A need for clarity on charities in the state
By State Sen. Mike Brubaker, Special to the Sunday News
Public charities play an important role in meeting the needs of our communities and helping vulnerable populations in the commonwealth and across the entire nation.
Their selfless acts and services stand as a shining example of the good that can be accomplished when individuals work together toward a common goal.
But while many of these organizations constantly struggle to attract enough volunteers and donations to meet the demand for services, they have now encountered another roadblock that has added a significant obstacle to their efforts. This roadblock comes in the form of a court ruling and the obstacle is the threat of considerably higher tax bills.
Last year, a Pennsylvania Supreme Court decision denied public charity status to a summer camp in Pike County. In its opinion, the court referred to a judicially created test known as the HUP test. While the HUP test was a good start for defining public charities in 1985, it was ripe with confusion and inconsistencies as charity status was left to the local courts' interpretation.
For years, nonprofits and taxing bodies spent countless dollars on litigation. A clear set of standards was needed for the benefit of both nonprofits and local government taxing authorities.
To provide that much needed clarity, the Institutions of Purely Public Charity Act (Act 55) was enacted in 1997, receiving unanimous support in the Legislature. This law was the culmination of 21 months of work by the General Assembly.
The House Finance Committee held six public hearings in all corners of the state in addition to countless meetings. Most importantly, all appropriate parties were involved in the creation of the act: nonprofit organizations, the Pennsylvania League of Cities, the County Commissioners' Association, the Pennsylvania Association of Township Supervisors, Association of Boroughs and others.
By enacting Act 55, the state had a clear set of realistic and measurable standards for what qualifies as a purely public charity.
However, that changed with the 2012 Supreme Court ruling. It not only dismissed and disregarded the comprehensive work done by state lawmakers, but it also declared that any legislation passed by the General Assembly regarding purely public charities is subordinate to the judicially created test.
Understanding that Act 55 is not perfect, I believe the citizens of Pennsylvania, through their elected officials, should be able to decide the criteria for charity status and also have the ability to modify those standards as they see fit.
Due to this court decision, a number of charities have seen their property tax exemptions revoked by local taxing bodies and many other nonprofits statewide will be impacted as some local governments plan countywide reviews. This will result in widespread uncertainty and costly litigation as the criteria for purely public charity status is, again, left to the courts.
That's why I am spearheading legislation -- Senate Bill 4 -- alongside Senate President Pro Tempore Joe Scarnati to clarify that it is the exclusive role of the Legislature to write laws providing for the qualifications of institutions of purely public charity. The bill recently passed the Senate and awaits consideration by the House of Representatives.
To be clear: Senate Bill 4 would not change the criteria or standards for a purely public charity, nor would it limit a local government from challenging charity status.
The legislation does call for a constitutional amendment, which requires approval by the Legislature in two consecutive legislative sessions and by the citizens in a voter referendum.
So contrary to opposing arguments, there is no way to "fast track" this bill nor can it be said that my proposal is "Harrisburg as usual."
I believe our nonprofits and taxing authorities deserve a clear set of standards on which to base their charitable status decisions.
I also believe this legislation is necessary to avoid costly litigation which every tax-paying citizen in the commonwealth funds in one way or another.
Most importantly, my bill will allow the people of Pennsylvania to determine who sets the standards for purely public charities.
State Sen. Mike Brubaker, a Republican from Warwick Township, represents the 36th District.