SENATE AMENDED PRIOR PRINTER'S NOS. 64, 994, 1071 PRINTER'S NO. 2563
No. 55 Session of 1997
INTRODUCED BY BOYES, TRELLO, KENNEY, TIGUE, ITKIN, BROWNE, NAILOR, CAWLEY, DENT, DeLUCA, DEMPSEY, COY, FLICK, READSHAW, GANNON, PRESTON, BOSCOLA, BROWN, CURRY, GRUPPO, BELARDI, ARMSTRONG, ROONEY, LAWLESS, COLAIZZO, LYNCH, ROBERTS, GODSHALL, OLASZ, TRAVAGLIO, MUNDY, MELIO, WOJNAROSKI, C. WILLIAMS, GIGLIOTTI, YOUNGBLOOD, SAYLOR, L. I. COHEN, STEVENSON, WILT, BELFANTI, O'BRIEN, ZUG, BUNT, ADOLPH, GLADECK, LESCOVITZ, E. Z. TAYLOR, EACHUS, LaGROTTA, HASAY, LEH, ROSS AND SERAFINI, JANUARY 28, 1997
SENATOR HART, FINANCE, IN SENATE, AS AMENDED, NOVEMBER 17, 1997
AN ACT 1 Providing for the tax exemption of institutions of purely public <-- 2 charity; exempting real property owned by State-related 3 universities or Federal Government instrumentalities from 4 taxation; and providing for unfair competition. 5 TABLE OF CONTENTS 6 Section 1. Short title. 7 Section 2. Legislative intent. 8 Section 3. State-related universities. 9 Section 4. Definitions. 10 Section 5. Criteria. 11 Section 6. Multiple jurisdictions. 12 Section 7. Existing agreements. 13 Section 8. Unfair competition with small businesses. 14 Section 9. Accountability and disclosure. 15 Section 10. Exemption for Federal Government
1 instrumentality. 2 Section 11. Repeals. 3 Section 12. Applicability. 4 Section 13. Effective date. 5 PROVIDING FOR THE TAX EXEMPTION OF INSTITUTIONS OF PURELY PUBLIC <-- 6 CHARITY; EXEMPTING REAL PROPERTY OWNED BY STATE-RELATED 7 UNIVERSITIES OR FEDERAL GOVERNMENT INSTRUMENTALITIES FROM 8 TAXATION; PROVIDING FOR UNFAIR COMPETITION; IMPOSING 9 PENALTIES; AND MAKING REPEALS. 10 TABLE OF CONTENTS 11 SECTION 1. SHORT TITLE. 12 SECTION 2. LEGISLATIVE INTENT. 13 SECTION 3. DEFINITIONS. 14 SECTION 4. STATE-RELATED UNIVERSITIES. 15 SECTION 5. CRITERIA FOR INSTITUTIONS OF PURELY PUBLIC CHARITY. 16 SECTION 6. PRESUMPTION PROCESS. 17 SECTION 7. VOLUNTARY AGREEMENTS. 18 SECTION 8. UNFAIR COMPETITION WITH SMALL BUSINESSES. 19 SECTION 9. ACCOUNTABILITY AND DISCLOSURE. 20 SECTION 10. EXEMPTION FOR FEDERAL GOVERNMENT INSTRUMENTALITY. 21 SECTION 11. PROHIBITED ACT. 22 SECTION 12. COMPLIANCE. 23 SECTION 13. CIVIL PENALTY. 24 SECTION 14. REPEALS. 25 SECTION 15. APPLICABILITY. 26 SECTION 16. EFFECTIVE DATE. 27 The General Assembly of the Commonwealth of Pennsylvania 28 hereby enacts as follows: 29 Section 1. Short title. <-- 30 This act shall be known and may be cited as the Institutions 31 of Purely Public Charity Act. 32 Section 2. Legislative intent. 19970H0055B2563 - 2 -
1 (a) Findings.--The General Assembly finds and declares as 2 follows: 3 (1) It is in the best interest of this Commonwealth and 4 its citizens that the recognition of tax-exempt status be 5 accomplished in an orderly, uniform and economical manner. 6 (2) For more than 100 years, it has been the policy of 7 this Commonwealth to foster the organization and operation of 8 charitable organizations by exempting charitable 9 organizations from taxation. 10 (3) Because charitable organizations contribute to the 11 common good or lessen the burdens of government, the historic 12 policy of exempting charitable institutions from taxation 13 should be continued. 14 (4) The General Assembly recognizes that it is 15 unrealistic today to expect charitable organizations to rely 16 completely upon private philanthropy and that there is an 17 appropriate role and responsibility for government support 18 with respect to activities historically recognized as 19 charitable. 20 (5) The General Assembly recognizes that the lack of 21 specific legislative standards defining the term 22 "institutions of purely public charity" has led to increasing 23 confusion and confrontation among traditionally tax-exempt 24 organizations and local governments to the detriment of the 25 public. 26 (6) There is increasing concern that the eligibility 27 standards for charitable tax exemptions are being applied 28 inconsistently, which may violate the uniformity provision of 29 the Constitution of Pennsylvania. 30 (b) Intent.--It is the intent of the General Assembly to 19970H0055B2563 - 3 -
1 eliminate inconsistent application of eligibility standards for 2 charitable tax exemptions, reduce confusion and confrontation 3 among traditionally tax-exempt organizations and local 4 governments and insure that charitable and public funds are not 5 unnecessarily diverted from the public good to litigate 6 eligibility for tax-exempt status by providing standards to be 7 applied uniformly in all proceedings throughout this 8 Commonwealth for determining eligibility for exemption from 9 State and local taxation which are consistent with traditional 10 legislative and judicial applications of the constitutional term 11 "institutions of purely public charity." 12 Section 3. State-related universities. 13 (a) General rule.--It is the intent of the General Assembly 14 to recognize that the State-related universities provide a 15 direct public benefit and serve the public purposes of this 16 Commonwealth by declaring the real property of State-related 17 universities to be public property for purposes of exemption 18 from State and local taxation when the property is actually and 19 regularly used for public purposes, provided that nothing in 20 this section is intended or shall be construed to affect the 21 title to real property of State-related universities or the 22 power and authority of the governing bodies of State-related 23 universities with respect to such real property. Further, 24 nothing in this section is intended or shall be construed to 25 affect, impair or terminate any contract or agreement in effect 26 on or before the effective date of this act by and between a 27 State-related university and any county, city, borough, township 28 or school district wherein the State-related university pays 29 real estate taxes, amounts in lieu of real estate taxes or other 30 charges, fees or contributions for municipal services. 19970H0055B2563 - 4 -
1 (b) Real property.--All real property owned by State-related 2 universities, or owned by the Commonwealth and used by a State- 3 related university, is and shall be deemed public property for 4 purposes of the Constitution of Pennsylvania and the laws of 5 this Commonwealth relating to the assessment, taxation and 6 exemption of real estate and shall be exempt from all State and 7 local taxation when actually and regularly used for public 8 purposes. 9 (c) Exemption.--This section shall not include the property 10 of a State-related university the possession and control of 11 which has been transferred to a for-profit entity not otherwise 12 entitled to tax-exempt status, irrespective of whether that 13 entity is affiliated with the university. The execution of a 14 management services contract with a third party entity to 15 provide operational services to the university which would 16 otherwise be provided or conducted directly by the university 17 shall not, however, be considered a transfer of possession and 18 control of real property within the meaning of this section. 19 (d) Definitions.--As used in this section, the following 20 words and phrases shall have the meanings given to them in this 21 subsection: 22 "Public purposes." All activities relating to the 23 educational mission of State-related universities, including 24 teaching, research, service and activities incident or ancillary 25 thereto which provide services to or for students, employees or 26 the public. 27 "State-related universities." The Pennsylvania State 28 University and its affiliate, the Pennsylvania College of 29 Technology, the University of Pittsburgh, Temple University and 30 its subsidiaries Temple University Hospital, Inc., and Temple 19970H0055B2563 - 5 -
1 University Children's Hospital, Inc., and Lincoln University. 2 Section 4. Definitions. 3 The following words and phrases when used in this act shall 4 have the meanings given to them in this section unless the 5 context clearly indicates otherwise: 6 "Commercial business." The sale of products or services that 7 are principally the same as those offered by an existing small 8 business in the same community. 9 "Goods or services." Goods or services which promote any of 10 the six enumerated purposes under section 5(b) and which are 11 valued in accordance with generally accepted accounting 12 principles applicable to the institution. If the institution's 13 purpose is to provide health care services, the term shall 14 include, but not be limited to, medically necessary goods or 15 services in life-threatening situations. 16 "Government agency." Any Commonwealth agency or any 17 political subdivision or municipal or other local authority or 18 any officer or agency of any political subdivision or local 19 authority. 20 "Institution of purely public charity." A domestic or 21 foreign nonprofit corporation, association, trust or other 22 organization which meets the criteria under section 5. 23 "Net operating income." The amount of funds remaining after 24 deducting all operating expenses related to the provision of 25 goods or services associated with the institution's charitable 26 purpose from payments received from providing these goods or 27 services, as determined in accordance with the generally 28 accepted accounting principles applicable to the institution. 29 "Small business." Any self-employed individual, sole 30 proprietorship, firm, corporation, partnership, association or 19970H0055B2563 - 6 -
1 other entity that: 2 (1) has fewer than 101 full-time employees; and 3 (2) is subject to income taxation under the act of March 4 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971. 5 "Tax Reform Code." The act of March 4, 1971 (P.L.6, No.2), 6 known as the Tax Reform Code of 1971. 7 "Total operating expenses." The costs related to the 8 provision of goods or services associated with the institution's 9 charitable purpose, as determined in accordance with generally 10 accepted accounting principles applicable to the institution. 11 Section 5. Criteria. 12 (a) General rule.--An institution of purely public charity 13 is a nonprofit corporation, association, trust or other 14 organization which meets the criteria set forth in this section. 15 A nonprofit parent corporation, together with all of its 16 subsidiary nonprofit corporations, may elect to be considered as 17 a single institution in meeting the criteria set forth in this 18 section as long as all of the following are met: 19 (1) Each subsidiary: 20 (i) is a nonstock corporation of which the nonprofit 21 parent corporation is the only member; and 22 (ii) meets the requirements of subsections (b), (c), 23 (d), (e) and (f). 24 (2) The parent: 25 (i) is a nonstock corporation; 26 (ii) is duly qualified by the Internal Revenue 27 Service as meeting the requirements of section 501(c)(3) 28 of the Internal Revenue Code of 1986 (Public Law 99-514, 29 26 U.S.C. § 501(c)(3)); 30 (iii) meets the requirements of subsections (b) and 19970H0055B2563 - 7 -
1 (c); and 2 (iv) except for services that meet the requirements 3 of subsections (b), (c), (d), (e) and (f), does not 4 render services for a fee to an individual or entity that 5 does not meet the requirements of paragraph (1). 6 An institution of purely public charity shall meet all of the 7 criteria contained in subsections (b), (c), (d), (e) and (f). 8 Institutions of purely public charity which meet the criteria 9 specified in this section shall be considered to be founded, 10 endowed and maintained by public or private charity. 11 (b) Charitable purpose.--The institution shall advance a 12 charitable purpose. This criterion is satisfied if the 13 institution is organized and operated primarily to fulfill any 14 one or combination of the following purposes: 15 (1) Relief of poverty. 16 (2) Advancement of education, including, but not limited 17 to, postsecondary education. 18 (3) Advancement of religion. 19 (4) Prevention and treatment of disease or injury. 20 (5) Government or municipal purposes. 21 (6) Accomplishment of a purpose which is beneficial to 22 the community, including advancement of the arts and 23 sciences, advancement of the cultural, spiritual, mental, 24 physical, social or emotional welfare or improvement of 25 others. 26 (c) Private profit motive.--The institution shall operate 27 entirely free from private profit motive. Notwithstanding 28 whether the institution's revenues exceed its expenses, this 29 criterion is satisfied if the institution meets all of the 30 following: 19970H0055B2563 - 8 -
1 (1) Neither the institution's net earnings nor donations 2 which it receives inures to the benefit of private 3 shareholders or other individuals, as the private inurement 4 standard is interpreted under section 501(c)(3) of the 5 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 6 501(c)(3)). The purchase of tangible or intangible assets, 7 including professional practices for fair market value, shall 8 not, by itself, be construed to constitute evidence of 9 operation for a private profit motive. 10 (2) The institution applies or reserves any revenue in 11 excess of expenses in furtherance of its charitable purpose 12 or to funding of other charitable organizations which meet 13 the provisions of this subsection. 14 (3) Compensation, including benefits, of any director, 15 officer or employee, is not based primarily upon the 16 financial performance of the organization. 17 (d) Community service.-- 18 (1) The institution shall donate or render gratuitously 19 a substantial portion of its services. This criterion is 20 satisfied if the institution benefits the community by 21 actually providing any of the following: 22 (i) Goods or services to all who seek them without 23 regard to their ability to pay for what they receive if 24 all of the following apply: 25 (A) The institution has a written policy to this 26 effect. 27 (B) The institution has published this policy in 28 a reasonable manner. 29 (C) The institution provides uncompensated goods 30 or services at least equal to 75% of the 19970H0055B2563 - 9 -
1 institution's net operating income but not less than 2 3% of the institution's total operating expenses. 3 (ii) Goods or services for fees that are based upon 4 the recipient's ability to pay for them if all of the 5 following apply: 6 (A) The institution can demonstrate that it has 7 implemented a written policy and a written schedule 8 of fees based on individual or family income. An 9 institution will meet the requirement of this clause 10 if the institution consistently applies a formula to 11 all individuals requesting consideration of reduced 12 fees which is in part based on individual or family 13 income. 14 (B) At least 20% of the individuals receiving 15 goods or services from the institution pay no fee or 16 a fee which is lower than the cost of the goods or 17 services provided by the institution. 18 (C) At least 10% of the individuals receiving 19 goods or services from the institution receive a 20 reduction in fees of at least 10% of the cost of the 21 goods or services provided to them. 22 (D) No individual receiving goods or services 23 from the institution pays a fee which is equal to or 24 greater than the cost of the goods or services 25 provided to them, or the goods or services provided 26 to the individuals described in clause (B) are 27 comparable in quality and quantity to the goods or 28 services provided to those individuals who pay a fee 29 which is equal to or greater than the cost of the 30 goods or services provided to them. 19970H0055B2563 - 10 -
1 (iii) Wholly gratuitous goods or services to at 2 least 5% of those receiving similar goods or services 3 from the institution. 4 (iv) Financial assistance or uncompensated goods or 5 services to at least 20% of those receiving similar goods 6 or services from the institution if at least 10% of the 7 individuals receiving goods or services from the 8 institution either paid no fees or fees which were 90% or 9 less of the cost of the goods or services provided to 10 them, after consideration of any financial assistance 11 provided to them by the institution. 12 (v) Uncompensated goods or services which, in the 13 aggregate, are equal to at least 5% of the institution's 14 costs of providing goods or services. 15 (vi) Goods or services at no fee or reduced fees to 16 government agencies or goods or services to individuals 17 eligible for government programs if one of the following 18 applies: 19 (A) The institution receives 75% or more of its 20 gross operating revenue from grants or fee-for- 21 service payments by government agencies and if the 22 aggregate amount of fee-for-service payments from 23 government agencies does not exceed 95% of the 24 institution's costs of providing goods or services to 25 the individuals for whom the fee-for-services 26 payments are made. 27 (B) The institution provides goods or services 28 to individuals with mental retardation, to 29 individuals who need mental health services, to 30 members of an individual's family or guardian in 19970H0055B2563 - 11 -
1 support of such goods or services or to individuals 2 who are dependent, neglected or delinquent children, 3 as long as the institution performs duties that would 4 otherwise be the responsibility of government and the 5 institution is restricted in its ability to retain 6 revenue over expenses or voluntary contributions by 7 any one of the following statutes or regulations or 8 by contractual limitations with county children and 9 youth offices in this Commonwealth: 10 (I) Sections 1315(c) and 1905(d) of the 11 Social Security Act (49 Stat. 620, 42 U.S.C. §§ 12 1396d(d) and 1396n(c)). 13 (II) 42 CFR 440.150 (relating to 14 intermediate care facility (ICF/MR) services. 15 (III) 42 CFR Pt. 483 Subpt. I (relating to 16 conditions of participation for intermediate care 17 facilities for the mentally retarded). 18 (IV) The act of October 20, 1966 (3rd 19 Sp.Sess., P.L.96, No.6), known as the Mental 20 Health and Mental Retardation Act of 1966. 21 (V) Articles II, VII, IX and X of the act of 22 June 13, 1967 (P.L.31, No.21), known as the 23 Public Welfare Code. 24 (VI) 23 Pa.C.S. Ch. 63 (relating to child 25 protective services). 26 (VII) 42 Pa.C.S. Ch. 63 (relating to 27 juvenile matters). 28 (VIII) 55 Pa. Code Chs. 3170 (relating to 29 allowable costs and procedures for county 30 children and youth), 3680 (relating to 19970H0055B2563 - 12 -
1 administration and operation of a children and 2 youth social service agency) 4300 (relating to 3 county mental health and mental retardation 4 fiscal manual), 6400 (relating to community homes 5 for individuals with mental retardation), 6500 6 (relating to family living homes), 6210 (relating 7 to participation requirements for the 8 intermediate care facilities for the mentally 9 retarded program), 6211 (relating to allowable 10 cost reimbursement for non-State operated 11 intermediate care facilities for the mentally 12 retarded) and 6600 (relating to intermediate care 13 facilities for the mentally retarded). 14 (vii) Funds to corporations, associations, trusts or 15 other organizations which meet the criteria of this 16 section, funds to government agencies or funds to 17 organizations which qualify under section 501(c)(3) of 18 the Internal Revenue Code of 1986 (Public Law 99-514, 26 19 U.S.C. § 501(c)(3)), if the institution providing the 20 funds is primarily engaged in fundraising on behalf of or 21 making grants to such corporations, associations, trusts, 22 such government agencies or such organizations. 23 (2) The institution may elect to average the applicable 24 data for its five most recently completed fiscal years for 25 the purposes of calculating any formula or meeting any 26 quantitative standard in paragraph (1). 27 (3) For the purposes of calculating the number of 28 individuals for use in the percentage calculations in this 29 subsection, educational institutions may use full time 30 equivalent students as defined by the Department of 19970H0055B2563 - 13 -
1 Education. 2 (4) As used in this subsection, the term "uncompensated 3 goods or services" shall include all benefits provided to the 4 community the institution serves, including, but not limited 5 to, the following: 6 (i) The full cost of all goods or services provided 7 by the institution for which the institution has not 8 received monetary compensation or the difference between 9 the full cost and any lesser fee received for the goods 10 or services, including the cost of the goods or services 11 provided to individuals unable to pay. 12 (ii) The difference between the full cost of 13 education and research programs provided by or 14 participated in by the institution and the payment made 15 to the institution to support the education and research 16 programs. 17 (iii) The difference between the full cost of 18 providing the goods or services and the payment made to 19 the institution under any government program, including 20 individuals covered by Medicare or Medicaid. 21 (iv) The difference between the full cost of the 22 community services which the institution provides or 23 participates in and the payment made to the institution 24 to support such community services. 25 (v) The reasonable value of any moneys, property, 26 goods or services donated by the primary donor to another 27 institution of purely public charity or to a government 28 agency or the reasonable value of the net donation made 29 by a secondary donor to a primary donor. As used in this 30 subparagraph, the following words and phrases shall have 19970H0055B2563 - 14 -
1 the following meanings: 2 "Net donation." In the case of a donation of money, 3 property or identical goods and services made by a 4 secondary donor, the difference between the value of the 5 donation made by the secondary donor and the value of the 6 donation made by the primary donor, provided such value 7 is positive. 8 "Primary donor." An institution which makes a 9 donation of any money, property, goods or services to 10 another institution of purely public charity. 11 "Secondary donor." An institution which receives a 12 donation of any money, property, goods or services from a 13 primary donor and then makes a donation back to that 14 primary donor within three years of having received such 15 donation. 16 (vi) The reasonable value of volunteer assistance 17 donated by individuals to the institution. The reasonable 18 value of volunteer assistance, computed on an hourly 19 basis, shall not exceed the "Statewide average weekly 20 wage" as defined in section 105.1 of the act of June 2, 21 1915 (P.L.736, No.338), known as the Workers' 22 Compensation Act divided by 40. 23 (vii) The cost of goods or services provided to an 24 individual by charitable health care facilities licensed 25 by the Department of Health or the Department of Public 26 Welfare, which are bad debts, as determined in accordance 27 with the generally accepted accounting principles 28 applicable to the institution. 29 (viii) The reasonable value of any moneys, property, 30 goods or services donated to a political subdivision. If 19970H0055B2563 - 15 -
1 the institution of purely public charity donates to a 2 political subdivision an amount equal to or greater than 3 25% of the tax liability the exempt entity would incur if 4 its currently tax-exempt property were taxable, the 5 institution can credit the donation at 200% of the actual 6 value for purposes of meeting the requirements of this 7 subsection. 8 (e) Charity to persons.-- 9 (1) The institution shall benefit a substantial and 10 indefinite class of persons who are legitimate subjects of 11 charity. 12 (2) As used in this subsection, the following words and 13 phrases shall have the meanings given to them in this 14 paragraph: 15 "Legitimate subjects of charity." Those individuals who 16 are unable to provide themselves with what the institution 17 provides for them. 18 "Substantial and indefinite class of persons." Persons 19 not predetermined in number, provided that, where the goods 20 or services are received primarily by members of the 21 institution, membership cannot be predetermined in number and 22 cannot be arbitrarily denied by a vote of the existing 23 members. This section specifically recognizes that the use of 24 admissions criteria and enrollment limitations by educational 25 institutions do not constitute predetermined membership or 26 arbitrary restrictions on membership so as to violate this 27 section and recognizes that an institution may reasonably 28 deny membership based on the types of services it provides, 29 as long as denial is not in violation of Federal or State 30 antidiscrimination laws, such as the Civil Rights Act of 1964 19970H0055B2563 - 16 -
1 (Public Law 88-352, 78 Stat. 241) and the act of October 27, 2 1955 (P.L.744, No.222), known as the Pennsylvania Human 3 Relations Act. 4 (3) An institution shall be considered to benefit a 5 substantial and indefinite class of persons who are 6 legitimate subjects of charity if the institution is 7 primarily engaged in fundraising on behalf of or making 8 grants to: 9 (i) corporations, associations, trusts or other 10 organizations which meet the criteria set forth in this 11 section; 12 (ii) government agencies; or 13 (iii) organizations which qualify under section 14 501(c)(3) of the Internal Revenue Code of 1986 (Public 15 Law 99-514, 26 U.S.C. § 501(c)(3)). 16 (4) An institution shall not be considered to benefit a 17 substantial and indefinite class of persons who are 18 legitimate subjects of charity if: 19 (i) the institution is not qualified under section 20 501(c)(3) of the Internal Revenue Code of 1986; and 21 (ii) the institution is qualified under section 22 501(c)(4), (5), (6), (7), (8) or (9) of the Internal 23 Revenue Code of 1986 as any of the following: 24 (A) An association of employees, the membership 25 of which is limited to the employees of a designated 26 person or persons. 27 (B) A labor organization. 28 (C) An agricultural or horticultural 29 organization. 30 (D) A business league, chamber of commerce, real 19970H0055B2563 - 17 -
1 estate board, board of trade or professional sports 2 league. 3 (E) A club organized for pleasure or recreation. 4 (F) A fraternal beneficiary society, order or 5 association. 6 (f) Government service.--The institution shall relieve the 7 government of some of its burden. This criterion is satisfied if 8 the institution meets any of the following: 9 (1) provides a service to the public that the government 10 would otherwise be obliged to fund or to provide directly or 11 indirectly or assure that a similar organization exists to 12 provide the service; 13 (2) provides services in furtherance of its charitable 14 purpose which are either the responsibility of the government 15 by law or which historically have been assumed or offered or 16 funded by the government; 17 (3) receives on a regular basis payments for services 18 rendered under a government program if the payments are less 19 than the full costs incurred by the institution for the 20 rendering of the services or if the institution can 21 demonstrate that comparable services are more expensive when 22 provided by the government; or 23 (4) provides a service which advances important 24 community, public, spiritual, mental, physical, educational, 25 emotional, civic, historical or cultural objectives. 26 (g) Standards.-- 27 (1) Except as provided in paragraph (2), nothing in this 28 act shall be deemed to prohibit a charitable organization 29 from conducting activities intended to influence legislation. 30 (2) No substantial part of the activities of an 19970H0055B2563 - 18 -
1 institution of purely public charity shall consist of 2 carrying on propaganda or otherwise attempting to influence 3 legislation, except as otherwise provided in section 501(h) 4 of the Internal Revenue Code of 1986 or participating in or 5 intervening in, including the publishing or distributing of 6 statements, any political campaign on behalf of, or in 7 opposition to, any candidate for public office as such 8 limitations are interpreted under section 501 of the Internal 9 Revenue Code of 1986. 10 (3) Nothing in this act shall affect, impair or hinder 11 the responsibilities or prerogatives of the political 12 subdivision responsible for maintaining real property 13 assessment rolls to make a determination whether a parcel of 14 property or a portion of a parcel of property is being used 15 to advance the charitable purpose of an institution of purely 16 public charity, or to assess the parcel or part of the parcel 17 of property as taxable based on the use of the parcel or part 18 of the parcel for purposes other than the charitable purpose 19 of the institution. Such determination and assessment shall 20 be made in accord with applicable status regarding the 21 assessment of real property for taxation purposes and shall 22 be made without regard to the corporate structure of the 23 institution, the subsidiary nature of the use or the form or 24 nature of ownership or acquisition of the property. 25 (4) Nothing in this act shall prohibit a political 26 subdivision from filing challenges to or making 27 determinations as to whether a particular parcel of property 28 is being used to advance the charitable purpose of an 29 institution of purely public charity. 30 (5) No additional criteria shall be imposed on any 19970H0055B2563 - 19 -
1 organization in order to be recognized as an institution of 2 purely public charity. 3 Section 6. Multiple jurisdictions. 4 (a) Intent.-- 5 (1) It is the intent of the General Assembly to foster 6 uniformity in the application of the standards contained 7 within this act for determining status as an institution of 8 purely public charity. The General Assembly recognizes that 9 multiple jurisdictions at different levels of government will 10 be required to determine whether an organization requesting 11 tax exemption meets such standards. Because many 12 organizations will be required to seek and receive approval 13 from different governmental entities, the General Assembly 14 believes that an organization which demonstrates compliance 15 with the standards at the State level shall be entitled to a 16 rebuttable presumption that it has met those standards when 17 determining qualification for local property tax exemptions. 18 (2) The General Assembly, recognizing the interest of 19 the taxpayers in a fair and equitable system of property tax 20 assessment and the attendant statutory requirements for the 21 political subdivision responsible for maintaining real 22 property assessment roles to administer the system of 23 property assessment, believes that such a presumption shall 24 not in any way limit the responsibilities, prerogatives or 25 abilities of counties or local jurisdictions with respect to 26 the determination of, or challenges to, the taxable status of 27 a parcel or part of a parcel of property based on the use of 28 the parcel or part of the parcel of property. 29 (b) Presumption.--An organization possessing a valid 30 exemption from the tax imposed by Article II of the Tax Reform 19970H0055B2563 - 20 -
1 Code, pursuant to administrative or judicial determination that 2 the organization qualifies for exemption under section 204(10) 3 of the Tax Reform Code, shall be entitled to assert a 4 presumption that it meets the criteria contained in section 5 5(b), (c), (d), (e) and (f), and any person challenging such 6 presumption before any agency or court shall bear the burden, by 7 the preponderance of evidence, of proving the contrary. The 8 Department of Revenue shall furnish to any institution applying 9 for exemption a written determination of the department's 10 decision including specific information concerning how the 11 applicant does or does not meet each of the criteria in section 12 5. Any organization asserting such a presumption shall be deemed 13 to have waived any right to confidentiality and consented to 14 release of any information supporting the exemption from the tax 15 imposed by Article II of the Tax Reform Code under section 16 204(10), and such information, along with the written 17 determination of the department's decision in support of that 18 exemption, shall be public record which the department shall 19 furnish to any person upon request. Any person challenging such 20 presumption may request from the institution all relevant 21 financial statements, records and documents used to obtain the 22 exemption under section 204(10) of the Tax Reform Code. Failure 23 by the institution to supply, or at its option, to permit 24 inspection of such information in its possession within 30 days 25 shall remove the presumption with respect to that challenge. 26 (c) Applicability of presumption.--The provisions of this 27 section shall apply only to sales and use tax exemptions granted 28 or renewed on or after the effective date of this act. 29 Section 7. Existing agreements. 30 Nothing in this act shall be construed to affect, impair, 19970H0055B2563 - 21 -
1 terminate or supersede any contract, agreement or arrangement in 2 effect on or before the effective date of this act which 3 authorizes or requires payment of taxes, amounts in lieu of 4 taxes, or other charges or fees for the services of a political 5 subdivision of this Commonwealth. Further, nothing in this act 6 shall be construed to impair, or otherwise inhibit, the right or 7 ability of any institution or political subdivision to enter 8 into such agreements after the effective date of this act. 9 Section 8. Unfair competition with small businesses. 10 (a) Intent.--It is the policy of this act that institutions 11 of purely public charity shall not use their tax-exempt status 12 to compete unfairly with small business. 13 (b) Rule.--An institution of purely public charity may not 14 fund, capitalize, guarantee the indebtedness of, lease 15 obligations of, or subsidize a commercial business that is 16 unrelated to the institution's charitable purpose as stated in 17 the institution's charter or governing legal documents. 18 (c) Exceptions.--Institutions of purely public charity are 19 not in violation of subsection (b) if any of the following 20 apply: 21 (1) The commercial business is intended only for the use 22 of its employees, staff, alumni, faculty, members, students, 23 clients, volunteers, patients or residents. For purposes of 24 this paragraph, a person shall not be considered an employee, 25 staff, member, alumnus, faculty, student, client, volunteer, 26 patient or resident if the person's only relationship with 27 the institution is to receive products or services resulting 28 from the commercial business. 29 (2) The commercial business results in sales to the 30 general public that are incidental or periodic rather than 19970H0055B2563 - 22 -
1 permanent and ongoing. 2 (d) Support for other charities.--Nothing in this section 3 shall be construed as prohibiting or limiting the ability of an 4 institution of purely public charity to fund, capitalize, 5 guarantee the indebtedness of or otherwise subsidize another 6 institution of purely public charity. 7 (e) Investments.--An institution of purely public charity 8 that invests in publicly traded stocks and bonds; real estate; 9 or other investments is not in violation of subsection (b). 10 (f) Educational functions.--An institution of purely public 11 charity that uses its facilities to host groups for educational 12 purposes only is not in violation of subsection (b). 13 (g) Government functions.--An institution of purely public 14 charity may engage in a new commercial business that may 15 otherwise be in violation of subsection (b) if the institution 16 is formally requested to do so by the Commonwealth or a 17 political subdivision. 18 (h) Existing arrangements.--An institution of purely public 19 charity that prior to the effective date of this act funded, 20 capitalized, guaranteed the indebtedness of, leased obligations 21 of or subsidized a commercial business may continue to own and 22 operate such businesses without violating subsection (b) as long 23 as the institution does not substantially expand the scope of 24 the commercial business. In the event an injunction is issued 25 under subsection (i), the effect of such injunction shall be 26 limited to restraining the substantial expansion of the scope of 27 the commercial business which was initiated after the effective 28 date of this act. 29 (i) Remedies.--Whenever the Attorney General receives a 30 complaint from an aggrieved small business or has reason to 19970H0055B2563 - 23 -
1 believe that any institution of purely public charity is 2 violating this section and the proceedings would be in the 3 public interest, the Attorney General may bring an action in the 4 name of the Commonwealth against that institution to restrain 5 such violation by temporary or permanent injunction. The 6 Attorney General must either bring an action or issue a written 7 determination to the aggrieved small business within 120 days of 8 the filing of a complaint. 9 (1) If the Attorney General fails to bring an action or 10 to issue a written determination to a small business 11 complainant within 120 days of the filing of a complaint, the 12 small business may petition the Commonwealth Court for a writ 13 of mandamus ordering the Attorney General either to bring an 14 action under this section or to provide the reason or reasons 15 why the Attorney General has declined to do so. 16 (2) Nothing in this subsection shall preclude either an 17 aggrieved small business or an institution of purely public 18 charity that has been affected by a decision of the Attorney 19 General from pursuing an appeal of that decision under 2 20 Pa.C.S. Ch. 7 Subch. A (relating to judicial review of 21 Commonwealth agency action). 22 Section 9. Accountability and disclosure. 23 (a) Intent.--An institution which qualifies for a tax 24 exemption by virtue of being designated an institution of purely 25 public charity has a unique responsibility to periodically 26 demonstrate to the public that it is fulfilling the purpose for 27 which the exemption is granted. The citizens of this 28 Commonwealth expect an organization which is granted tax 29 exemption to adhere to a high standard of accountability and 30 public disclosure. Therefore, the institution should make an 19970H0055B2563 - 24 -
1 annual report in which it makes available certain information 2 about its organization and its charitable activities. The report 3 should be made consistent with the desire of the General 4 Assembly to avoid burdensome reporting requirements which unduly 5 distract the organization from its charitable purposes. 6 (b) Report required.--It shall be the duty of the president, 7 chairman or principal officer of an institution which files, or 8 is required to file, an annual return with the Internal Revenue 9 Service under the Internal Revenue Code of 1986 (Public Law 99- 10 514, 26 U.S.C. § 1 et seq.) to file a report with the bureau no 11 later than the date, including any extensions granted by the 12 Internal Revenue Service, the institution files or is required 13 to file an annual return with the Internal Revenue Service. The 14 following information shall be included in the report required 15 by this section and shall be in a format approved by the 16 Secretary of the Commonwealth: 17 (1) A copy of the annual return filed or required to be 18 filed with the Internal Revenue Service. 19 (2) The date the institution was organized under 20 applicable law and a reference to any determination of its 21 tax-exempt status under the Internal Revenue Code of 1986, 22 including, if applicable: 23 (i) The institution's Internal Revenue tax exemption 24 number and the tax-exempt purposes as established by the 25 Internal Revenue Service. 26 (ii) A revocation of tax-exempt status by the 27 Internal Revenue Service. 28 (3) The following information on each affiliate of the 29 institution of purely public charity: 30 (i) The name and type of organization. 19970H0055B2563 - 25 -
1 (ii) Whether the affiliate is organized on a for- 2 profit or nonprofit basis. 3 (iii) The relationship of each affiliate to the 4 institution making the report. 5 (4) The institution's relationship with any other 6 nonprofit corporation or unincorporated association if the 7 relationship involves formal governance or the sharing of 8 revenue. 9 (c) Amendments to annual returns.--It shall be the duty of 10 the president, chairman or principal officer of any institution 11 which files an amended annual return with the Internal Revenue 12 Service to file a copy of the amended annual return with the 13 bureau within ten days of its filing with the Internal Revenue 14 Service. 15 (d) Exemption from filing.-- 16 (1) An institution which is not required to file an 17 annual return with the Internal Revenue Service shall be 18 exempt from the requirements of this section. 19 (2) An institution which files a consolidated annual 20 return with the Internal Revenue Service shall not be 21 required to file any report except as otherwise required by 22 this subsection. The institution shall file with the bureau a 23 statement giving the name and tax-exempt number of the 24 organization filing the consolidated annual return. 25 (e) Paperwork reduction.--The Secretary of the Commonwealth 26 shall implement procedures and may modify the reporting 27 requirements of this section in order to reduce or eliminate 28 duplicate filing by institutions subject to this section. The 29 Secretary of the Commonwealth shall allow the president, 30 chairman or principal officer of an institution subject to this 19970H0055B2563 - 26 -
1 section to substitute the registration statement required under 2 section 5 of the act of December 19, 1990 (P.L.1200, No.202), 3 known as the Solicitation of Funds for Charitable Purposes Act, 4 for those portions of the report required under subsection (b) 5 which duplicate the information required under section 5 of the 6 Solicitation of Funds for Charitable Purposes Act. The Secretary 7 of the Commonwealth shall allow the institution to certify that 8 the information required in subsection (b)(2), (3) or (4) has 9 not changed since the prior report in lieu of providing the same 10 information in the report required by subsection (b). The 11 Secretary of the Commonwealth may obtain from the Internal 12 Revenue Service copies of annual returns of institutions which 13 file annual returns with the Internal Revenue Service on 14 computer disk or other electronic or paper media. 15 (f) Retention of records.--The Secretary of the Commonwealth 16 shall retain the reporting information required by this section 17 for three years after the reports are required to be filed. 18 (g) Utilization of reports.--The Secretary of the 19 Commonwealth shall make reports submitted under this section 20 available for public inspection to the extent that the 21 information is available for public inspection under section 22 6104 of the Internal Revenue Code of 1986. The Secretary of the 23 Commonwealth shall provide any government agency a copy of the 24 report filed under this section upon request. Nothing in this 25 subsection shall prevent a government agency from requiring any 26 organization seeking exemption as an institution of purely 27 public charity to provide the information described in 28 subsection (b) to that agency as part of a determination of the 29 tax exempt status of the institution. 30 (h) Definitions.--As used in this section, the following 19970H0055B2563 - 27 -
1 words and phrases shall have the meanings given to them in this 2 subsection: 3 "Affiliate." A domestic or foreign corporation, association, 4 trust or other organization which owns a 10% or greater interest 5 in the institution. A domestic or foreign corporation, 6 association, trust or other organization in which the 7 institution owns a 10% or greater interest. 8 "Annual return." The annual information return required to be 9 filed with the Internal Revenue Service by organizations exempt 10 from tax by virtue of section 501(a) of the Internal Revenue 11 Code of 1986 (Public Law 99-514, 26 U.S.C. §1, et seq.). The 12 annual information return consists of Internal Revenue Service 13 Form 990 or Form 990EZ and Schedule A. 14 "Bureau." The Bureau of Charitable Organizations of the 15 Department of State of the Commonwealth. 16 "Institution." A domestic or foreign nonprofit corporation, 17 association, trust or other organization which qualifies as an 18 institution of purely public charity under the provisions of 19 this act and which receives or claims exemption from the real 20 property tax imposed by any political subdivision in this 21 Commonwealth or which receives or claims exemption from the tax 22 imposed by Article II of the Tax Reform Code. 23 Section 10. Exemption for Federal Government instrumentality. 24 It is the intent of the General Assembly to affirm that all 25 real property owned by any corporation established by an act of 26 the Congress of the United States, that is required to submit 27 annual reports of its activities to Congress containing itemized 28 accounts of all receipts and expenditures after being fully 29 audited by the Department of Defense, for purposes of the 30 Constitution of Pennsylvania and the laws of this Commonwealth 19970H0055B2563 - 28 -
1 relating to the assessment and taxation of real estate, is 2 property of a Federal Government instrumentality and thus exempt 3 from all State and local taxation. 4 Section 11. Repeals. 5 All acts and parts of acts are repealed insofar as they are 6 inconsistent with this act except for section 204(a)(3) of the 7 act of May 22, 1933 (P.L.853, No.155), known as The General 8 County Assessment Law, as it applies to charitable organizations 9 providing residential housing services. 10 Section 12. Applicability. 11 This act shall not apply to nor affect 40 Pa.C.S. § 6103 or 12 6301 or the entities subject to those sections. 13 Section 13. Effective date. 14 This act shall take effect January 1, next following the date 15 of final enactment. 16 SECTION 1. SHORT TITLE. <-- 17 THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE INSTITUTIONS 18 OF PURELY PUBLIC CHARITY ACT. 19 SECTION 2. LEGISLATIVE INTENT. 20 (A) FINDINGS.--THE GENERAL ASSEMBLY FINDS AND DECLARES AS 21 FOLLOWS: 22 (1) IT IS IN THE BEST INTEREST OF THIS COMMONWEALTH AND 23 ITS CITIZENS THAT THE RECOGNITION OF TAX-EXEMPT STATUS BE 24 ACCOMPLISHED IN AN ORDERLY, UNIFORM AND ECONOMICAL MANNER. 25 (2) FOR MORE THAN 100 YEARS, IT HAS BEEN THE POLICY OF 26 THIS COMMONWEALTH TO FOSTER THE ORGANIZATION AND OPERATION OF 27 INSTITUTIONS OF PURELY PUBLIC CHARITY BY EXEMPTING THEM FROM 28 TAXATION. 29 (3) BECAUSE INSTITUTIONS OF PURELY PUBLIC CHARITY 30 CONTRIBUTE TO THE COMMON GOOD OR LESSEN THE BURDEN OF 19970H0055B2563 - 29 -
1 GOVERNMENT, THE HISTORIC POLICY OF EXEMPTING THESE 2 INSTITUTIONS FROM TAXATION SHOULD BE CONTINUED. 3 (4) LACK OF SPECIFIC LEGISLATIVE STANDARDS DEFINING THE 4 TERM "INSTITUTIONS OF PURELY PUBLIC CHARITY" HAS LED TO 5 INCREASING CONFUSION AND CONFRONTATION AMONG TRADITIONALLY 6 TAX-EXEMPT INSTITUTIONS AND POLITICAL SUBDIVISIONS TO THE 7 DETRIMENT OF THE PUBLIC. 8 (5) THERE IS INCREASING CONCERN THAT THE ELIGIBILITY 9 STANDARDS FOR CHARITABLE TAX EXEMPTIONS ARE BEING APPLIED 10 INCONSISTENTLY, WHICH MAY VIOLATE THE UNIFORMITY PROVISION OF 11 THE CONSTITUTION OF PENNSYLVANIA. 12 (6) RECOGNIZING THE INTEREST OF THE TAXPAYERS IN A FAIR 13 AND EQUITABLE SYSTEM OF PROPERTY TAX ASSESSMENT AND THE 14 ATTENDANT STATUTORY REQUIREMENTS FOR THE POLITICAL 15 SUBDIVISION RESPONSIBLE FOR MAINTAINING REAL PROPERTY 16 ASSESSMENT ROLES TO ADMINISTER THE SYSTEM OF PROPERTY 17 ASSESSMENT, THIS ACT SHALL NOT IN ANY WAY LIMIT THE 18 RESPONSIBILITIES, PREROGATIVES OR ABILITIES OF POLITICAL 19 SUBDIVISIONS WITH RESPECT TO THE DETERMINATION OF, OR 20 CHALLENGES TO, THE TAXABLE STATUS OF A PARCEL OF PROPERTY 21 BASED ON THE USE OF THE PARCEL OR PART OF THE PARCEL OF 22 PROPERTY. 23 (7) INSTITUTIONS OF PURELY PUBLIC CHARITY BENEFIT 24 SUBSTANTIALLY FROM LOCAL GOVERNMENT SERVICES. THESE 25 INSTITUTIONS HAVE SIGNIFICANT VALUE TO THE COMMONWEALTH AND 26 ITS CITIZENS AND THE NEED EXISTS FOR REVENUES TO MAINTAIN 27 LOCAL GOVERNMENT SERVICES PROVIDED FOR THE BENEFIT OF ALL 28 CITIZENS, INCLUDING INSTITUTIONS OF PURELY PUBLIC CHARITY. IT 29 IS THE INTENT OF THIS ACT TO ENCOURAGE FINANCIALLY SECURE 30 INSTITUTIONS OF PURELY PUBLIC CHARITY TO ENTER INTO VOLUNTARY 19970H0055B2563 - 30 -
1 AGREEMENTS OR MAINTAIN EXISTING OR CONTINUING AGREEMENTS FOR 2 THE PURPOSE OF DEFRAYING SOME OF THE COST OF VARIOUS LOCAL 3 GOVERNMENT SERVICES. PAYMENTS MADE UNDER SUCH AGREEMENTS 4 SHALL BE DEEMED TO BE IN COMPLIANCE WITH ANY FIDUCIARY 5 OBLIGATION PERTAINING TO SUCH INSTITUTIONS OF PURELY PUBLIC 6 CHARITY, ITS OFFICERS OR DIRECTORS. 7 (B) INTENT.--IT IS THE INTENT OF THE GENERAL ASSEMBLY TO 8 ELIMINATE INCONSISTENT APPLICATION OF ELIGIBILITY STANDARDS FOR 9 CHARITABLE TAX EXEMPTIONS, REDUCE CONFUSION AND CONFRONTATION 10 AMONG TRADITIONALLY TAX-EXEMPT INSTITUTIONS AND POLITICAL 11 SUBDIVISIONS AND ENSURE THAT CHARITABLE AND PUBLIC FUNDS ARE NOT 12 UNNECESSARILY DIVERTED FROM THE PUBLIC GOOD TO LITIGATE 13 ELIGIBILITY FOR TAX-EXEMPT STATUS BY PROVIDING STANDARDS TO BE 14 APPLIED UNIFORMLY IN ALL PROCEEDINGS THROUGHOUT THIS 15 COMMONWEALTH FOR DETERMINING ELIGIBILITY FOR EXEMPTION FROM 16 STATE AND LOCAL TAXATION WHICH ARE CONSISTENT WITH TRADITIONAL 17 LEGISLATIVE AND JUDICIAL APPLICATIONS OF THE CONSTITUTIONAL TERM 18 "INSTITUTIONS OF PURELY PUBLIC CHARITY." 19 SECTION 3. DEFINITIONS. 20 THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ACT SHALL 21 HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE 22 CONTEXT CLEARLY INDICATES OTHERWISE: 23 "AFFILIATE." A DOMESTIC OR FOREIGN CORPORATION, ASSOCIATION, 24 TRUST OR OTHER ORGANIZATION WHICH OWNS A 10% OR GREATER INTEREST 25 IN AN INSTITUTION OF PURELY PUBLIC CHARITY. A DOMESTIC OR 26 FOREIGN CORPORATION, ASSOCIATION, TRUST OR OTHER ORGANIZATION IN 27 WHICH AN INSTITUTION OF PURELY PUBLIC CHARITY OWNS A 10% OR 28 GREATER INTEREST. 29 "ANNUAL RETURN." THE ANNUAL INFORMATION RETURN REQUIRED TO BE 30 FILED WITH THE INTERNAL REVENUE SERVICE BY INSTITUTIONS EXEMPT 19970H0055B2563 - 31 -
1 FROM TAX UNDER SECTION 501(A) OF THE INTERNAL REVENUE CODE OF 2 1986 (PUBLIC LAW 99-514, 26 U.S.C. §1, ET SEQ.). THE ANNUAL 3 INFORMATION RETURN CONSISTS OF INTERNAL REVENUE SERVICE FORM 990 4 OR FORM 990EZ AND SCHEDULE A OR ANY SUCCEEDING FORM USED FOR THE 5 SAME OR SIMILAR PURPOSE. FOR AN INSTITUTION, WHICH IS NOT 6 REQUIRED TO FILE SUCH RETURNS, THE INSTITUTION'S ANNUAL 7 FINANCIAL STATEMENT WITH REPORTED INCOME SHALL CONSTITUTE ITS 8 ANNUAL RETURN. 9 "BUREAU." THE BUREAU OF CHARITABLE ORGANIZATIONS OF THE 10 DEPARTMENT OF STATE OF THE COMMONWEALTH. 11 "COMMERCIAL BUSINESS." THE SALE OF PRODUCTS OR SERVICES THAT 12 ARE PRINCIPALLY THE SAME AS THOSE OFFERED BY AN EXISTING SMALL 13 BUSINESS IN THE SAME COMMUNITY. 14 "CONTRIBUTION." THE PROMISE, GRANT, PLEDGE OR GIFT OF MONEY, 15 PROPERTY, GOODS, SERVICES, FINANCIAL ASSISTANCE OR OTHER SIMILAR 16 REMITTANCE. 17 "GOODS OR SERVICES." GOODS OR SERVICES WHICH PROMOTE ANY OF 18 THE ENUMERATED PURPOSES UNDER SECTION 5(B) AND WHICH ARE VALUED 19 IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES 20 APPLICABLE TO THE INSTITUTION. 21 "GOVERNMENT AGENCY." ANY COMMONWEALTH AGENCY OR ANY 22 POLITICAL SUBDIVISION OR MUNICIPAL OR OTHER LOCAL AUTHORITY OR 23 ANY OFFICER OR AGENCY OF ANY POLITICAL SUBDIVISION OR LOCAL 24 AUTHORITY. 25 "INSTITUTION." A DOMESTIC OR FOREIGN NONPROFIT CORPORATION, 26 ASSOCIATION OR TRUST OR OTHER SIMILAR ENTITY. 27 "INSTITUTION OF PURELY PUBLIC CHARITY." AN INSTITUTION WHICH 28 MEETS THE CRITERIA UNDER SECTION 5. 29 "NET OPERATING INCOME." THE AMOUNT OF FUNDS REMAINING AFTER 30 ALL OPERATING EXPENSES RELATED TO THE PROVISION OF GOODS OR 19970H0055B2563 - 32 -
1 SERVICES ASSOCIATED WITH THE INSTITUTION'S CHARITABLE PURPOSE 2 ARE DEDUCTED FROM PAYMENTS RECEIVED FOR PROVIDING THESE GOODS OR 3 SERVICES, AS DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED 4 ACCOUNTING PRINCIPLES APPLICABLE TO THE INSTITUTION. 5 "POLITICAL SUBDIVISION." ANY COUNTY, CITY, BOROUGH, TOWN, 6 TOWNSHIP, SCHOOL DISTRICT, VOCATIONAL SCHOOL DISTRICT AND COUNTY 7 INSTITUTION DISTRICT. 8 "PROGRAM SERVICE REVENUE." INCOME EARNED FROM THE PROVISION 9 OF GOODS OR SERVICES, INCLUDING GOVERNMENT FEES AND CONTRACTS 10 ASSOCIATED WITH THE INSTITUTION'S CHARITABLE PURPOSE, WHICH IS 11 REPORTED ON THE ANNUAL RETURN. 12 "SMALL BUSINESS." ANY SELF-EMPLOYED INDIVIDUAL, SOLE 13 PROPRIETORSHIP, FIRM, CORPORATION, PARTNERSHIP, ASSOCIATION OR 14 OTHER ENTITY THAT: 15 (1) HAS FEWER THAN 101 FULL-TIME EMPLOYEES; AND 16 (2) IS SUBJECT TO INCOME TAXATION UNDER THE ACT OF MARCH 17 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971. 18 "TOTAL OPERATING EXPENSES." THE COSTS RELATED TO THE 19 PROVISION OF GOODS OR SERVICES ASSOCIATED WITH THE INSTITUTION'S 20 CHARITABLE PURPOSE, AS DETERMINED IN ACCORDANCE WITH GENERALLY 21 ACCEPTED ACCOUNTING PRINCIPLES APPLICABLE TO THE INSTITUTION. 22 "VOLUNTARY AGREEMENT." AN AGREEMENT, CONTRACT OR OTHER 23 ARRANGEMENT FOR THE PURPOSE OF RECEIVING CONTRIBUTIONS PURSUANT 24 TO SECTION 7 BETWEEN A POLITICAL SUBDIVISION AND AN INSTITUTION 25 SEEKING OR POSSESSING AN EXEMPTION AS AN INSTITUTION OF PURELY 26 PUBLIC CHARITY. THESE CONTRIBUTIONS ARE FOR THE PURPOSE OF 27 DEFRAYING SOME OF THE COST OF VARIOUS LOCAL GOVERNMENT SERVICES. 28 THE TERM INCLUDES THE ESTABLISHMENT OF PUBLIC SERVICE 29 FOUNDATIONS BY INSTITUTIONS OF PURELY PUBLIC CHARITY. 30 SECTION 4. STATE-RELATED UNIVERSITIES. 19970H0055B2563 - 33 -
1 (A) GENERAL RULE.--IT IS THE INTENT OF THE GENERAL ASSEMBLY 2 TO RECOGNIZE THAT THE STATE-RELATED UNIVERSITIES PROVIDE A 3 DIRECT PUBLIC BENEFIT AND SERVE THE PUBLIC PURPOSES OF THIS 4 COMMONWEALTH BY DECLARING THE REAL PROPERTY OF STATE-RELATED 5 UNIVERSITIES TO BE PUBLIC PROPERTY FOR PURPOSES OF EXEMPTION 6 FROM STATE AND LOCAL TAXATION WHEN THE PROPERTY IS ACTUALLY AND 7 REGULARLY USED FOR PUBLIC PURPOSES, PROVIDED THAT NOTHING IN 8 THIS SECTION IS INTENDED OR SHALL BE CONSTRUED TO AFFECT THE 9 TITLE TO REAL PROPERTY OF STATE-RELATED UNIVERSITIES OR THE 10 POWER AND AUTHORITY OF THE GOVERNING BODIES OF STATE-RELATED 11 UNIVERSITIES WITH RESPECT TO SUCH REAL PROPERTY. FURTHER, 12 NOTHING IN THIS SECTION IS INTENDED OR SHALL BE CONSTRUED TO 13 AFFECT, IMPAIR OR TERMINATE ANY CONTRACT OR AGREEMENT IN EFFECT 14 ON OR BEFORE THE EFFECTIVE DATE OF THIS SECTION BY AND BETWEEN A 15 STATE-RELATED UNIVERSITY AND ANY POLITICAL SUBDIVISION WHEREIN 16 THE STATE-RELATED UNIVERSITY PAYS REAL ESTATE TAXES, AMOUNTS IN 17 LIEU OF REAL ESTATE TAXES OR OTHER CHARGES, FEES OR 18 CONTRIBUTIONS FOR GOVERNMENT SERVICES. 19 (B) REAL PROPERTY.--ALL REAL PROPERTY OWNED BY STATE-RELATED 20 UNIVERSITIES, OR OWNED BY THE COMMONWEALTH AND USED BY A STATE- 21 RELATED UNIVERSITY, IS AND SHALL BE DEEMED PUBLIC PROPERTY FOR 22 PURPOSES OF THE CONSTITUTION OF PENNSYLVANIA AND THE LAWS OF 23 THIS COMMONWEALTH RELATING TO THE ASSESSMENT, TAXATION AND 24 EXEMPTION OF REAL ESTATE AND SHALL BE EXEMPT FROM ALL STATE AND 25 LOCAL TAXATION WHEN ACTUALLY AND REGULARLY USED FOR PUBLIC 26 PURPOSES. 27 (C) EXCEPTION.--THIS SECTION SHALL NOT INCLUDE THE PROPERTY 28 OF A STATE-RELATED UNIVERSITY THE POSSESSION AND CONTROL OF 29 WHICH HAS BEEN TRANSFERRED TO A FOR-PROFIT ENTITY NOT OTHERWISE 30 ENTITLED TO TAX-EXEMPT STATUS, IRRESPECTIVE OF WHETHER THAT 19970H0055B2563 - 34 -
1 ENTITY IS AFFILIATED WITH THE UNIVERSITY. THE EXECUTION OF A 2 MANAGEMENT SERVICES CONTRACT WITH A THIRD PARTY ENTITY TO 3 PROVIDE OPERATIONAL SERVICES TO THE UNIVERSITY WHICH WOULD 4 OTHERWISE BE PROVIDED OR CONDUCTED DIRECTLY BY THE UNIVERSITY 5 SHALL NOT, HOWEVER, BE CONSIDERED A TRANSFER OF POSSESSION AND 6 CONTROL OF REAL PROPERTY WITHIN THE MEANING OF THIS SECTION. 7 (D) DEFINITIONS.--AS USED IN THIS SECTION, THE FOLLOWING 8 WORDS AND PHRASES SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS 9 SUBSECTION: 10 "PUBLIC PURPOSES." ALL ACTIVITIES RELATING TO THE 11 EDUCATIONAL MISSION OF STATE-RELATED UNIVERSITIES, INCLUDING 12 TEACHING, RESEARCH, SERVICE AND ACTIVITIES INCIDENT OR ANCILLARY 13 THERETO WHICH PROVIDE SERVICES TO OR FOR STUDENTS, EMPLOYEES OR 14 THE PUBLIC. 15 "STATE-RELATED UNIVERSITIES." THE PENNSYLVANIA STATE 16 UNIVERSITY AND ITS AFFILIATE, THE PENNSYLVANIA COLLEGE OF 17 TECHNOLOGY, THE UNIVERSITY OF PITTSBURGH, TEMPLE UNIVERSITY AND 18 ITS SUBSIDIARIES TEMPLE UNIVERSITY HOSPITAL, INC., AND TEMPLE 19 UNIVERSITY CHILDREN'S HOSPITAL, INC., AND LINCOLN UNIVERSITY. 20 SECTION 5. CRITERIA FOR INSTITUTIONS OF PURELY PUBLIC CHARITY. 21 (A) GENERAL RULE.--AN INSTITUTION OF PURELY PUBLIC CHARITY 22 IS AN INSTITUTION WHICH MEETS THE CRITERIA SET FORTH IN 23 SUBSECTIONS (B), (C), (D), (E) AND (F). AN INSTITUTION WHICH 24 MEETS THE CRITERIA SPECIFIED IN THIS SECTION SHALL BE CONSIDERED 25 TO BE FOUNDED, ENDOWED AND MAINTAINED BY PUBLIC OR PRIVATE 26 CHARITY. 27 (B) CHARITABLE PURPOSE.--THE INSTITUTION MUST ADVANCE A 28 CHARITABLE PURPOSE. THIS CRITERION IS SATISFIED IF THE 29 INSTITUTION IS ORGANIZED AND OPERATED PRIMARILY TO FULFILL ANY 30 ONE OR COMBINATION OF THE FOLLOWING PURPOSES: 19970H0055B2563 - 35 -
1 (1) RELIEF OF POVERTY. 2 (2) ADVANCEMENT AND PROVISION OF EDUCATION. THIS 3 PARAGRAPH INCLUDES POSTSECONDARY EDUCATION. 4 (3) ADVANCEMENT OF RELIGION. 5 (4) PREVENTION AND TREATMENT OF DISEASE OR INJURY, 6 INCLUDING MENTAL RETARDATION AND MENTAL DISORDERS. 7 (5) GOVERNMENT OR MUNICIPAL PURPOSES. 8 (6) ACCOMPLISHMENT OF A PURPOSE WHICH IS RECOGNIZED AS 9 IMPORTANT AND BENEFICIAL TO THE PUBLIC AND WHICH ADVANCES 10 SOCIAL, MORAL OR PHYSICAL OBJECTIVES. 11 (C) PRIVATE PROFIT MOTIVE.--THE INSTITUTION MUST OPERATE 12 ENTIRELY FREE FROM PRIVATE PROFIT MOTIVE. NOTWITHSTANDING 13 WHETHER THE INSTITUTION'S REVENUES EXCEED ITS EXPENSES, THIS 14 CRITERION IS SATISFIED IF THE INSTITUTION MEETS ALL OF THE 15 FOLLOWING: 16 (1) NEITHER THE INSTITUTION'S NET EARNINGS NOR DONATIONS 17 WHICH IT RECEIVES INURES TO THE BENEFIT OF PRIVATE 18 SHAREHOLDERS OR OTHER INDIVIDUALS, AS THE PRIVATE INUREMENT 19 STANDARD IS INTERPRETED UNDER SECTION 501(C)(3) OF THE 20 INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 21 501(C)(3)). 22 (2) THE INSTITUTION APPLIES OR RESERVES ALL REVENUE, 23 INCLUDING CONTRIBUTIONS, IN EXCESS OF EXPENSES IN FURTHERANCE 24 OF ITS CHARITABLE PURPOSE OR TO FUNDING OF OTHER INSTITUTIONS 25 WHICH MEET THE PROVISIONS OF THIS SUBSECTION AND SUBSECTION 26 (B). 27 (3) COMPENSATION, INCLUDING BENEFITS, OF ANY DIRECTOR, 28 OFFICER OR EMPLOYEE, IS NOT BASED PRIMARILY UPON THE 29 FINANCIAL PERFORMANCE OF THE INSTITUTION. 30 (4) THE GOVERNING BODY OF THE INSTITUTION OF PURELY 19970H0055B2563 - 36 -
1 PUBLIC CHARITY HAS ADOPTED, AS PART OF ITS ARTICLES OF 2 INCORPORATION, OR IF UNINCORPORATED, OTHER GOVERNING LEGAL 3 DOCUMENTS, A PROVISION THAT EXPRESSLY PROHIBITS THE USE OF 4 ANY SURPLUS FUNDS FOR PRIVATE INUREMENT TO ANY PERSON IN THE 5 EVENT OF A SALE OR DISSOLUTION OF THE INSTITUTION OF PURELY 6 PUBLIC CHARITY. 7 (D) COMMUNITY SERVICE.-- 8 (1) THE INSTITUTION MUST DONATE OR RENDER GRATUITOUSLY A 9 SUBSTANTIAL PORTION OF ITS SERVICES. THIS CRITERION IS 10 SATISFIED IF THE INSTITUTION BENEFITS THE COMMUNITY BY 11 ACTUALLY PROVIDING ANY ONE OF THE FOLLOWING: 12 (I) GOODS OR SERVICES TO ALL WHO SEEK THEM WITHOUT 13 REGARD TO THEIR ABILITY TO PAY FOR WHAT THEY RECEIVE IF 14 ALL OF THE FOLLOWING APPLY: 15 (A) THE INSTITUTION HAS A WRITTEN POLICY TO THIS 16 EFFECT. 17 (B) THE INSTITUTION HAS PUBLISHED THIS POLICY IN 18 A REASONABLE MANNER. 19 (C) THE INSTITUTION PROVIDES UNCOMPENSATED GOODS 20 OR SERVICES AT LEAST EQUAL TO 75% OF THE 21 INSTITUTION'S NET OPERATING INCOME BUT NOT LESS THAN 22 3% OF THE INSTITUTION'S TOTAL OPERATING EXPENSES. 23 (II) GOODS OR SERVICES FOR FEES THAT ARE BASED UPON 24 THE RECIPIENT'S ABILITY TO PAY FOR THEM IF ALL OF THE 25 FOLLOWING APPLY: 26 (A) THE INSTITUTION CAN DEMONSTRATE THAT IT HAS 27 IMPLEMENTED A WRITTEN POLICY AND A WRITTEN SCHEDULE 28 OF FEES BASED ON INDIVIDUAL OR FAMILY INCOME. AN 29 INSTITUTION WILL MEET THE REQUIREMENT OF THIS CLAUSE 30 IF THE INSTITUTION CONSISTENTLY APPLIES A FORMULA TO 19970H0055B2563 - 37 -
1 ALL INDIVIDUALS REQUESTING CONSIDERATION OF REDUCED 2 FEES WHICH IS IN PART BASED ON INDIVIDUAL OR FAMILY 3 INCOME. 4 (B) AT LEAST 20% OF THE INDIVIDUALS RECEIVING 5 GOODS OR SERVICES FROM THE INSTITUTION PAY NO FEE OR 6 A FEE WHICH IS LOWER THAN THE COST OF THE GOODS OR 7 SERVICES PROVIDED BY THE INSTITUTION. 8 (C) AT LEAST 10% OF THE INDIVIDUALS RECEIVING 9 GOODS OR SERVICES FROM THE INSTITUTION RECEIVE A 10 REDUCTION IN FEES OF AT LEAST 10% OF THE COST OF THE 11 GOODS OR SERVICES PROVIDED TO THEM. 12 (D) NO INDIVIDUAL RECEIVING GOODS OR SERVICES 13 FROM THE INSTITUTION PAYS A FEE WHICH IS EQUAL TO OR 14 GREATER THAN THE COST OF THE GOODS OR SERVICES 15 PROVIDED TO THEM, OR THE GOODS OR SERVICES PROVIDED 16 TO THE INDIVIDUALS DESCRIBED IN CLAUSE (B) ARE 17 COMPARABLE IN QUALITY AND QUANTITY TO THE GOODS OR 18 SERVICES PROVIDED TO THOSE INDIVIDUALS WHO PAY A FEE 19 WHICH IS EQUAL TO OR GREATER THAN THE COST OF THE 20 GOODS OR SERVICES PROVIDED TO THEM. 21 (III) WHOLLY GRATUITOUS GOODS OR SERVICES TO AT 22 LEAST 5% OF THOSE RECEIVING SIMILAR GOODS OR SERVICES 23 FROM THE INSTITUTION. 24 (IV) FINANCIAL ASSISTANCE OR UNCOMPENSATED GOODS OR 25 SERVICES TO AT LEAST 20% OF THOSE RECEIVING SIMILAR GOODS 26 OR SERVICES FROM THE INSTITUTION IF AT LEAST 10% OF THE 27 INDIVIDUALS RECEIVING GOODS OR SERVICES FROM THE 28 INSTITUTION EITHER PAID NO FEES OR FEES WHICH WERE 90% OR 29 LESS OF THE COST OF THE GOODS OR SERVICES PROVIDED TO 30 THEM, AFTER CONSIDERATION OF ANY FINANCIAL ASSISTANCE 19970H0055B2563 - 38 -
1 PROVIDED TO THEM BY THE INSTITUTION. 2 (V) UNCOMPENSATED GOODS OR SERVICES WHICH, IN THE 3 AGGREGATE, ARE EQUAL TO AT LEAST 5% OF THE INSTITUTION'S 4 COSTS OF PROVIDING GOODS OR SERVICES. 5 (VI) GOODS OR SERVICES AT NO FEE OR REDUCED FEES TO 6 GOVERNMENT AGENCIES OR GOODS OR SERVICES TO INDIVIDUALS 7 ELIGIBLE FOR GOVERNMENT PROGRAMS IF ANY ONE OF THE 8 FOLLOWING APPLIES: 9 (A) THE INSTITUTION RECEIVES 75% OR MORE OF ITS 10 GROSS OPERATING REVENUE FROM GRANTS OR FEE-FOR- 11 SERVICE PAYMENTS BY GOVERNMENT AGENCIES AND IF THE 12 AGGREGATE AMOUNT OF FEE-FOR-SERVICE PAYMENTS FROM 13 GOVERNMENT AGENCIES DOES NOT EXCEED 95% OF THE 14 INSTITUTION'S COSTS OF PROVIDING GOODS OR SERVICES TO 15 THE INDIVIDUALS FOR WHOM THE FEE-FOR-SERVICES 16 PAYMENTS ARE MADE. 17 (B) THE INSTITUTION PROVIDES GOODS OR SERVICES 18 TO INDIVIDUALS WITH MENTAL RETARDATION, TO 19 INDIVIDUALS WHO NEED MENTAL HEALTH SERVICES, TO 20 MEMBERS OF AN INDIVIDUAL'S FAMILY OR GUARDIAN IN 21 SUPPORT OF SUCH GOODS OR SERVICES OR TO INDIVIDUALS 22 WHO ARE DEPENDENT, NEGLECTED OR DELINQUENT CHILDREN, 23 AS LONG AS THE INSTITUTION PERFORMS DUTIES THAT WOULD 24 OTHERWISE BE THE RESPONSIBILITY OF GOVERNMENT AND THE 25 INSTITUTION IS RESTRICTED IN ITS ABILITY TO RETAIN 26 REVENUE OVER EXPENSES OR VOLUNTARY CONTRIBUTIONS BY 27 ANY ONE OF THE FOLLOWING STATUTES OR REGULATIONS OR 28 BY CONTRACTUAL LIMITATIONS WITH COUNTY CHILDREN AND 29 YOUTH OFFICES IN THIS COMMONWEALTH: 30 (I) SECTIONS 1315(C) AND 1905(D) OF THE 19970H0055B2563 - 39 -
1 SOCIAL SECURITY ACT (49 STAT. 620, 42 U.S.C. §§ 2 1396D(D) AND 1396N(C)). 3 (II) 42 CFR 440.150 (RELATING TO 4 INTERMEDIATE CARE FACILITY (ICF/MR) SERVICES. 5 (III) 42 CFR PT. 483 SUBPT. I (RELATING TO 6 CONDITIONS OF PARTICIPATION FOR INTERMEDIATE CARE 7 FACILITIES FOR THE MENTALLY RETARDED). 8 (IV) THE ACT OF OCTOBER 20, 1966 (3RD 9 SP.SESS., P.L.96, NO.6), KNOWN AS THE MENTAL 10 HEALTH AND MENTAL RETARDATION ACT OF 1966. 11 (V) ARTICLES II, VII, IX AND X OF THE ACT OF 12 JUNE 13, 1967 (P.L.31, NO.21), KNOWN AS THE 13 PUBLIC WELFARE CODE. 14 (VI) 23 PA.C.S. CH. 63 (RELATING TO CHILD 15 PROTECTIVE SERVICES). 16 (VII) 42 PA.C.S. CH. 63 (RELATING TO 17 JUVENILE MATTERS). 18 (VIII) 55 PA. CODE CHS. 3170 (RELATING TO 19 ALLOWABLE COSTS AND PROCEDURES FOR COUNTY 20 CHILDREN AND YOUTH), 3680 (RELATING TO 21 ADMINISTRATION AND OPERATION OF A CHILDREN AND 22 YOUTH SOCIAL SERVICE AGENCY) 4300 (RELATING TO 23 COUNTY MENTAL HEALTH AND MENTAL RETARDATION 24 FISCAL MANUAL), 6400 (RELATING TO COMMUNITY HOMES 25 FOR INDIVIDUALS WITH MENTAL RETARDATION), 6500 26 (RELATING TO FAMILY LIVING HOMES), 6210 (RELATING 27 TO PARTICIPATION REQUIREMENTS FOR THE 28 INTERMEDIATE CARE FACILITIES FOR THE MENTALLY 29 RETARDED PROGRAM), 6211 (RELATING TO ALLOWABLE 30 COST REIMBURSEMENT FOR NON-STATE OPERATED 19970H0055B2563 - 40 -
1 INTERMEDIATE CARE FACILITIES FOR THE MENTALLY 2 RETARDED) AND 6600 (RELATING TO INTERMEDIATE CARE 3 FACILITIES FOR AND 6600 (RELATING TO INTERMEDIATE 4 CARE FACILITIES FOR THE MENTALLY RETARDED). 5 (VII) FUNDRAISING ON BEHALF OF, OR GRANTS TO, AN 6 INSTITUTION OF PURELY PUBLIC CHARITY, AN ENTITY SIMILARLY 7 RECOGNIZED BY ANOTHER STATE OR FOREIGN JURISDICTION, A 8 QUALIFYING RELIGIOUS ORGANIZATION OR A GOVERNMENT AGENCY 9 AND ACTUAL CONTRIBUTION OF A SUBSTANTIAL PORTION OF THE 10 FUNDS RAISED OR CONTRIBUTIONS RECEIVED TO AN INSTITUTION 11 OF PURELY PUBLIC CHARITY, AN ENTITY SIMILARLY RECOGNIZED 12 BY ANOTHER STATE OR FOREIGN JURISDICTION, A QUALIFYING 13 RELIGIOUS ORGANIZATION OR A GOVERNMENT AGENCY. 14 (2) THE INSTITUTION MAY ELECT TO AVERAGE THE APPLICABLE 15 DATA FOR ITS FIVE MOST RECENTLY COMPLETED FISCAL YEARS FOR 16 THE PURPOSES OF CALCULATING ANY FORMULA OR MEETING ANY 17 QUANTITATIVE STANDARD IN PARAGRAPH (1). 18 (3) FOR THE PURPOSES OF CALCULATING THE NUMBER OF 19 INDIVIDUALS FOR USE IN THE PERCENTAGE CALCULATIONS IN THIS 20 SUBSECTION, EDUCATIONAL INSTITUTIONS MAY USE FULL TIME 21 EQUIVALENT STUDENTS AS DEFINED BY THE DEPARTMENT OF 22 EDUCATION. 23 (4) FOR PURPOSES OF THIS SUBSECTION, THE TERM 24 "UNCOMPENSATED GOODS OR SERVICES" SHALL BE LIMITED TO ANY OF 25 THE FOLLOWING: 26 (I) THE FULL COST OF ALL GOODS OR SERVICES PROVIDED 27 BY THE INSTITUTION FOR WHICH THE INSTITUTION HAS NOT 28 RECEIVED MONETARY COMPENSATION OR THE DIFFERENCE BETWEEN 29 THE FULL COST AND ANY LESSER FEE RECEIVED FOR THE GOODS 30 OR SERVICES, INCLUDING THE COST OF THE GOODS OR SERVICES 19970H0055B2563 - 41 -
1 PROVIDED TO INDIVIDUALS UNABLE TO PAY. 2 (II) THE DIFFERENCE BETWEEN THE FULL COST OF 3 EDUCATION AND RESEARCH PROGRAMS PROVIDED BY OR 4 PARTICIPATED IN BY THE INSTITUTION AND THE PAYMENT MADE 5 TO THE INSTITUTION TO SUPPORT THE EDUCATION AND RESEARCH 6 PROGRAMS. 7 (III) THE DIFFERENCE BETWEEN THE FULL COST OF 8 PROVIDING THE GOODS OR SERVICES AND THE PAYMENT MADE TO 9 THE INSTITUTION UNDER ANY GOVERNMENT PROGRAM, INCLUDING 10 INDIVIDUALS COVERED BY MEDICARE OR MEDICAID. 11 (IV) THE DIFFERENCE BETWEEN THE FULL COST OF THE 12 COMMUNITY SERVICES WHICH THE INSTITUTION PROVIDES OR 13 PARTICIPATES IN AND THE PAYMENT MADE TO THE INSTITUTION 14 TO SUPPORT SUCH COMMUNITY SERVICES. 15 (V) THE REASONABLE VALUE OF ANY MONEYS, PROPERTY, 16 GOODS OR SERVICES DONATED BY A PRIMARY DONOR TO AN 17 INSTITUTION OF PURELY PUBLIC CHARITY OR TO A GOVERNMENT 18 AGENCY OR THE REASONABLE VALUE OF THE NET DONATION MADE 19 BY A SECONDARY DONOR TO A PRIMARY DONOR. AS USED IN THIS 20 SUBPARAGRAPH, THE FOLLOWING WORDS AND PHRASES SHALL HAVE 21 THE FOLLOWING MEANINGS: 22 "NET DONATION." IN THE CASE OF A DONATION OF MONEY, 23 PROPERTY OR IDENTICAL GOODS AND SERVICES MADE BY A 24 SECONDARY DONOR, THE DIFFERENCE BETWEEN THE VALUE OF THE 25 DONATION MADE BY THE SECONDARY DONOR AND THE VALUE OF THE 26 DONATION MADE BY THE PRIMARY DONOR, PROVIDED SUCH VALUE 27 IS POSITIVE. 28 "PRIMARY DONOR." AN INSTITUTION WHICH MAKES A 29 DONATION OF ANY MONEY, PROPERTY, GOODS OR SERVICES TO AN 30 INSTITUTION OF PURELY PUBLIC CHARITY. 19970H0055B2563 - 42 -
1 "SECONDARY DONOR." AN INSTITUTION WHICH RECEIVES A 2 DONATION OF ANY MONEY, PROPERTY, GOODS OR SERVICES FROM A 3 PRIMARY DONOR AND THEN MAKES A DONATION BACK TO THAT 4 PRIMARY DONOR WITHIN THREE YEARS OF HAVING RECEIVED SUCH 5 DONATION. 6 (VI) THE REASONABLE VALUE OF VOLUNTEER ASSISTANCE 7 DONATED BY INDIVIDUALS WHO ARE INVOLVED OR ASSIST IN THE 8 PROVISION OF GOODS OR SERVICES BY THE INSTITUTION. THE 9 REASONABLE VALUE OF VOLUNTEER ASSISTANCE, COMPUTED ON AN 10 HOURLY BASIS, SHALL NOT EXCEED THE "STATEWIDE AVERAGE 11 WEEKLY WAGE" AS DEFINED IN SECTION 105.1 OF THE ACT OF 12 JUNE 2, 1915 (P.L.736, NO.338), KNOWN AS THE WORKERS' 13 COMPENSATION ACT DIVIDED BY 40. 14 (VII) THE COST OF GOODS OR SERVICES PROVIDED BY AN 15 INSTITUTION LICENSED BY THE DEPARTMENT OF HEALTH OR THE 16 DEPARTMENT OF PUBLIC WELFARE TO INDIVIDUALS WHO ARE 17 UNABLE TO PAY PROVIDED THAT REASONABLE AND CUSTOMARY 18 COLLECTION EFFORTS HAVE BEEN MADE BY THE INSTITUTION. 19 (VIII) THE VALUE OF ANY VOLUNTARY AGREEMENT AS SET 20 FORTH IN SECTION 7(C). 21 (E) CHARITY TO PERSONS.-- 22 (1) THE INSTITUTION MUST BENEFIT A SUBSTANTIAL AND 23 INDEFINITE CLASS OF PERSONS WHO ARE LEGITIMATE SUBJECTS OF 24 CHARITY. 25 (2) AS USED IN THIS SUBSECTION, THE FOLLOWING WORDS AND 26 PHRASES SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS 27 PARAGRAPH: 28 "LEGITIMATE SUBJECTS OF CHARITY." THOSE INDIVIDUALS WHO 29 ARE UNABLE TO PROVIDE THEMSELVES WITH WHAT THE INSTITUTION 30 PROVIDES FOR THEM. 19970H0055B2563 - 43 -
1 "SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS." PERSONS 2 NOT PREDETERMINED IN NUMBER, PROVIDED THAT, WHERE THE GOODS 3 OR SERVICES ARE RECEIVED PRIMARILY BY MEMBERS OF THE 4 INSTITUTION, MEMBERSHIP CANNOT BE PREDETERMINED IN NUMBER AND 5 CANNOT BE ARBITRARILY DENIED BY A VOTE OF THE EXISTING 6 MEMBERS. THIS SUBSECTION SPECIFICALLY RECOGNIZES THAT THE USE 7 OF ADMISSIONS CRITERIA AND ENROLLMENT LIMITATIONS BY 8 EDUCATIONAL INSTITUTIONS DO NOT CONSTITUTE PREDETERMINED 9 MEMBERSHIP OR ARBITRARY RESTRICTIONS ON MEMBERSHIP SO AS TO 10 VIOLATE THIS SECTION AND RECOGNIZES THAT AN INSTITUTION MAY 11 REASONABLY DENY MEMBERSHIP BASED ON THE TYPES OF SERVICES IT 12 PROVIDES, AS LONG AS DENIAL IS NOT IN VIOLATION OF FEDERAL OR 13 STATE ANTIDISCRIMINATION LAWS, SUCH AS THE CIVIL RIGHTS ACT 14 OF 1964 (PUBLIC LAW 88-352, 78 STAT. 241) AND THE ACT OF 15 OCTOBER 27, 1955 (P.L.744, NO.222), KNOWN AS THE PENNSYLVANIA 16 HUMAN RELATIONS ACT. 17 (3) AN INSTITUTION SHALL BE CONSIDERED TO BENEFIT A 18 SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS WHO ARE 19 LEGITIMATE SUBJECTS OF CHARITY IF THE INSTITUTION IS 20 PRIMARILY ENGAGED IN FUNDRAISING ON BEHALF OF OR MAKING 21 GRANTS TO AN INSTITUTION OF PURELY PUBLIC CHARITY, AN ENTITY 22 SIMILARLY RECOGNIZED BY ANOTHER STATE OR FOREIGN 23 JURISDICTION, A QUALIFYING RELIGIOUS ORGANIZATION OR A 24 GOVERNMENT AGENCY AND THERE IS ACTUAL CONTRIBUTION OF A 25 SUBSTANTIAL PORTION OF THE FUNDS RAISED OR CONTRIBUTIONS 26 RECEIVED TO AN INSTITUTION OF PURELY PUBLIC CHARITY, AN 27 ENTITY SIMILARLY RECOGNIZED BY ANOTHER STATE OR FOREIGN 28 JURISDICTION, A QUALIFYING RELIGIOUS ORGANIZATION OR A 29 GOVERNMENT AGENCY. 30 (4) AN INSTITUTION WHICH OPERATES EXCLUSIVELY ON A 19970H0055B2563 - 44 -
1 VOLUNTARY BASIS TO PROVIDE EMERGENCY HEALTH AND SAFETY 2 SERVICES TO THE COMMUNITY OR AN INSTITUTION WHICH PROVIDES 3 FUNDS AND SUPPORT EXCLUSIVELY TO VOLUNTEER INSTITUTIONS WHICH 4 PROVIDE EMERGENCY HEALTH AND SAFETY SERVICES TO THE COMMUNITY 5 SHALL BE CONSIDERED TO BENEFIT A SUBSTANTIAL AND INDEFINITE 6 CLASS OF PERSONS WHO ARE LEGITIMATE SUBJECTS OF CHARITY. 7 (5) AN INSTITUTION SHALL NOT BE CONSIDERED TO BENEFIT A 8 SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS WHO ARE 9 LEGITIMATE SUBJECTS OF CHARITY IF: 10 (I) THE INSTITUTION IS NOT QUALIFIED UNDER SECTION 11 501(C)(3) OF THE INTERNAL REVENUE CODE OF 1986 (26 U.S.C. 12 § 501(C)(3)); AND 13 (II) THE INSTITUTION IS QUALIFIED UNDER SECTION 14 501(C)(4), (5), (6), (7), (8) OR (9) OF THE INTERNAL 15 REVENUE CODE OF 1986 (26 U.S.C. § 501(C)(4), (5), (6), 16 (7), (8) OR (9)) AS ANY OF THE FOLLOWING: 17 (A) AN ASSOCIATION OF EMPLOYEES, THE MEMBERSHIP 18 OF WHICH IS LIMITED TO THE EMPLOYEES OF A DESIGNATED 19 PERSON OR PERSONS. 20 (B) A LABOR ORGANIZATION. 21 (C) AN AGRICULTURAL OR HORTICULTURAL 22 ORGANIZATION. 23 (D) A BUSINESS LEAGUE, CHAMBER OF COMMERCE, REAL 24 ESTATE BOARD, BOARD OF TRADE OR PROFESSIONAL SPORTS 25 LEAGUE. 26 (E) A CLUB ORGANIZED FOR PLEASURE OR RECREATION. 27 (F) A FRATERNAL BENEFICIARY SOCIETY, ORDER OR 28 ASSOCIATION. 29 (F) GOVERNMENT SERVICE.--THE INSTITUTION MUST RELIEVE THE 30 GOVERNMENT OF SOME OF ITS BURDEN. THIS CRITERION IS SATISFIED IF 19970H0055B2563 - 45 -
1 THE INSTITUTION MEETS ANY ONE OF THE FOLLOWING: 2 (1) PROVIDES A SERVICE TO THE PUBLIC THAT THE GOVERNMENT 3 WOULD OTHERWISE BE OBLIGED TO FUND OR TO PROVIDE DIRECTLY OR 4 INDIRECTLY OR TO ASSURE THAT A SIMILAR INSTITUTION EXISTS TO 5 PROVIDE THE SERVICE. 6 (2) PROVIDES SERVICES IN FURTHERANCE OF ITS CHARITABLE 7 PURPOSE WHICH ARE EITHER THE RESPONSIBILITY OF THE GOVERNMENT 8 BY LAW OR WHICH HISTORICALLY HAVE BEEN ASSUMED OR OFFERED OR 9 FUNDED BY THE GOVERNMENT. 10 (3) RECEIVES ON A REGULAR BASIS PAYMENTS FOR SERVICES 11 RENDERED UNDER A GOVERNMENT PROGRAM IF THE PAYMENTS ARE LESS 12 THAN THE FULL COSTS INCURRED BY THE INSTITUTION, AS 13 DETERMINED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 14 (4) PROVIDES A SERVICE TO THE PUBLIC WHICH DIRECTLY OR 15 INDIRECTLY REDUCES DEPENDENCE ON GOVERNMENT PROGRAMS OR 16 RELIEVES OR LESSENS THE BURDEN BORNE BY GOVERNMENT FOR THE 17 ADVANCEMENT OF SOCIAL, MORAL, EDUCATIONAL OR PHYSICAL 18 OBJECTIVES. 19 (5) ADVANCES OR PROMOTES RELIGION AND IS OWNED AND 20 OPERATED BY A CORPORATION OR OTHER ENTITY AS A RELIGIOUS 21 MINISTRY AND OTHERWISE SATISFIES THE CRITERIA SET FORTH IN 22 SECTION 5. 23 (6) HAS A VOLUNTARY AGREEMENT UNDER SECTION 7. 24 (G) OTHER NONPROFIT ENTITIES.--A NONPROFIT PARENT 25 CORPORATION, TOGETHER WITH ALL OF ITS SUBSIDIARY NONPROFIT 26 CORPORATIONS, MAY ELECT TO BE CONSIDERED AS A SINGLE INSTITUTION 27 IN MEETING THE CRITERIA SET FORTH IN THIS SECTION AS LONG AS ALL 28 OF THE FOLLOWING ARE MET: 29 (1) EACH SUBSIDIARY: 30 (I) IS A NONSTOCK CORPORATION OF WHICH THE NONPROFIT 19970H0055B2563 - 46 -
1 PARENT CORPORATION IS THE ONLY MEMBER; AND 2 (II) MEETS THE REQUIREMENTS OF THIS SECTION. 3 (2) THE PARENT: 4 (I) IS A NONSTOCK CORPORATION; 5 (II) IS QUALIFIED BY THE INTERNAL REVENUE SERVICE AS 6 MEETING THE REQUIREMENTS OF SECTION 501(C)(3) OF THE 7 INTERNAL REVENUE CODE OF 1986 (26 U.S.C. § 501(C)(3)); 8 (III) MEETS THE REQUIREMENTS OF SUBSECTION (B) AND 9 (C); AND 10 (IV) EXCEPT FOR SERVICES THAT MEET THE REQUIREMENTS 11 OF THIS SECTION, DOES NOT RENDER SERVICES FOR A FEE TO AN 12 INDIVIDUAL OR ENTITY THAT DOES NOT MEET THE REQUIREMENTS 13 OF PARAGRAPH (1). 14 (H) PARCEL REVIEW.-- 15 (1) NOTHING IN THIS ACT SHALL AFFECT, IMPAIR OR HINDER 16 THE RESPONSIBILITIES OR PREROGATIVES OF THE POLITICAL 17 SUBDIVISION RESPONSIBLE FOR MAINTAINING REAL PROPERTY 18 ASSESSMENT ROLLS TO MAKE A DETERMINATION WHETHER A PARCEL OF 19 PROPERTY OR A PORTION OF A PARCEL OF PROPERTY IS BEING USED 20 TO ADVANCE THE CHARITABLE PURPOSE OF AN INSTITUTION OF PURELY 21 PUBLIC CHARITY, OR TO ASSESS THE PARCEL OR PART OF THE PARCEL 22 OF PROPERTY AS TAXABLE BASED ON THE USE OF THE PARCEL OR PART 23 OF THE PARCEL FOR PURPOSES OTHER THAN THE CHARITABLE PURPOSE 24 OF THAT INSTITUTION. 25 (2) NOTHING IN THIS ACT SHALL PROHIBIT AN AGGRIEVED 26 PERSON OR A POLITICAL SUBDIVISION FROM FILING CHALLENGES TO, 27 OR PROHIBIT A POLITICAL SUBDIVISION FROM MAKING 28 DETERMINATIONS AS TO, WHETHER A PARTICULAR PARCEL OF PROPERTY 29 IS BEING USED TO ADVANCE THE CHARITABLE PURPOSE OF AN 30 INSTITUTION OF PURELY PUBLIC CHARITY. 19970H0055B2563 - 47 -
1 (I) STANDARDS.--AN INSTITUTION OF PURELY PUBLIC CHARITY MAY 2 CONDUCT ACTIVITIES INTENDED TO INFLUENCE LEGISLATION PROVIDED 3 THAT NO SUBSTANTIAL PART OF THE ACTIVITIES OF AN INSTITUTION OF 4 PURELY PUBLIC CHARITY SHALL CONSIST OF CARRYING ON PROPAGANDA, 5 EXCEPT AS OTHERWISE PROVIDED IN SECTION 501(H) OF THE INTERNAL 6 REVENUE CODE OF 1986 (26 U.S.C. § 501(H)) OR PARTICIPATING IN OR 7 INTERVENING IN, INCLUDING THE PUBLISHING OR DISTRIBUTING OF 8 STATEMENTS, ANY POLITICAL CAMPAIGN ON BEHALF OF, OR IN 9 OPPOSITION TO, ANY CANDIDATE FOR PUBLIC OFFICE AS SUCH 10 LIMITATIONS ARE INTERPRETED UNDER SECTION 501 OF THE INTERNAL 11 REVENUE CODE OF 1986 (26 U.S.C. § 501). 12 SECTION 6. PRESUMPTION PROCESS. 13 (A) PRESUMPTION DETERMINATION.--AN INSTITUTION OF PURELY 14 PUBLIC CHARITY POSSESSING A VALID EXEMPTION FROM THE TAX IMPOSED 15 BY ARTICLE II OF THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN 16 AS THE TAX REFORM CODE OF 1971, SHALL BE ENTITLED TO ASSERT A 17 REBUTTABLE PRESUMPTION REGARDING THAT INSTITUTION'S COMPLIANCE 18 WITH THE CRITERIA SET FORTH IN SECTION 5 AS FOLLOWS: 19 (1) AN INSTITUTION OF PURELY PUBLIC CHARITY THAT HAS 20 ANNUAL PROGRAM SERVICE REVENUE LESS THAN $10,000,000 SHALL BE 21 ENTITLED TO ASSERT THE PRESUMPTION IF THE INSTITUTION 22 POSSESSES A VALID EXEMPTION UNDER SECTION 204(10) OF THE TAX 23 REFORM CODE OF 1971. 24 (2) AN INSTITUTION OF PURELY PUBLIC CHARITY THAT HAS 25 ANNUAL PROGRAM SERVICE REVENUE EQUAL TO OR EXCEEDING 26 $10,000,000 SHALL BE ENTITLED TO ASSERT THE PRESUMPTION IF 27 ALL OF THE FOLLOWING APPLY: 28 (I) THE INSTITUTION POSSESSES A VALID EXEMPTION 29 UNDER SECTION 204(10) OF THE TAX REFORM CODE OF 1971; AND 30 (II) THE INSTITUTION HAS A VOLUNTARY AGREEMENT AS 19970H0055B2563 - 48 -
1 PROVIDED UNDER SECTION 7 WITH A POLITICAL SUBDIVISION IN 2 WHICH THAT INSTITUTION CONDUCTS SUBSTANTIAL BUSINESS 3 OPERATIONS. 4 (3) THE PRESUMPTION PURSUANT TO PARAGRAPH (2) MAY BE 5 ASSERTED BY AN INSTITUTION OF PURELY PUBLIC CHARITY ONLY WITH 6 REGARD TO A CHALLENGE MADE CONCERNING OR BY A POLITICAL 7 SUBDIVISION WITH WHICH THAT INSTITUTION HAS A VOLUNTARY 8 AGREEMENT IN EFFECT PURSUANT TO SECTION 7. 9 (4) FOR THE PURPOSE OF CALCULATING ANNUAL PROGRAM 10 SERVICE REVENUE UNDER THIS SECTION, AN INSTITUTION OF PURELY 11 PUBLIC CHARITY MAY ELECT TO AVERAGE ANNUAL PROGRAM SERVICE 12 REVENUE FOR ITS TWO MOST RECENTLY COMPLETED FISCAL YEARS. 13 (5) COMMENCING JULY 1, 1999, AND EVERY YEAR THEREAFTER, 14 THE DEPARTMENT OF REVENUE SHALL INCREASE THE AMOUNT SET FORTH 15 IN PARAGRAPHS (1) AND (2) BY 1%. THE DEPARTMENT SHALL 16 TRANSMIT NOTICE OF THE ADJUSTMENT TO THE LEGISLATIVE 17 REFERENCE BUREAU FOR PUBLICATION IN THE PENNSYLVANIA 18 BULLETIN. 19 (B) BURDEN OF PROOF.--IF AN INSTITUTION OF PURELY PUBLIC 20 CHARITY ASSERTS A PRESUMPTION UNDER SUBSECTION (A), AN AGGRIEVED 21 PERSON OR A POLITICAL SUBDIVISION CHALLENGING THAT INSTITUTION 22 BEFORE A GOVERNMENT AGENCY OR COURT SHALL BEAR THE BURDEN, BY A 23 PREPONDERANCE OF THE EVIDENCE, OF PROVING THAT THE INSTITUTION 24 OF PURELY PUBLIC CHARITY DOES NOT COMPLY WITH THE REQUIREMENTS 25 OF SECTION 5. 26 (C) ISSUANCE OF WRITTEN ORDER.--THE DEPARTMENT SHALL FURNISH 27 A WRITTEN ORDER TO ANY INSTITUTION APPLYING FOR EXEMPTION UNDER 28 SECTION 204(10) OF THE TAX REFORM CODE OF 1971 APPROVING OR 29 DENYING THE EXEMPTION. AN ORDER DENYING AN EXEMPTION SHALL 30 INCLUDE SPECIFIC INFORMATION CONCERNING THAT INSTITUTION'S 19970H0055B2563 - 49 -
1 FAILURE TO COMPLY WITH AT LEAST ONE OF THE CRITERIA UNDER 2 SECTION 5. 3 (D) WAIVER OF CONFIDENTIALITY.--AN INSTITUTION OF PURELY 4 PUBLIC CHARITY ASSERTING A PRESUMPTION UNDER SUBSECTION (A) 5 SHALL BE DEEMED TO HAVE WAIVED ANY RIGHT TO CONFIDENTIALITY WITH 6 REGARD TO ALL RECORDS IN THE POSSESSION OF THE DEPARTMENT 7 RELATING TO THE APPLICATION FOR EXEMPTION. THESE RECORDS SHALL 8 BE DEEMED PUBLIC RECORDS THAT THE DEPARTMENT MUST FURNISH TO ANY 9 PERSON UPON REQUEST. A POLITICAL SUBDIVISION CHALLENGING SUCH 10 PRESUMPTION MAY REQUEST FROM THE INSTITUTION OF PURELY PUBLIC 11 CHARITY ALL RELEVANT FINANCIAL STATEMENTS, RECORDS AND DOCUMENTS 12 USED TO OBTAIN THE EXEMPTION UNDER SECTION 204(10) OF THE TAX 13 REFORM CODE OF 1971. FAILURE BY THAT INSTITUTION TO SUPPLY OR, 14 AT ITS OPTION, TO PERMIT INSPECTION OF SUCH INFORMATION IN ITS 15 POSSESSION WITHIN 30 DAYS SHALL ELIMINATE THE PRESUMPTION WITH 16 RESPECT TO THAT CHALLENGE. 17 (E) DEPARTMENT INVOLVEMENT.--A DETERMINATION MADE UNDER THIS 18 SECTION SHALL NOT, IN ANY WAY, SUBJECT THE DEPARTMENT TO 19 PARTICIPATION IN ANY CONTROVERSY, DISCOVERY OR LITIGATION 20 BETWEEN AN AGGRIEVED PERSON OR A POLITICAL SUBDIVISION AND AN 21 INSTITUTION CLAIMING THE EXEMPTION AS AN INSTITUTION OF PURELY 22 PUBLIC CHARITY, OTHER THAN PROVIDING A COPY OF ITS WRITTEN ORDER 23 AND ANY SUPPORTING DOCUMENTATION SUPPLIED TO THE DEPARTMENT BY 24 THAT INSTITUTION. 25 SECTION 7. VOLUNTARY AGREEMENTS. 26 (A) GENERAL RULE.--A POLITICAL SUBDIVISION MAY EXECUTE A 27 VOLUNTARY AGREEMENT WITH AN INSTITUTION THAT OWNS REAL PROPERTY 28 WITHIN THE POLITICAL SUBDIVISION. ALL CONTRIBUTIONS RECEIVED 29 FROM SUCH VOLUNTARY AGREEMENTS SHALL BE USED TO HELP ENSURE THAT 30 ESSENTIAL GOVERNMENTAL, PUBLIC OR COMMUNITY SERVICES WILL 19970H0055B2563 - 50 -
1 CONTINUE TO BE PROVIDED IN A MANNER THAT WILL PERMIT AN 2 INSTITUTION TO CONTINUE TO FULFILL ITS CHARITABLE MISSION. 3 NOTHING IN THIS SECTION SHALL BE CONSTRUED TO PROHIBIT A 4 POLITICAL SUBDIVISION FROM SHARING WITH ANOTHER POLITICAL 5 SUBDIVISION A PORTION OF THE PROCEEDS DERIVED FROM A VOLUNTARY 6 AGREEMENT UPON THE MUTUAL AGREEMENT OF ALL AFFECTED PARTIES. 7 (B) PUBLIC SERVICE FOUNDATIONS.--INSTITUTIONS OF PURELY 8 PUBLIC CHARITY MAY ESTABLISH A PUBLIC SERVICE FOUNDATION, UPON 9 MUTUAL AGREEMENT WITH A POLITICAL SUBDIVISION, FOR THE PURPOSE 10 OF RECEIVING CONTRIBUTIONS FROM INSTITUTIONS OF PURELY PUBLIC 11 CHARITY. UPON AGREEMENT, THE FOUNDATION SHALL MAKE DISTRIBUTIONS 12 OR GRANTS TO A PARTICIPATING POLITICAL SUBDIVISION TO HELP 13 ENSURE THAT ESSENTIAL GOVERNMENTAL, PUBLIC OR COMMUNITY SERVICES 14 WILL CONTINUE TO BE PROVIDED IN A MANNER THAT WILL PERMIT AN 15 INSTITUTION TO CONTINUE TO FULFILL ITS CHARITABLE MISSION. A 16 POLITICAL SUBDIVISION WHICH RECEIVES A DISTRIBUTION OR GRANT 17 FROM A PUBLIC SERVICE FOUNDATION SHALL NOT ASSESS OR SEEK A 18 SEPARATE CONTRIBUTION FOR SERVICES FROM INSTITUTIONS OF PURELY 19 PUBLIC CHARITY PARTICIPATING IN A FOUNDATION. 20 (C) ADDITIONAL CREDIT FOR VOLUNTARY AGREEMENTS.--AN 21 INSTITUTION WHICH HAS ENTERED INTO A VOLUNTARY AGREEMENT MAY 22 CREDIT THE FOLLOWING PERCENTAGE OF THE REASONABLE VALUE OF ITS 23 CONTRIBUTION FOR PURPOSES OF COMPUTING THE COMMUNITY SERVICE 24 CRITERIA SET FORTH IN SECTION 5(D)(4)(VIII): 25 (1) IF THE REASONABLE VALUE OF THE INSTITUTION'S 26 CONTRIBUTION IS EQUAL TO OR LESS THAN 0.15% OF ITS PROGRAM 27 SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE ENTIRE 28 CONTRIBUTION AT 150% OF ITS VALUE. 29 (2) IF THE REASONABLE VALUE OF THE INSTITUTION'S 30 CONTRIBUTION IS GREATER THAN 0.15% BUT LESS THAN 0.25% OF ITS 19970H0055B2563 - 51 -
1 PROGRAM SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE 2 ENTIRE CONTRIBUTION AT 250% OF ITS VALUE. 3 (3) IF THE REASONABLE VALUE OF THE INSTITUTION'S 4 CONTRIBUTION IS EQUAL TO OR GREATER THAN 0.25% OF ITS PROGRAM 5 SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE ENTIRE 6 CONTRIBUTION AT 350% OF ITS VALUE. 7 (D) EXISTING AGREEMENTS.--NOTHING IN THIS ACT SHALL BE 8 CONSTRUED TO AFFECT, IMPAIR, TERMINATE OR SUPERSEDE ANY 9 CONTRACT, AGREEMENT OR OTHER ARRANGEMENT IN EFFECT ON OR BEFORE 10 THE EFFECTIVE DATE OF THIS SECTION BETWEEN AN INSTITUTION AND A 11 POLITICAL SUBDIVISION, WHICH AUTHORIZES OR REQUIRES PAYMENT OF 12 TAXES, AMOUNTS IN LIEU OF TAXES OR OTHER CHARGES OR FEES FOR THE 13 SERVICES OF A POLITICAL SUBDIVISION. 14 (E) NEW AGREEMENTS.--NOTHING IN THIS ACT SHALL BE CONSTRUED 15 TO IMPAIR OR OTHERWISE INHIBIT THE RIGHT OR ABILITY OF ANY 16 INSTITUTION SEEKING OR POSSESSING AN EXEMPTION AS AN INSTITUTION 17 OF PURELY PUBLIC CHARITY, A PUBLIC SERVICE FOUNDATION OR A 18 POLITICAL SUBDIVISION FROM EXECUTING VOLUNTARY AGREEMENTS AFTER 19 THE EFFECTIVE DATE OF THIS SECTION. 20 SECTION 8. UNFAIR COMPETITION WITH SMALL BUSINESSES. 21 (A) INTENT.--IT IS THE POLICY OF THIS ACT THAT INSTITUTIONS 22 OF PURELY PUBLIC CHARITY SHALL NOT USE THEIR TAX-EXEMPT STATUS 23 TO COMPETE UNFAIRLY WITH SMALL BUSINESS. 24 (B) GENERAL RULE.--AN INSTITUTION OF PURELY PUBLIC CHARITY 25 MAY NOT FUND, CAPITALIZE, GUARANTEE THE INDEBTEDNESS OF, LEASE 26 OBLIGATIONS OF, OR SUBSIDIZE A COMMERCIAL BUSINESS THAT IS 27 UNRELATED TO THE INSTITUTION'S CHARITABLE PURPOSE AS STATED IN 28 THE INSTITUTION'S CHARTER OR GOVERNING LEGAL DOCUMENTS. 29 (C) EXCEPTIONS.--INSTITUTIONS OF PURELY PUBLIC CHARITY ARE 30 NOT IN VIOLATION OF SUBSECTION (B) IF ANY OF THE FOLLOWING 19970H0055B2563 - 52 -
1 APPLY: 2 (1) THE COMMERCIAL BUSINESS IS INTENDED ONLY FOR THE USE 3 OF ITS EMPLOYEES, STAFF, ALUMNI, FACULTY, MEMBERS, STUDENTS, 4 CLIENTS, VOLUNTEERS, PATIENTS OR RESIDENTS. FOR PURPOSES OF 5 THIS PARAGRAPH, A PERSON SHALL NOT BE CONSIDERED AN EMPLOYEE, 6 STAFF, MEMBER, ALUMNUS, FACULTY, STUDENT, CLIENT, VOLUNTEER, 7 PATIENT OR RESIDENT IF THE PERSON'S ONLY RELATIONSHIP WITH 8 THE INSTITUTION OF PURELY PUBLIC CHARITY IS TO RECEIVE 9 PRODUCTS OR SERVICES RESULTING FROM THE COMMERCIAL BUSINESS. 10 (2) THE COMMERCIAL BUSINESS RESULTS IN SALES TO THE 11 GENERAL PUBLIC THAT ARE INCIDENTAL OR PERIODIC RATHER THAN 12 PERMANENT AND ONGOING. 13 (D) SUPPORT FOR OTHER CHARITIES.--NOTHING IN THIS SECTION 14 SHALL BE CONSTRUED AS PROHIBITING OR LIMITING THE ABILITY OF AN 15 INSTITUTION OF PURELY PUBLIC CHARITY TO FUND, CAPITALIZE, 16 GUARANTEE THE INDEBTEDNESS OF OR OTHERWISE SUBSIDIZE ANOTHER 17 INSTITUTION OF PURELY PUBLIC CHARITY. 18 (E) INVESTMENTS.--THE INVESTMENT IN PUBLICLY TRADED STOCKS 19 AND BONDS; REAL ESTATE, WHETHER DIRECTLY OR INDIRECTLY; OR OTHER 20 INVESTMENTS BY AN INSTITUTION OF PURELY PUBLIC CHARITY DOES NOT 21 VIOLATE SUBSECTION (B). 22 (F) EDUCATIONAL FUNCTIONS.--USE OF FACILITIES TO HOST GROUPS 23 FOR EDUCATIONAL PURPOSES BY AN INSTITUTION OF PURELY PUBLIC 24 CHARITY DOES NOT VIOLATE SUBSECTION (B). 25 (G) GOVERNMENT FUNCTIONS.--AN INSTITUTION OF PURELY PUBLIC 26 CHARITY MAY ENGAGE IN A NEW COMMERCIAL BUSINESS THAT MAY 27 OTHERWISE BE IN VIOLATION OF SUBSECTION (B) IF THE INSTITUTION 28 IS FORMALLY REQUESTED TO DO SO BY THE COMMONWEALTH OR A 29 POLITICAL SUBDIVISION. 30 (H) EXISTING BUSINESS ARRANGEMENTS.--AN INSTITUTION OF 19970H0055B2563 - 53 -
1 PURELY PUBLIC CHARITY THAT PRIOR TO THE EFFECTIVE DATE OF THIS 2 SECTION FUNDED, CAPITALIZED, GUARANTEED THE INDEBTEDNESS OF, 3 LEASED OBLIGATIONS OF OR SUBSIDIZED A COMMERCIAL BUSINESS MAY 4 CONTINUE TO OWN AND OPERATE SUCH BUSINESSES WITHOUT VIOLATING 5 SUBSECTION (B) AS LONG AS THE INSTITUTION DOES NOT SUBSTANTIALLY 6 EXPAND THE SCOPE OF THE COMMERCIAL BUSINESS. IN THE EVENT AN 7 INJUNCTION IS ISSUED UNDER SUBSECTION (I), THE EFFECT OF SUCH 8 INJUNCTION SHALL BE LIMITED TO RESTRAINING THE SUBSTANTIAL 9 EXPANSION OF THE SCOPE OF THE COMMERCIAL BUSINESS WHICH WAS 10 INITIATED AFTER THE EFFECTIVE DATE OF THIS SECTION. 11 (I) REMEDIES.--THE DEPARTMENT OF STATE SHALL ESTABLISH A 12 SYSTEM OF MANDATORY ARBITRATION FOR THE PURPOSE OF RECEIVING ALL 13 COMPLAINTS FROM AGGRIEVED SMALL BUSINESSES RELATING TO AN 14 INSTITUTION OF PURELY PUBLIC CHARITY'S ALLEGED VIOLATION OF 15 THIS SECTION. UPON RECEIPT OF SUCH COMPLAINT, THE DEPARTMENT 16 SHALL DIRECT THAT THE COMPLAINT BE RESOLVED AS PROVIDED IN THIS 17 SUBSECTION. 18 (1) ALL COMPLAINTS SHALL BE IN THE FORM OF A SWORN 19 STATEMENT SETTING FORTH ALL ALLEGATIONS AND REQUESTS FOR 20 RELIEF, AND SHALL BE FILED WITH THE DEPARTMENT, TOGETHER WITH 21 A FEE AS PRESCRIBED BY THE DEPARTMENT. 22 (2) WITHIN TEN DAYS OF FILING THE COMPLAINT WITH THE 23 DEPARTMENT, THE AGGRIEVED SMALL BUSINESS SHALL SERVE A COPY 24 OF THE COMPLAINT ON THE INSTITUTION OF PURELY PUBLIC CHARITY 25 AGAINST WHICH THE COMPLAINT IS FILED. THE INSTITUTION OF 26 PURELY PUBLIC CHARITY MUST RESPOND TO THE COMPLAINT WITHIN 30 27 DAYS OF ITS RECEIPT BY THE INSTITUTION OF THE PURELY PUBLIC 28 CHARITY. 29 (3) WITHIN 30 DAYS FOLLOWING THE PERIOD OF TIME ALLOTTED 30 TO THE INSTITUTION OF PURELY PUBLIC CHARITY TO RESPOND TO THE 19970H0055B2563 - 54 -
1 COMPLAINT, THE DEPARTMENT SHALL PROVIDE AN UNBIASED AND 2 QUALIFIED ARBITRATOR WHO POSSESSES SUFFICIENT KNOWLEDGE 3 REGARDING SUCH INSTITUTIONS TO ADJUDICATE THE MATTER. IF THE 4 INSTITUTION OF PURELY PUBLIC CHARITY DOES NOT PARTICIPATE IN 5 THE ARBITRATION, THE ARBITRATOR MAY ISSUE AN ORDER TO COMPEL 6 SUCH PARTICIPATION. SUCH AN ORDER SHALL BE ENFORCEABLE BY THE 7 COURT OF COMMON PLEAS IN THE JUDICIAL DISTRICT WHERE THE 8 ARBITRATION TAKES PLACE. 9 (4) THE ARBITRATION SHALL TAKE PLACE IN THE JUDICIAL 10 DISTRICT IN WHICH THE INSTITUTION OF PURELY PUBLIC CHARITY IS 11 LOCATED. THE DEPARTMENT SHALL PROVIDE THE ARBITRATOR ALL 12 RELEVANT MATERIAL REGARDING THE COMPLAINT, INCLUDING THE 13 ORIGINAL COMPLAINT, THE INSTITUTION OF PURELY PUBLIC 14 CHARITY'S RESPONSE TO THE COMPLAINT AND COPIES OF ANY OTHER 15 RELEVANT INFORMATION WHICH THE DEPARTMENT MAY POSSESS. THE 16 ARBITRATION SHALL BE COMPLETED WITHIN ONE YEAR FROM THE DATE 17 ON WHICH THE ARBITRATOR WAS ASSIGNED. 18 (5) WITHIN 30 DAYS OF THE ARBITRATOR'S ASSIGNMENT, THE 19 ARBITRATOR SHALL DETERMINE IF THE COMPLAINT SETS FORTH PRIMA 20 FACIE EVIDENCE THAT A VIOLATION OF THIS SECTION HAS OCCURRED. 21 IF THE ARBITRATOR DETERMINES THAT THE COMPLAINT DOES NOT 22 CONTAIN PRIMA FACIE EVIDENCE, THE ARBITRATOR SHALL ISSUE A 23 WRITTEN REPORT DETAILING THE FINDINGS AND SHALL TERMINATE THE 24 ARBITRATION. A SMALL BUSINESS MAY APPEAL SUCH A DETERMINATION 25 AS PROVIDED IN PARAGRAPH (9). 26 (6) THE ARBITRATOR SHALL DETERMINE IF THE ACTIVITY OF 27 THE INSTITUTION OF PURELY PUBLIC CHARITY IS IN VIOLATION OF 28 THIS SECTION. IN MAKING THIS DETERMINATION, THE ARBITRATOR 29 SHALL REVIEW ALL RELEVANT LAW, INCLUDING PREVIOUS 30 ARBITRATORS' DECISIONS; REGULATIONS; AND THE CHARTER OR 19970H0055B2563 - 55 -
1 GOVERNING LEGAL DOCUMENTS OF THE INSTITUTION OF PURELY PUBLIC 2 CHARITY. 3 (7) THE DECISION OF THE ARBITRATOR SHALL BE SET FORTH IN 4 A WRITTEN DECISION ISSUED TO EACH PARTY, SPECIFYING FINDINGS 5 OF FACT AND CONCLUSIONS OF LAW. IF THE ARBITRATOR FINDS A 6 VIOLATION OF THIS SECTION, THE ARBITRATOR MAY INCLUDE AN 7 ORDER OR INJUNCTION AS PART OF THE DECISION, PROVIDED THAT NO 8 DAMAGES MAY BE ASSESSED AGAINST AN INSTITUTION OF PURELY 9 PUBLIC CHARITY. 10 (8) UPON AGREEMENT OF THE PARTIES, THE DECISION OF THE 11 ARBITRATOR SHALL BE FINAL AND BINDING AS TO ALL MATTERS OF 12 FACT AND LAW AND SHALL BE ENTERED BY THE ARBITRATOR AS A 13 FINAL JUDGMENT IN THE COURT OF COMMON PLEAS OF THE JUDICIAL 14 DISTRICT IN WHICH THE ARBITRATION TOOK PLACE. A COPY OF THE 15 ARBITRATOR'S FINAL DECISION SHALL ALSO BE FILED WITH THE 16 DEPARTMENT. 17 (9) EITHER PARTY MAY INITIATE A DE NOVO APPEAL FROM THE 18 ARBITRATOR'S DECISION IN THE COURT OF COMMON PLEAS OF THE 19 JUDICIAL DISTRICT IN WHICH THE ARBITRATION TOOK PLACE WITHIN 20 30 DAYS OF THE ARBITRATOR'S DECISION. 21 (10) THE DEPARTMENT MAY PROVIDE FOR THE SYSTEM OF 22 ARBITRATION BY MAINTAINING A LIST OF QUALIFIED ARBITRATORS OR 23 BY CONTRACTING FOR QUALIFIED ARBITRATION SERVICES. 24 (11) THE DEPARTMENT MAY ADOPT REGULATIONS NECESSARY TO 25 IMPLEMENT THIS SECTION. 26 (12) THE COST OF AN ARBITRATION PROCEEDING, INCLUDING 27 THE ARBITRATOR'S FEE, SHALL BE BORNE BY THE COMPLAINANT, 28 UNLESS THE ARBITRATOR DIRECTS OTHERWISE. EACH PARTY SHALL BE 29 RESPONSIBLE FOR ITS ATTORNEY FEES AND OTHER COSTS INCURRED. 30 (13) EXCEPT AS SET FORTH IN THIS SECTION OR IN 19970H0055B2563 - 56 -
1 REGULATIONS PROMULGATED BY THE DEPARTMENT UNDER THIS SECTION, 2 THE ARBITRATION SHALL BE GOVERNED BY 42 PA.C.S. CH. 73 SUBCH. 3 A (RELATING TO STATUTORY ARBITRATION). 4 (14) THE REMEDIES SET FORTH IN THIS SUBSECTION SHALL BE 5 THE EXCLUSIVE REMEDIES AVAILABLE TO AN AGGRIEVED SMALL 6 BUSINESS. 7 SECTION 9. ACCOUNTABILITY AND DISCLOSURE. 8 (A) REPORTING.--AN INSTITUTION OF PURELY PUBLIC CHARITY THAT 9 DOES NOT REGISTER WITH THE DEPARTMENT OF STATE UNDER THE ACT OF 10 DECEMBER 19, 1990 (P.L.1200, NO.202), KNOWN AS THE SOLICITATION 11 OF FUNDS FOR CHARITABLE PURPOSES ACT, INCLUDING INSTITUTIONS 12 EXEMPTED FROM REGISTRATION UNDER SECTION 6(A) OF THE 13 SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES ACT, SHALL FILE AN 14 ANNUAL REPORT WITH THE BUREAU. THE REPORT SHALL BE FILED WITHIN 15 135 DAYS AFTER THE CLOSE OF THE INSTITUTION'S FISCAL YEAR UNLESS 16 AN EXTENSION IS GRANTED BY THE DEPARTMENT. THE REPORT SHALL BE 17 IN A FORMAT APPROVED BY THE DEPARTMENT AND SHALL INCLUDE: 18 (1) A COPY OF THE ANNUAL RETURN FILED OR REQUIRED TO BE 19 FILED WITH THE INTERNAL REVENUE SERVICE. 20 (2) THE DATE THE INSTITUTION WAS ORGANIZED UNDER 21 APPLICABLE LAW. 22 (3) ANY REVOCATION OF TAX-EXEMPT STATUS BY THE INTERNAL 23 REVENUE SERVICE. 24 (4) THE FOLLOWING INFORMATION ON EACH AFFILIATE OF THE 25 INSTITUTION OF PURELY PUBLIC CHARITY: 26 (I) THE NAME AND TYPE OF ORGANIZATION. 27 (II) WHETHER THE AFFILIATE IS ORGANIZED ON A FOR- 28 PROFIT OR NONPROFIT BASIS. 29 (III) THE RELATIONSHIP OF EACH AFFILIATE TO THE 30 INSTITUTION OF PURELY PUBLIC CHARITY MAKING THE REPORT. 19970H0055B2563 - 57 -
1 (5) THE RELATIONSHIP OF THE INSTITUTION OF PURELY PUBLIC 2 CHARITY WITH ANY OTHER NONPROFIT CORPORATION OR 3 UNINCORPORATED ASSOCIATION IF THE RELATIONSHIP INVOLVES 4 FORMAL GOVERNANCE OR THE SHARING OF REVENUE. 5 (B) REGULATIONS.--THE DEPARTMENT SHALL PROMULGATE 6 REGULATIONS TO REQUIRE INSTITUTIONS OF PURELY PUBLIC CHARITY 7 WHICH REGISTER UNDER SECTION 5 OF THE SOLICITATION OF FUNDS FOR 8 CHARITABLE PURPOSES ACT TO INCLUDE THE INFORMATION SET FORTH IN 9 SUBSECTION (A). 10 (C) AMENDMENTS TO ANNUAL RETURNS.--AN INSTITUTION WHICH 11 FILES AN AMENDED ANNUAL RETURN WITH THE INTERNAL REVENUE SERVICE 12 SHALL FILE A COPY OF THE AMENDED ANNUAL RETURN WITH THE BUREAU 13 WITHIN TEN DAYS OF ITS FILING WITH THE INTERNAL REVENUE SERVICE. 14 (D) EXEMPTION FROM FILING.--EACH OF THE FOLLOWING 15 INSTITUTIONS SHALL BE EXEMPT FROM THE REPORTING REQUIREMENTS OF 16 THIS SECTION: 17 (1) A BONA FIDE DULY CONSTITUTED RELIGIOUS INSTITUTION 18 AND SUCH SEPARATE GROUPS OR CORPORATIONS WHICH FORM AN 19 INTEGRAL PART OF A RELIGIOUS INSTITUTION AND ARE EXEMPT FROM 20 FILING AN ANNUAL RETURN PURSUANT TO THE INTERNAL REVENUE CODE 21 OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 1 ET SEQ.). 22 (2) AN INSTITUTION OF PURELY PUBLIC CHARITY WHICH 23 RECEIVES CONTRIBUTIONS OF LESS THAN $25,000 PER YEAR PROVIDED 24 THAT THE INSTITUTION'S PROGRAM SERVICE REVENUE DOES NOT EQUAL 25 OR EXCEED $5,000,000. 26 (E) FILING FEE.--AN INSTITUTION OF PURELY PUBLIC CHARITY 27 WHICH IS REQUIRED TO FILE A REPORT UNDER SUBSECTION (A) SHALL 28 PAY AN ANNUAL FILING FEE OF $15. ALL FEES COLLECTED UNDER THIS 29 ACT AND UNDER THE SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES 30 ACT SHALL BE DEPOSITED IN THE STATE TREASURY. THE AMOUNT OF THE 19970H0055B2563 - 58 -
1 FILING FEE UNDER THIS SUBSECTION MAY BE ADJUSTED BY THE 2 DEPARTMENT BY REGULATION. ALL FINES, PENALTIES, ATTORNEY FEES 3 AND COSTS OF INVESTIGATION COLLECTED UNDER THIS ACT AND UNDER 4 THE SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES ACT SHALL BE 5 PAID AS FOLLOWS: 6 (1) AMOUNTS COLLECTED BY THE BUREAU SHALL BE PAID TO THE 7 STATE TREASURY. 8 (2) AMOUNTS COLLECTED BY THE ACTION OR LITIGATION OF 9 ANOTHER GOVERNMENT AGENCY SHALL BE PAID DIRECTLY TO THAT 10 AGENCY. 11 (F) PAPERWORK REDUCTION.--THE DEPARTMENT SHALL ALLOW AN 12 INSTITUTION OF PURELY PUBLIC CHARITY TO CERTIFY THAT THE 13 INFORMATION REQUIRED IN SUBSECTION (A)(2) THROUGH (5) HAS NOT 14 CHANGED SINCE THE PRIOR REPORT IN LIEU OF PROVIDING THE SAME 15 INFORMATION IN THE REPORT REQUIRED BY SUBSECTION (A). THE 16 DEPARTMENT MAY OBTAIN FROM THE INTERNAL REVENUE SERVICE COPIES 17 OF ANNUAL RETURNS OF INSTITUTIONS WHICH FILE ANNUAL RETURNS WITH 18 THE INTERNAL REVENUE SERVICE ON COMPUTER DISK OR OTHER 19 ELECTRONIC OR PAPER MEDIA. 20 (G) RETENTION OF RECORDS.--THE DEPARTMENT SHALL RETAIN THE 21 REPORTING INFORMATION REQUIRED BY THIS SECTION FOR THREE YEARS 22 FROM THE DATE THE REPORTS ARE REQUIRED TO BE FILED. 23 (H) UTILIZATION OF REPORTS.--THE DEPARTMENT SHALL MAKE 24 REPORTS SUBMITTED UNDER THIS SECTION AVAILABLE FOR PUBLIC 25 INSPECTION TO THE EXTENT THAT THE INFORMATION IS AVAILABLE FOR 26 PUBLIC INSPECTION UNDER SECTION 6104 OF THE INTERNAL REVENUE 27 CODE OF 1986 (26 U.S.C. § 6104). THE DEPARTMENT SHALL PROVIDE 28 ANY GOVERNMENT AGENCY A COPY OF THE REPORT FILED UNDER THIS 29 SECTION UPON REQUEST. NOTHING IN THIS SUBSECTION SHALL PREVENT A 30 GOVERNMENT AGENCY FROM REQUIRING ANY INSTITUTION SEEKING 19970H0055B2563 - 59 -
1 EXEMPTION AS AN INSTITUTION OF PURELY PUBLIC CHARITY TO PROVIDE 2 THE INFORMATION DESCRIBED IN SUBSECTION (A) TO THAT AGENCY AS 3 PART OF A DETERMINATION OF THE TAX EXEMPT STATUS OF THE 4 INSTITUTION. 5 (I) ADMINISTRATIVE PENALTY.--THE DEPARTMENT MAY IMPOSE AN 6 ADMINISTRATIVE PENALTY NOT TO EXCEED $500 FOR ANY OF THE 7 FOLLOWING: 8 (1) KNOWINGLY FAILING TO FILE THE REPORT REQUIRED BY 9 THIS SECTION. 10 (2) KNOWINGLY MAKING A FALSE STATEMENT WHICH IS MATERIAL 11 IN A REPORT REQUIRED BY THIS SECTION. 12 SECTION 10. EXEMPTION FOR FEDERAL GOVERNMENT INSTRUMENTALITY. 13 ALL REAL PROPERTY OWNED BY ANY CORPORATION ESTABLISHED BY AN 14 ACT OF THE CONGRESS OF THE UNITED STATES, THAT IS REQUIRED TO 15 SUBMIT ANNUAL REPORTS OF ITS ACTIVITIES TO CONGRESS CONTAINING 16 ITEMIZED ACCOUNTS OF ALL RECEIPTS AND EXPENDITURES AFTER BEING 17 FULLY AUDITED BY THE DEPARTMENT OF DEFENSE, FOR PURPOSES OF THE 18 CONSTITUTION OF PENNSYLVANIA AND THE LAWS OF THIS COMMONWEALTH 19 RELATING TO THE ASSESSMENT AND TAXATION OF REAL ESTATE, IS 20 DEEMED TO BE PROPERTY OF A FEDERAL GOVERNMENT INSTRUMENTALITY 21 AND THUS EXEMPT FROM ALL STATE AND LOCAL TAXATION. 22 SECTION 11. PROHIBITED ACT. 23 NO INSTITUTION MAY CLAIM AN EXEMPTION FROM SALES AND USE TAX 24 AS AN INSTITUTION OF PURELY PUBLIC CHARITY UNLESS THE 25 INSTITUTION HAS RECEIVED AN ORDER FROM THE DEPARTMENT OF REVENUE 26 APPROVING AND AUTHORIZING THE EXEMPTION. 27 SECTION 12. COMPLIANCE. 28 INSTITUTIONS OF PURELY PUBLIC CHARITY SHALL COMPLY WITH THE 29 PROVISIONS OF THIS ACT AND WITH THE PROVISIONS OF ARTICLE II OF 30 THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM 19970H0055B2563 - 60 -
1 CODE OF 1971. 2 SECTION 13. CIVIL PENALTY. 3 IN ADDITION TO ANY PENALTIES AUTHORIZED BY THE ACT OF MARCH 4 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, FOR 5 VIOLATIONS OF THAT ACT, THE DEPARTMENT OF REVENUE MAY IMPOSE AN 6 ADMINISTRATIVE PENALTY NOT TO EXCEED $500 FOR ANY WILLFUL AND 7 KNOWING VIOLATION OF THIS ACT. THIS SECTION SHALL NOT APPLY TO 8 ANY VIOLATION OF SECTION 8. 9 SECTION 14. REPEALS. 10 (A) ABSOLUTE.--SECTION 24 OF THE ACT OF DECEMBER 19, 1990 11 (P.L.1200, NO. 202), KNOWN AS THE SOLICITATION OF FUNDS FOR 12 CHARITABLE PURPOSES ACT, IS REPEALED. 13 (B) GENERAL.--ALL OTHER ACTS AND PARTS OF ACTS ARE REPEALED 14 INSOFAR AS THEY ARE INCONSISTENT WITH THIS ACT EXCEPT FOR 15 SECTION 204(A)(3) OF THE ACT OF MAY 22, 1933 (P.L.853, NO.155), 16 KNOWN AS THE GENERAL COUNTY ASSESSMENT LAW, AS IT APPLIES TO 17 CHARITABLE ORGANIZATIONS PROVIDING RESIDENTIAL HOUSING SERVICES. 18 SECTION 15. APPLICABILITY. 19 (A) GENERAL.--THIS ACT SHALL NOT APPLY TO NOR AFFECT 40 20 PA.C.S. § 6103 (RELATING TO EXEMPTIONS APPLICABLE TO CERTIFIED 21 HOSPITAL PLAN CORPORATIONS) OR 6307 (RELATING TO EXEMPTIONS 22 APPLICABLE TO CERTIFICATED PROFESSIONAL HEALTH SERVICE 23 CORPORATIONS) OR THE ENTITIES SUBJECT TO THOSE SECTIONS. 24 (B) EXISTING SALES AND USE TAX EXEMPTIONS.--AN EXEMPTION 25 FROM TAX UNDER SECTION 204(10) OF THE ACT OF MARCH 4, 1971 26 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, EXISTING ON 27 THE EFFECTIVE DATE OF THIS SECTION SHALL REMAIN IN EFFECT UNTIL 28 THE EXPIRATION OF THAT EXEMPTION. 29 (C) PRESUMPTION.--NO INSTITUTION OF PURELY PUBLIC CHARITY 30 MAY ASSERT A PRESUMPTION PURSUANT TO SECTION 6 UNTIL THAT 19970H0055B2563 - 61 -
1 INSTITUTION'S EXEMPTION UNDER SECTION 204(10) OF THE TAX REFORM 2 CODE OF 1971 IS GRANTED OR RENEWED ON OR AFTER THE EFFECTIVE 3 DATE OF THIS SECTION. 4 SECTION 16. EFFECTIVE DATE. 5 THIS ACT SHALL TAKE EFFECT AS FOLLOWS: 6 (1) SECTIONS 8 AND 9 SHALL TAKE EFFECT IN 120 DAYS. 7 (2) THE REMAINDER OF THIS ACT SHALL TAKE EFFECT 8 IMMEDIATELY. A15L72DGS/19970H0055B2563 - 62 -