Opinion
No. 1840 C.D. 2011
06-22-2012
Panther Valley School District, Appellant v. Carbon County Board of Assessment Appeals and Catholic Housing Corp. of Lansford, Inc.
BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY SENIOR JUDGE COLINS
Panther Valley School District (School District) appeals the order of the Court of Common Pleas of Carbon County (Trial Court) denying the post-verdict motions of the School District relative to a verdict entered on June 7, 2011 in a tax assessment appeal, and granting a real estate tax exemption to Catholic Housing Corporation of Lansford, Inc. (CHC). We affirm.
CHC is a Pennsylvania non-profit corporation, exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code. It is a single-asset corporation that operates a three-story, seventeen-unit, low-income housing facility for the elderly in the Borough of Lansford, Carbon County, Pennsylvania. CHC offers residents the services of a staff coordinator who assists them in finding medical, transportation, and other community outreach services. CHC operates under guidelines established by the U.S. Department of Housing and Urban Development (HUD) for a Section 202 Project Rental Assistance Contract (PRAC) housing project. Under this grant program, residents pay rent equal to thirty percent of their adjusted monthly income, and PRAC makes up the difference by providing $560 per unit. (April 15, 2011 Record Transcript w/Exhibits (Transcript w/Exhibits), HUD PRAC Contract, Ex. Owner 5 (PRAC Agreement).) If a rental unit is unoccupied, CHC submits a claim, and, if approved, HUD provides 50% of the monthly $560 for that unit. Id.
CHC filed an application for exemption from real estate taxation with the Carbon County Board of Assessment Appeals (Board) under the General County Assessment Law (Law), and the Board granted the exemption on the basis of 72 P.S. §5020-204(a)(3), having determined that CHC met each of the five elements required thereunder. To be eligible for exemption under the Law, an entity must:
The Carbon County Board of Assessment Appeals joined in the brief submitted by CHC.
Act of May 22, 1933, P.L. 853, as amended, 72 P.S. §§5020-1 - 5020-602.
Section 204 of the Law states:
Exemptions from Taxation. (a) The following property shall be exempt from all county, city, borough, town, township, road, poor and school tax, to wit:72 P.S. §5020-204(a)(3).
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(3) All hospitals, universities, colleges, seminaries, academies, associations and institutions 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: And provided further, That any charitable organization providing residential services in which the charitable nonprofit organization received subsidies of at least ninety-five per centum of the residential housing units from a low-income Federal housing program shall remain a "purely private charity" and tax exempt provided that any surplus from such assistance or subsidy is monitored by the appropriate governmental agency and used solely to advance common charitable purposes within the charitable organization.
(1) Establish itself as a charitable organization;72 P.S. §5020-204(a)(3).
(2) Provide residential housing services;
(3) Establish that at least 95% or more of the residential housing units receives subsidies from a low-income federal housing program;
(4) Establish that any surplus from the federal subsidy or assistance is monitored by the appropriate governmental agency; and
(5) Use the surplus solely for the advancement of the common charitable purposes within the charitable organization.
In addition, Article VIII, Section 2(a)(v) of the Pennsylvania Constitution limits the exemption to only those organizations that are institutions of purely public charity. In Hospital Utilization Project v. Commonwealth of Pennsylvania, 507 Pa. 1, 487 A.2d 1306 (1985) (HUP), the Pennsylvania Supreme Court set forth the five characteristics or elements that an entity must possess in order to be considered a purely public charity for purposes of Article VIII, Section 2(a)(v), as follows:
(1) Advance a charitable purpose;HUP, 507 Pa. at 21-22, 487 A.2d at 1317.
(2) Donate or render gratuitously a substantial portion of its services;
(3) Benefit a substantial and indefinite class of persons who are legitimate subjects of charity;
(4) Relieve the government of some of its burden; and
(5) Operate entirely free from private profit motive.
On appeal, the School District concedes that CHC meets the first two elements of 72 P.S. §5020-204(a)(3), but argues that the evidence presented regarding the remaining three elements was insufficient. The School District asserts that because CHC's program is new, and the majority of the rental units are not yet occupied, it is impossible to establish that at least 95% of the units will receive subsidies from a low income federal housing program as required under element (3). Similarly, the School District submits it is premature to establish whether surpluses from a federal subsidy will be monitored by the appropriate governmental agency (element (4)), or to what charitable purpose such surpluses might be applied (element (5)).
Our scope of review in a real estate tax assessment appeal is limited to determining whether the Trial Court's findings are supported by substantial evidence or whether the trial court abused its discretion or committed an error of law. Church of the Overcomer v. Delaware County Board of Assessment Appeals, 18 A.2d 386, 388-89 n. 1 (Pa. Cmwlth. 2011). Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Id. The trial court is the fact finder and resolves all matters of credibility and evidentiary weight. Its findings are binding on this Court if supported by substantial evidence. St. Margaret Seneca Place v. Board of Property Assessment, Appeals and Review, 536 Pa. 478, 483-84, 640 A.2d 380, 383 (1994).
In a well-reasoned opinion, the Trial Court credited the testimony of the project manager, Mr. Mark Mason, an employee of Catholic Senior Housing and Healthcare Services, Inc. (CSHHS), the entity serving as the management agent for CHC. The Trial Court stated that it was clear from Mr. Mason's testimony, as well as from the PRAC Agreement, that every one of CHC's units is eligible for some sort of federal funding; thus, the Trial Court found the eligibility of federal funding for 100% of the housing units to be sufficient for satisfaction of element (3) of Section 204(a)(3). (December 19, 2011 Memorandum Opinion of the Trial Court (Trial Court Opinion), Reproduced Record (R.R.) at 108a, n.14.) Mr. Mason testified that if there is a budget surplus at the end of the year, within sixty days it must be deposited into a HUD-controlled account, which can be used, with HUD's written consent, solely for repairs to the housing facility. (Transcript w/Exhibits at 11, R.R. at 73a.) Again, the Trial Court cited this testimony, together with HUD's Capital Advance Program Regulatory Agreement (Transcript w/Exhibits at Ex. Owner 7) as evidence sufficient to satisfy elements (4) and (5) of Section 204(a)(3), in that budget surpluses are deposited into HUD-controlled accounts and used solely for the advancement of common charitable purposes, to wit, providing and maintaining a building fit for occupation by low-income seniors. (Trial Court Opinion, R.R. at 109a.)
The School District also concedes that CHC meets elements (1), (3), and (5) of the five-part HUP test, but argues on appeal that CHC fails to meet elements (2) and (4). Element (2) of the HUP test requires the organization seeking exemption to donate or render gratuitously a substantial portion of its services, and element (4) requires the entity to relieve the government of some of its burden. The Trial Court found that CHC satisfies each of these requirements. In addition to HUD funding received, CSHHS, as management agent for CHC, donated $600,000 toward construction costs. (Transcript w/Exhibits at 27-28, R.R. at 89a-90a.) The School District argues that this one-time investment towards construction costs cannot be equated with the required donation of a substantial portion of CHC's services. We disagree. The services offered by CHC begin with, and could not be provided absent, the construction of the housing facility for low-income senior citizens. CHC contributed a significant portion of these construction costs. Moreover, CHC is obligated to cover any budgetary shortfalls that may arise from the operation of the housing facility. (Id. at 29, R.R. at 91a.)
The total project cost for construction was $3.2 million, including CHC's $600,000 contribution. (Transcript w/Exhibits at 17.) --------
The School District claims that a similar factual scenario can be found in WRC Northfolk Heights, Inc. v. Board of Assessment Appeals of Jefferson County, 917 A.2d 893 (Pa. Cmwlth.), appeal denied, 596 Pa. 721, 944 A.2d 760 (2007), where this Court applied the HUP test, and denied a federally subsidized low-income housing facility for the elderly a real estate tax exemption, finding that it neither donated a "substantial portion" of its services nor relieved the government of some of its burden. WRC Northfolk Heights involved a fifty-six unit housing facility whose elderly residents, like those at CHC, were provided with assistance to access medical and social services; however, the Court found no record evidence of costs incurred by the facility in WRC Northfolk Heights. Id. at 901. Here, it is uncontested that CHC, through its agent, contributed $600,000 toward the costs of construction, costs that the government would have otherwise been required to contribute. CHC has underwritten a significant portion of the costs of providing low-cost housing for the elderly, and in so doing, has further acted to relieve the government of some of its burden.
We find substantial evidence to support the finding of the Trial Court that CHC has met its burden in establishing that it qualifies for a real estate tax exemption. Accordingly, the order of the Trial Court is AFFIRMED.
/s/ _________
JAMES GARDNER COLINS, Senior Judge ORDER
AND NOW, this 22nd day of June, 2012, the order of the Carbon County Court of Common Pleas is AFFIRMED.
/s/ _________
JAMES GARDNER COLINS, Senior Judge