Appeal from the Order of the Court of Common Pleas of Lancaster County, in case of In Re: Appeal of Lutheran Social Services -- East Region, a Pennsylvania non-profit organization, from the Determination of the Lancaster County Board of Assessment Appeals, Tax Parcel 37-8K6-5-9, Municipality -- Lititz Borough Assessment for the year 1986, property of Lutheran Social Services -- East Region, No. 3940 of 1985.
Robert W. Hallinger, Barley, Snyder, Cooper & Barber, for appellant.
Paul K. Allison, for appellee.
Judges Craig and MacPhail, and Senior Judge Barbieri, sitting as a panel of three. Opinion by Judge Craig.
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Lutheran Social Services -- East Region (LSS) appeals from an order of the Court of Common Pleas of Lancaster County that denied the tax exemption claim of LSS in regard to two portions of a parcel of real estate. The issue is whether either or both of those portions meet the constitutional and statutory requirements for exemption from real estate tax based on charitable use of the property.
LSS is a non-profit corporation affiliated with the Luthern Church of America through the Central Pennsylvania Synod. LSS owns a 40-acre site in Lancaster County on which it operates a retirement community for the elderly known as Luther Acres, which consists of
[ 114 Pa. Commw. Page 631]
a 98-bed nursing care facility, a 96-unit apartment building, known as the Luther Townehome Apartments, and 81 cottage units. The apartment building is attached to the nursing facility through an adjoining wing in which are located facilities that the two buildings share -- chapel, dining room, kitchen, activities area, lounge and library.
In 1985 the Lancaster County Board of Assessment Appeals (board) reclassified the apartment building and the cottages from tax exempt to taxable; the board did not change the status of the nursing facility, which remains classified as tax exempt. LSS appealed the changes to the board, which affirmed its initial determination; LSS then appealed to the court of common pleas. After a hearing de novo, the court denied the appeal and held that the apartment building and cottages were not entitled to tax exempt status. This appeal followed.
The Constitution of the Commonwealth of Pennsylvania authorizes the legislature to exempt by law 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." Pa. Const. art. VIII, § 2(a)(v) (emphasis added). Pursuant to that authorization, the legislature enacted section 204(a)(3) of the General County Assessment Law, Act of May 22, 1933, P.L. 853, as amended, 72 P.S. § 5020-204(a)(3), which provides:
(a) The following property shall be exempt from all county, city, borough, town, township, road, poor and school tax, to wit:
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(3) All hospitals, universities, colleges, seminaries, academies, associations and institutions Page 632} 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 by 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 . . . . (Emphasis added.)
In Hospital Utilization Project v. Commonwealth, 507 Pa. 1, 487 A.2d 1306 (1985), our Supreme Court established a test to be used to determine when a particular entity meets the constitutional requirement of being a "purely public charity." After reviewing and analyzing the extensive case law in this area, the court stated:
From the foregoing it can be concluded that an entity qualifies as a purely public charity if it possesses the following characteristics.
(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 ...