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decided: May 22, 1987.


Appeal from the Order of the Commonwealth Court of Pennsylvania dated August 16, 1985, No. 658 C.D. 1984, Reversing the final Decree of the Court of Common Pleas of Bucks County, Pennsylvania, at No. 81-7169-14-5 in Equity. Pa. Commw. Ct. , Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Larsen, J., filed a dissenting opinion in which Hutchinson, J., joined.

Author: Zappala

[ 515 Pa. Page 56]


The substantive issue in this case is whether property of the Appellant, G.D.L. Plaza Corporation, qualifies for exemption from taxation under Article VIII, Section 2 of the Constitution of the Commonwealth, and the General County Assessment Law, Act of May 22, 1933, P.L. 853, Art. II, as amended, 72 P.S. § 5020-204(a)(3). We granted allowance of appeal to consider whether Commonwealth Court exceeded the proper scope of its review in denying the exemption despite the chancellor's finding and holding to the contrary.

By resolution of May 5, 1980, Appellee, Council Rock School District, imposed a residential construction tax of $875.00 per unit on all new construction in the district.*fn1 Pursuant to the purposes for which it was incorporated, G.D.L. Plaza sought to construct a 111 unit apartment complex for elderly and handicapped persons on property it owned within the district. The corporation claimed exemption from the construction tax as a purely public charity, but because of scheduling necessities related to the

[ 515 Pa. Page 57]

    project's financing paid the $97,125 tax under protest and later sought recovery of it in an equity action.

The facts are not in dispute. G.D.L. Plaza Corporation is a non-profit corporation formed by the Gloria Dei Lutheran Church of Huntingdon Valley. The primary purpose of G.D.L. Plaza as stated in the articles of incorporation is "building, owning, operating and maintaining residential facilities designed, planned and equipped to meet the physical, emotional, recreational, social and religious needs of elderly persons at moderate cost; and furnishing, to the limits of its ability to do so, financial security for persons who have been admitted to such facilities by maintaining at less than the regular charges any resident who becomes unable to pay such charges . . . ." Financing for the project was obtained from the federal government through the Department of Housing and Urban Development pursuant to Section 202 of the Housing Act of 1959, 12 U.S.C. § 1701q. As a condition of receiving this financing G.D.L. agreed to abide by guidelines of the Department with regard to admission, rental agreements, continuing occupancy, and rental subsidies. Under these guidelines, residence in the project is limited to persons who are at least sixty two years of age and retired, or who are handicapped, and whose income and assets do not exceed certain specified levels. Otherwise admission is open to the public at large on a first-come, first-served basis.

In addition to the construction financing obtained through the Section 202 mortgage, G.D.L. Plaza has entered into an agreement with the Department pursuant to Section 8 of the Housing Act of 1937, as amended, 42 U.S.C. § 1437f, with respect to Housing Assistance Payments. Under this program, by establishing the monthly rent for the various units in the project according to guidelines of the Department, G.D.L. is authorized to receive on behalf of eligible residents monthly assistance payments amounting to the difference between twenty five percent of the residents' income and the maximum monthly rent for the unit. All of

[ 515 Pa. Page 58]

    the rental units at G.D.L. Plaza are covered by Housing Assistance Payments to some extent.

The chancellor found that G.D.L. Plaza maintains a care program for its residents consisting of emergency call buttons from each apartment answerable 24 hours a day either at the management office or by a resident management couple. The Plaza also provides transportation to assist residents in going to doctors, dentists, places of worship, and the like. It also appears that various counseling services are made available to aid those with family or financial problems and to place those requiring more extensive personal and medical care in appropriate facilities. There is no separate charge for any of these services which are implemented by employees of Gloria Dei Outreach Corporation, a non-profit management corporation formed by the church to manage the Plaza and two other residential facilities for elderly and handicapped people. G.D.O. receives a management fee from the Plaza for its services based on a percentage of the revenue generated by rents received from the tenants and housing assistance payments. Gross rents cover 100% of the Plaza's operating costs. Should a revenue surplus ever accrue, Department regulations, after allowing for retention of a small cash reserve, require that it be applied to the principal obligation or to reduce the gross rents.

Article VIII, § 2(a)(v) of the Pennsylvania Constitution provides that "[t]he General Assembly may by law exempt from taxation . . . [i]nstitutions of purely public charity, but in the case of any real property tax exemptions only that portion of real property of such institution which is actually and regularly used for the purposes of the institution." It is clear from the language of this section, and this Court long ago held, that "[t]he constitution does not, of itself, exempt any property; it merely permits the legislature to do so within certain limits." Donohugh's Appeal, 86 Pa. 306, 309 (1878). Pursuant to this authority the General Assembly has acted to exempt from local taxation

[ 515 Pa. Page 59]

"[a]ll . . . institutions of learning, benevolence, or charity . . . 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 from the same be applied to the support and to increase the efficiency and facilities thereof, the repair and the necessary increase of grounds and buildings thereof, and for no other purpose . . . ."

Act of May 22, 1933, P.L. 853, art. II, § 204(a)(3), as amended, 72 P.S. § 5020-204(a)(3) (Emphasis added). Case law establishes that the limits of the constitutional authority to grant exemption and the exemption actually granted by the legislature are not co-extensive.*fn2 "[T]o obtain the claimed exemption from taxation, [the appellant] must affirmatively show that the entire institution, (1) is one of 'purely public charity'; (2) was founded by public or private charity; (3) ...

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