining tax exemption." 428 Pa. at 154, 236 A.2d at 780. The Court reasoned that:

"A purely public charity does not cease to be such where it receives some payment for its services. Thus a hospital may be such a charity where it maintains both private patient and ward service, its facilities being available to all. . . . The dormitories of the Pittsburgh Salvation Army are not subject to tax merely because the institution makes a charge for the use of its facilities, at a figure which is clearly not commercial. . . . And by the same reasoning, a university, school or educational institution which makes a tuition charge to its students, does not thereby alone release and relinquish its privilege to tax exemption." (Emphasis in original; citations omitted.)

428 Pa. at 154, 236 A.2d at 781, quoting Hill School Tax Exemption Case, 370 Pa. 27, 87 A.2d at 263.

In Appeal of Marple Newtown School District, 500 Pa. 160, 455 A.2d 98 (1982), the Supreme Court reversed a Commonwealth Court decision holding that Dunwoody Village, a retirement village, was a purely public charity. The Supreme Court summarily rejected our determination:

[ 90 Pa. Commw. Page 417]

Here, however, the record is clear that financial security is a prerequisite to the admission of all residents of the Dunwoody Village. If an applicant fails to meet this prerequisite, the applicant will not be further considered. Subsidization of a resident's required charges by the Village is a remote possibility, at best, as indicated by the fact that only one resident of the Village has been subsidized since the Village has been in operation. Even when the possibility of a need for subsidization arises, the decision to subsidize is wholly within the discretion of the Village, whose other options included the termination of the care agreement. Thus, on this record, it cannot be concluded that the charitable purpose found in Presbyterian Homes is shared by Dunwoody Village, a private housing facility which for all practical purposes offers its residents no services beyond those which the residents demonstrate an ability to afford.

500 Pa. at 165-66, 455 A.2d at 100.

In West Allegheny Hospital v. Board of Property Assessment, 500 Pa. 236, 455 A.2d 1170 (1982) decided the same day as Marple Newtown, our Supreme Court reversed a decision of the Commonwealth Court which denied West Allegheny Hospital's exemption claim. In deciding that the hospital had been endowed and maintained by public or private charity, the Supreme Court stated that the fact that the hospital billed its patients did not necessarily warrant the inference that the billings placed a disproportionate burden of the hospital's operating costs on patients. The Court determined that the revenues from patient billings had been used by the hospital for no other purpose than to contribute to the support and maintenance of the hospital. "[O]ur reading of the proviso

[ 90 Pa. Commw. Page 418]

    to [S]section 204(a)(3) convinces us that the word 'charity' as used by the Legislature does not contemplate the requirement that there be only a nominal charge to the beneficiaries." West Allegheny Hospital, 500 Pa. at 243, 455 A.2d at 1173.

We applied the precepts of Marple Newton in General Conference Mennonite Appeal, 72 Pa. Commonwealth Ct. 96, 455 A.2d 1274 (1983), wherein we held that the retirement complex in question, the Frederick Mennonite Home (Home), was not a purely public charity founded and maintained by charity. We first noted the similarities between the Home and Dunwoody Village: both were composed of apartments close to a medical facility; both required residents to pay an entrance fee and monthly charge; both required residents to demonstrate their good health and financial ability; and both required the execution of a formal agreement which gave each institution the right to require a resident to leave if unable to pay. The determining factor in both cases, in our view, was the fact that in neither case was there a realistic prospect of a resident receiving a financial subsidy. We therefore held that Marple Newton required us to reject the Home's argument that its retirement complex was a purely public charity as that phrase is used in our law.

The only matter in dispute in the instant case is whether Springfield has been maintained by public or private charity.*fn5 Appellant contends that in light of the substantial entrance fees and monthly charges,

[ 90 Pa. Commw. Page 419]

    lack of contractual obligation to subsidize residents who cannot afford these charges, lack of meaningful subsidies actually donated by Springfield,*fn6 that Springfield is not a purely public charity maintained by public or private charity. We must disagree.

[ 90 Pa. Commw. Page 420]

As previously noted, Springfield's application process requires that the applicant complete a financial statement. The financial statement is evaluated to determine what the applicant's monthly income will be after deducting an amount equal to the entrance

[ 90 Pa. Commw. Page 421]

    fee. As we have noted, no application is denied solely on account of financial inability.

If the application is approved, the applicant is placed on one of two lists: a financial aid list and a non-financial aid list. When there is an available residence at Springfield, applicants are taken from the lists in chronological order. Applicants are only taken from the financial aid list when there is a subsidy available, with the proviso that the amount of subsidy available determines who will be admitted from the list. For example, if there is a $2,000 subsidy available, the first name on the list that needed only $2,000 would be admitted, no matter where he stood on the list.

As of December, 1979, 59 out of the 140 residents received some sort of subsidy -- a figure slightly less than half. September of 1977 was the last time an individual was admitted from the financial aid list. Since 1977, a total of 34 individuals have been admitted to Springfield, none of whom are subsidized.

In Presbyterian Homes, residents were admitted under one of three plans, only one of which presupposed financial security; half of the residents were admitted under this plan. Similarly, residents at Springfield are admitted under two plans, one of which presupposes financial security. Financial security is therefore not a prerequisite to the admission of all residents of Springfield. And although the decision to subsidize residents is wholly within the discretion of Springfield, whose other options include terminating the "life care" contract, the factor we held to be determinative in Marple Newton and General Conference Mennonite Appeal -- no realistic prospect of financial subsidization -- is not present in the instant case. No resident has ever been required to leave because he could no longer meet the monthly charges; if a resident cannot meet an increase in

[ 90 Pa. Commw. Page 422]

    charges, he is granted a subsidy. There was no evidence presented to indicate that the subsidization policy espoused by Springfield was not utilized.

Springfield has never realized a profit, and all revenues received from the entrance fees and monthly charges are specifically designated for the support and maintenance of Springfield. We agree with the trial court that the real estate is being put to a public charitable use and that although expenses are charged, the evidence and the findings demonstrate that Springfield is not being operated as a commercial enterprise. Presbyterian Homes.

We will affirm the order of the trial court.


The order of the Court of Common Pleas of Montgomery County, dated February 9, 1983, at Nos. 76-17761, 77-20751, 78-16789 and 79-21547 is affirmed.



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