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ARC Human Servs., Inc. v. Clearfield County Assessment Office and Tax Bureau

Commonwealth Court of Pennsylvania

July 13, 2015

ARC Human Services, Inc., Appellant
v.
Clearfield County Assessment Office and Tax Bureau, and Jennifer A.M. Wooster, and Kim C. Kesner

Argued June 15, 2015

Appealed from Nos. 2013-0831-0833-CD. Common Pleas Court of the County of Clearfield. Ammerman, President Judge.

Alexandra A. Romano, Pittsburgh, for appellant.

Kim C. Kesner, Clearfield, for appellee Clearfield County Assessment Office and Tax Bureau.

BEFORE: HONORABLE ROBERT SIMPSON, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE JAMES GARDNER COLINS, Senior Judge.

OPINION

P. KEVIN BROBSON, J.

In these consolidated appeals, Appellant ARC Human Services, Inc. (ARC) appeals from the orders of the Court of Common Pleas of Clearfield County (trial court).

Page 466

The trial court denied ARC's statutory tax appeal from the decisions of the Clearfield County (County) Board of Assessment (Board), which denied ARC's request for tax exemptions for three tax parcels. We affirm the trial court's orders.

ARC operates group homes in ten Pennsylvania counties, providing residential accommodations for individuals with intellectual disabilities. ARC is the owner of three parcels of property in the County identified in the County's tax assessment maps. ARC operates a group home on one of the subject parcels, having a street address of 3147 Oklahoma-Salem Road in Sandy Township (No. 128-C4-42-243 on the County's tax assessment map). This parcel consists of a residential dwelling, buildings, and two lots. ARC also operates a group home facility located on two separately assessed parcels (No. 119.0-G02-457-5 and No. 119-0-G02-457-6 on the assessment map), which share the street address of 10015 State Park Road in Huston Township. Those parcels together consist of a house, a garage, a building, and .27 acres.

Between February 17, 2012 and October 30, 2012, ARC sent letters to the Board regarding the Sandy Township and Huston Township parcels, seeking exemption from real estate taxes based upon ARC's assertion that it is an institution of purely public charity (IPPC) and that the parcels are used for such purposes. On May 7, 2013, the Board held a hearing on the applications. On or about May 9, 2013, the Board issued notices of Board Assessment Appeals, in which the Board, without reference to ARC's claim for exemption, affirmed the parcels' original market valuations and tax assessments. On May 28, 2013, ARC filed appeals from the Board's notices with the trial court, asserting that, contrary to the Board's implicit conclusions, the evidence ARC submitted to the Board supported its contention that the properties should be exempt from taxation.

On April 4, 2014, the trial court conducted a non-jury trial on the appeals and, on June 23, 2014, issued an opinion and orders affirming the Board's decisions. The trial court observed that an entity seeking tax exemption for its real property must satisfy two legal criteria, the first one being a constitutional question, i.e., a demonstration that the entity is an IPPC and the second one being a statutory question under the Institutions of Purely Public Charity Act (Act 55),[1] i.e., whether the property for which an IPPC seeks a real estate tax exemption is being used to advance a charitable purpose of the IPPC that owns it. Alliance Home of Carlisle, Pa. v. Bd. of Assessment Appeals, 591 Pa. 436, 919 A.2d 206, 224 (Pa. 2007). The trial court noted that the Supreme Court's decision in Hospital Utilization Project v. Commonwealth, 507 Pa. 1, 487 A.2d 1306 (Pa. 1985) ( HUP ), set forth the proper analysis to resolve the first question--the constitutional question of whether an entity is an IPPC.[2] The trial court concluded that ARC failed to satisfy the second HUP element, based upon several

Page 467

key findings: (1) that the evidence does not show that some or any residents do not have to make any personal financial payment in order to live in an ARC group home; (2) that the evidence is insufficient to show the financial burden ARC itself bears in order to provide services to its residents; and (3) that ARC's evidence indicates that only a negligible portion of its costs of operating are from charitable contributions. Based upon its findings, the trial court affirmed the Board's rejection of ARC's request for an exemption for the parcels.

On appeal,[3] ARC raises the following two issues for our review: (1) whether the trial court erred in concluding that ARC does not donate or render gratuitously a substantial portion of its services to charity for the purpose of satisfying the second HUP element; and (2) whether the trial court applied the wrong standard of proof by stating that ARC had a " heavy burden" to establish the second HUP prong.

In HUP, our Supreme Court held that the question of whether the services an entity donates or gratuitously provides is " substantial" is an inquiry that is based upon the totality of the circumstances and that there is no specific percentage of donated or gratuitous services that must be established. HUP, 487 A.2d at 1316. The Supreme Court opined that " [i]t must appear from the facts that the organization makes a bona fide effort to service primarily those who cannot afford the usual fee." Id.

In WRC North Fork Heights v. Board of Assessment Appeals, Jefferson County, 917 A.2d 893 (Pa.Cmwlth.), appeal denied, 596 Pa. 721, 944 A.2d 760 (Pa. 2007), we considered an appeal involving an entity that provided low income elderly individuals with housing. The evidence indicated that residents paid rent and a federal housing program paid WRC a subsidy equal to the " difference between [the rent] and fair market value." WRC, 917 A.2d at 899. WRC also offered evidence that it aided residents to access services for medical, social, and emotional needs. The Court noted that the evidence concerning such services did not describe the extent of that help or whether WRC provided the help for no charge. Id. We rejected WRC's claim that it had established that it made a bona fide effort to service individuals who could not afford the usual costs of living in the housing provided. We concluded:

WCR's vague testimony that it assists residents in accessing help with medical, social, emotional and spiritual needs, with no attempt to quantify the costs incurred by WRC, could not meet the specific requirements regarding donations stated in [Act 55]. In terms of the HUP analysis, the record lacks evidence that WRC ...

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