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Commonwealth Court Rules in Favor of Johnson Duffie Client

05.08.18

On May 8, 2018, the Pennsylvania Commonwealth Court affirmed a trial court's decision to deny real estate tax exemption status for a non-profit company's residential properties in Dauphin County that it leases to multiple tenants. Attorney Brian Carter of Johnson Duffie representing the Borough of Highspire successfully argued the real estate was not tax exempt. The trial court in Dauphin County originally denied the tax exemption status and the non-profit company appealed the matter to the Commonwealth Court.

The Commonwealth Court stated the state or federal tax-exempt nature of the owner of real estate is not enough under the Pennsylvania Constitution to grant exemption from real estate taxes. The Court determined the non-profit company failed on two fronts: (1) by not benefiting a substantial and indefinite class of persons who are legitimate subjects of charity; and (2) failing to relieve the government of some of its burden.

The non-profit company had an extensive and secretive screening process to ensure prospective tenants were financially qualified to pay the rent. It was also noted that the rental subsidy to assist tenants was very discretionary and offered on an ad hoc basis that could be terminated at any time by the non-profit company. These activities caused the non-profit company to not serve a substantial and indefinite class of persons or to serve persons who are legitimate subjects of charity. The Commonwealth Court also noted the non-profit company failed to relieve the government of any of its burden because none of the services offered by the non-profit company would otherwise fall on the government to provide.