Allegheny County Challenges Real Estate Tax Exemptions
If they haven’t received it already, owners of tax-exempt properties in Allegheny County will shortly be getting a notice requiring them to justify the continued tax-exempt status of their property. The County is sending these notices out under County Ordinance 49-07. This Ordinance requires that every three years, the owners of tax exempt properties confirm continued compliance with Pennsylvania’s Institutions of Purely Public Charity Act. According to published statements, County Executive Rich Fitzgerald intends to send the notification letters over the next few weeks to approximately 9,000 owners of tax-exempt properties in Allegheny County.
By way of background, in April 2012 the Pennsylvania Supreme Court confirmed the long standing rule that in order to qualify for a real estate tax exemption as an “institution of purely public charity”, an organization must meet a five prong test. This test requires that the organization meet all of the following requirements:
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Advances a charitable purpose;
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Donates (or offers free of charge) a substantial amount of its services;
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Benefits a class of persons who are legitimate subjects of charity;
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Relieves the government of some of its burden; AND
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Operates entirely free of private profit motive.
In order to maintain tax exemptions for their properties, organizations have sixty (60) days from the date of the notification letter to provide the County’s Office of Property Assessments with a written explanation of how all five of these criteria are met. An otherwise tax-exempt nonprofit organization may not be entitled to exemptions for all of its properties, as the use of the property will control whether the exemption is appropriate. If a property is rented to tenants and is generating income, either all or a portion of the property could be deemed to be taxable.
Many nonprofits have paid little or no attention to increases in the assessed value of their real estate under the assumption that no tax will be due. However, for most nonprofits that are already dealing with cuts in government funding and constricting philanthropic dollars, the impact could be staggering. If a property located in the City of Pittsburgh assessed at $300,000 suddenly loses its real estate tax exemption, the tax liability – without adjustments – for County, City, and School District taxes using 2013 rates would equal $6,582.00. If that assessed value is above fair market value, the taking of a valuation appeal should also be considered; Allegheny County requires that valuation appeals for 2013 be filed by April 1.
Nonprofits should prepare to respond quickly and effectively to the Office of Property Assessments. Now is the time for organizations to gather information on how they meet the five prong test, to revisit the Application for Exemption of Real Estate Taxation previously provided to the County, to examine the specific use of individual properties and to review the data regarding those properties appearing on the Allegheny County Real Estate website (http://www2.county.allegheny.pa.us/RealEstate/Search.aspx). As the evaluation process progresses, the Office of Property Assessments will be posting answers to frequently asked questions online.
The members of the Meyer, Unkovic & Scott Real Estate Group have consistently achieved positive results for their clients in dealings with the Office of Property Assessments. Meyer, Unkovic & Scott LLP has extensive experience advising nonprofit entities on organizational, real estate and tax matters and can assist your organization with this new challenge. If you have any questions, please contact June Swanson at 412-456-2824 or by email at [email protected].
