SENATE AMENDED PRIOR PRINTER'S NOS. 64, 994, 1071, PRINTER'S NO. 2575 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
AS AMENDED ON SECOND CONSIDERATION, IN SENATE, NOVEMBER 18, 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.
1 Section 10. Exemption for Federal Government 2 instrumentality. 3 Section 11. Repeals. 4 Section 12. Applicability. 5 Section 13. Effective date. 6 PROVIDING FOR THE TAX EXEMPTION OF INSTITUTIONS OF PURELY PUBLIC <-- 7 CHARITY; EXEMPTING REAL PROPERTY OWNED BY STATE-RELATED 8 UNIVERSITIES OR FEDERAL GOVERNMENT INSTRUMENTALITIES FROM 9 TAXATION; PROVIDING FOR UNFAIR COMPETITION; IMPOSING 10 PENALTIES; AND MAKING REPEALS. 11 TABLE OF CONTENTS 12 SECTION 1. SHORT TITLE. 13 SECTION 2. LEGISLATIVE INTENT. 14 SECTION 3. DEFINITIONS. 15 SECTION 4. STATE-RELATED UNIVERSITIES. 16 SECTION 5. CRITERIA FOR INSTITUTIONS OF PURELY PUBLIC CHARITY. 17 SECTION 6. PRESUMPTION PROCESS. 18 SECTION 7. VOLUNTARY AGREEMENTS. 19 SECTION 8. UNFAIR COMPETITION WITH SMALL BUSINESSES. 20 SECTION 9. ACCOUNTABILITY AND DISCLOSURE. 21 SECTION 10. EXEMPTION FOR FEDERAL GOVERNMENT INSTRUMENTALITY. 22 SECTION 11. PROHIBITED ACT. 23 SECTION 12. COMPLIANCE. 24 SECTION 13. CIVIL PENALTY. 25 SECTION 14. REPEALS. 26 SECTION 15. APPLICABILITY. 27 SECTION 16. EFFECTIVE DATE. 28 The General Assembly of the Commonwealth of Pennsylvania 29 hereby enacts as follows: 30 Section 1. Short title. <-- 31 This act shall be known and may be cited as the Institutions 32 of Purely Public Charity Act. 19970H0055B2575 - 2 -
1 Section 2. Legislative intent. 2 (a) Findings.--The General Assembly finds and declares as 3 follows: 4 (1) It is in the best interest of this Commonwealth and 5 its citizens that the recognition of tax-exempt status be 6 accomplished in an orderly, uniform and economical manner. 7 (2) For more than 100 years, it has been the policy of 8 this Commonwealth to foster the organization and operation of 9 charitable organizations by exempting charitable 10 organizations from taxation. 11 (3) Because charitable organizations contribute to the 12 common good or lessen the burdens of government, the historic 13 policy of exempting charitable institutions from taxation 14 should be continued. 15 (4) The General Assembly recognizes that it is 16 unrealistic today to expect charitable organizations to rely 17 completely upon private philanthropy and that there is an 18 appropriate role and responsibility for government support 19 with respect to activities historically recognized as 20 charitable. 21 (5) The General Assembly recognizes that the lack of 22 specific legislative standards defining the term 23 "institutions of purely public charity" has led to increasing 24 confusion and confrontation among traditionally tax-exempt 25 organizations and local governments to the detriment of the 26 public. 27 (6) There is increasing concern that the eligibility 28 standards for charitable tax exemptions are being applied 29 inconsistently, which may violate the uniformity provision of 30 the Constitution of Pennsylvania. 19970H0055B2575 - 3 -
1 (b) Intent.--It is the intent of the General Assembly to 2 eliminate inconsistent application of eligibility standards for 3 charitable tax exemptions, reduce confusion and confrontation 4 among traditionally tax-exempt organizations and local 5 governments and insure that charitable and public funds are not 6 unnecessarily diverted from the public good to litigate 7 eligibility for tax-exempt status by providing standards to be 8 applied uniformly in all proceedings throughout this 9 Commonwealth for determining eligibility for exemption from 10 State and local taxation which are consistent with traditional 11 legislative and judicial applications of the constitutional term 12 "institutions of purely public charity." 13 Section 3. State-related universities. 14 (a) General rule.--It is the intent of the General Assembly 15 to recognize that the State-related universities provide a 16 direct public benefit and serve the public purposes of this 17 Commonwealth by declaring the real property of State-related 18 universities to be public property for purposes of exemption 19 from State and local taxation when the property is actually and 20 regularly used for public purposes, provided that nothing in 21 this section is intended or shall be construed to affect the 22 title to real property of State-related universities or the 23 power and authority of the governing bodies of State-related 24 universities with respect to such real property. Further, 25 nothing in this section is intended or shall be construed to 26 affect, impair or terminate any contract or agreement in effect 27 on or before the effective date of this act by and between a 28 State-related university and any county, city, borough, township 29 or school district wherein the State-related university pays 30 real estate taxes, amounts in lieu of real estate taxes or other 19970H0055B2575 - 4 -
1 charges, fees or contributions for municipal services. 2 (b) Real property.--All real property owned by State-related 3 universities, or owned by the Commonwealth and used by a State- 4 related university, is and shall be deemed public property for 5 purposes of the Constitution of Pennsylvania and the laws of 6 this Commonwealth relating to the assessment, taxation and 7 exemption of real estate and shall be exempt from all State and 8 local taxation when actually and regularly used for public 9 purposes. 10 (c) Exemption.--This section shall not include the property 11 of a State-related university the possession and control of 12 which has been transferred to a for-profit entity not otherwise 13 entitled to tax-exempt status, irrespective of whether that 14 entity is affiliated with the university. The execution of a 15 management services contract with a third party entity to 16 provide operational services to the university which would 17 otherwise be provided or conducted directly by the university 18 shall not, however, be considered a transfer of possession and 19 control of real property within the meaning of this section. 20 (d) Definitions.--As used in this section, the following 21 words and phrases shall have the meanings given to them in this 22 subsection: 23 "Public purposes." All activities relating to the 24 educational mission of State-related universities, including 25 teaching, research, service and activities incident or ancillary 26 thereto which provide services to or for students, employees or 27 the public. 28 "State-related universities." The Pennsylvania State 29 University and its affiliate, the Pennsylvania College of 30 Technology, the University of Pittsburgh, Temple University and 19970H0055B2575 - 5 -
1 its subsidiaries Temple University Hospital, Inc., and Temple 2 University Children's Hospital, Inc., and Lincoln University. 3 Section 4. Definitions. 4 The following words and phrases when used in this act shall 5 have the meanings given to them in this section unless the 6 context clearly indicates otherwise: 7 "Commercial business." The sale of products or services that 8 are principally the same as those offered by an existing small 9 business in the same community. 10 "Goods or services." Goods or services which promote any of 11 the six enumerated purposes under section 5(b) and which are 12 valued in accordance with generally accepted accounting 13 principles applicable to the institution. If the institution's 14 purpose is to provide health care services, the term shall 15 include, but not be limited to, medically necessary goods or 16 services in life-threatening situations. 17 "Government agency." Any Commonwealth agency or any 18 political subdivision or municipal or other local authority or 19 any officer or agency of any political subdivision or local 20 authority. 21 "Institution of purely public charity." A domestic or 22 foreign nonprofit corporation, association, trust or other 23 organization which meets the criteria under section 5. 24 "Net operating income." The amount of funds remaining after 25 deducting all operating expenses related to the provision of 26 goods or services associated with the institution's charitable 27 purpose from payments received from providing these goods or 28 services, as determined in accordance with the generally 29 accepted accounting principles applicable to the institution. 30 "Small business." Any self-employed individual, sole 19970H0055B2575 - 6 -
1 proprietorship, firm, corporation, partnership, association or 2 other entity that: 3 (1) has fewer than 101 full-time employees; and 4 (2) is subject to income taxation under the act of March 5 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971. 6 "Tax Reform Code." The act of March 4, 1971 (P.L.6, No.2), 7 known as the Tax Reform Code of 1971. 8 "Total operating expenses." The costs related to the 9 provision of goods or services associated with the institution's 10 charitable purpose, as determined in accordance with generally 11 accepted accounting principles applicable to the institution. 12 Section 5. Criteria. 13 (a) General rule.--An institution of purely public charity 14 is a nonprofit corporation, association, trust or other 15 organization which meets the criteria set forth in this section. 16 A nonprofit parent corporation, together with all of its 17 subsidiary nonprofit corporations, may elect to be considered as 18 a single institution in meeting the criteria set forth in this 19 section as long as all of the following are met: 20 (1) Each subsidiary: 21 (i) is a nonstock corporation of which the nonprofit 22 parent corporation is the only member; and 23 (ii) meets the requirements of subsections (b), (c), 24 (d), (e) and (f). 25 (2) The parent: 26 (i) is a nonstock corporation; 27 (ii) is duly qualified by the Internal Revenue 28 Service as meeting the requirements of section 501(c)(3) 29 of the Internal Revenue Code of 1986 (Public Law 99-514, 30 26 U.S.C. § 501(c)(3)); 19970H0055B2575 - 7 -
1 (iii) meets the requirements of subsections (b) and 2 (c); and 3 (iv) except for services that meet the requirements 4 of subsections (b), (c), (d), (e) and (f), does not 5 render services for a fee to an individual or entity that 6 does not meet the requirements of paragraph (1). 7 An institution of purely public charity shall meet all of the 8 criteria contained in subsections (b), (c), (d), (e) and (f). 9 Institutions of purely public charity which meet the criteria 10 specified in this section shall be considered to be founded, 11 endowed and maintained by public or private charity. 12 (b) Charitable purpose.--The institution shall advance a 13 charitable purpose. This criterion is satisfied if the 14 institution is organized and operated primarily to fulfill any 15 one or combination of the following purposes: 16 (1) Relief of poverty. 17 (2) Advancement of education, including, but not limited 18 to, postsecondary education. 19 (3) Advancement of religion. 20 (4) Prevention and treatment of disease or injury. 21 (5) Government or municipal purposes. 22 (6) Accomplishment of a purpose which is beneficial to 23 the community, including advancement of the arts and 24 sciences, advancement of the cultural, spiritual, mental, 25 physical, social or emotional welfare or improvement of 26 others. 27 (c) Private profit motive.--The institution shall operate 28 entirely free from private profit motive. Notwithstanding 29 whether the institution's revenues exceed its expenses, this 30 criterion is satisfied if the institution meets all of the 19970H0055B2575 - 8 -
1 following: 2 (1) Neither the institution's net earnings nor donations 3 which it receives inures to the benefit of private 4 shareholders or other individuals, as the private inurement 5 standard is interpreted under section 501(c)(3) of the 6 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 7 501(c)(3)). The purchase of tangible or intangible assets, 8 including professional practices for fair market value, shall 9 not, by itself, be construed to constitute evidence of 10 operation for a private profit motive. 11 (2) The institution applies or reserves any revenue in 12 excess of expenses in furtherance of its charitable purpose 13 or to funding of other charitable organizations which meet 14 the provisions of this subsection. 15 (3) Compensation, including benefits, of any director, 16 officer or employee, is not based primarily upon the 17 financial performance of the organization. 18 (d) Community service.-- 19 (1) The institution shall donate or render gratuitously 20 a substantial portion of its services. This criterion is 21 satisfied if the institution benefits the community by 22 actually providing any of the following: 23 (i) Goods or services to all who seek them without 24 regard to their ability to pay for what they receive if 25 all of the following apply: 26 (A) The institution has a written policy to this 27 effect. 28 (B) The institution has published this policy in 29 a reasonable manner. 30 (C) The institution provides uncompensated goods 19970H0055B2575 - 9 -
1 or services at least equal to 75% of the 2 institution's net operating income but not less than 3 3% of the institution's total operating expenses. 4 (ii) Goods or services for fees that are based upon 5 the recipient's ability to pay for them if all of the 6 following apply: 7 (A) The institution can demonstrate that it has 8 implemented a written policy and a written schedule 9 of fees based on individual or family income. An 10 institution will meet the requirement of this clause 11 if the institution consistently applies a formula to 12 all individuals requesting consideration of reduced 13 fees which is in part based on individual or family 14 income. 15 (B) At least 20% of the individuals receiving 16 goods or services from the institution pay no fee or 17 a fee which is lower than the cost of the goods or 18 services provided by the institution. 19 (C) At least 10% of the individuals receiving 20 goods or services from the institution receive a 21 reduction in fees of at least 10% of the cost of the 22 goods or services provided to them. 23 (D) No individual receiving goods or services 24 from the institution pays a fee which is equal to or 25 greater than the cost of the goods or services 26 provided to them, or the goods or services provided 27 to the individuals described in clause (B) are 28 comparable in quality and quantity to the goods or 29 services provided to those individuals who pay a fee 30 which is equal to or greater than the cost of the 19970H0055B2575 - 10 -
1 goods or services provided to them. 2 (iii) Wholly gratuitous goods or services to at 3 least 5% of those receiving similar goods or services 4 from the institution. 5 (iv) Financial assistance or uncompensated goods or 6 services to at least 20% of those receiving similar goods 7 or services from the institution if at least 10% of the 8 individuals receiving goods or services from the 9 institution either paid no fees or fees which were 90% or 10 less of the cost of the goods or services provided to 11 them, after consideration of any financial assistance 12 provided to them by the institution. 13 (v) Uncompensated goods or services which, in the 14 aggregate, are equal to at least 5% of the institution's 15 costs of providing goods or services. 16 (vi) Goods or services at no fee or reduced fees to 17 government agencies or goods or services to individuals 18 eligible for government programs if one of the following 19 applies: 20 (A) The institution receives 75% or more of its 21 gross operating revenue from grants or fee-for- 22 service payments by government agencies and if the 23 aggregate amount of fee-for-service payments from 24 government agencies does not exceed 95% of the 25 institution's costs of providing goods or services to 26 the individuals for whom the fee-for-services 27 payments are made. 28 (B) The institution provides goods or services 29 to individuals with mental retardation, to 30 individuals who need mental health services, to 19970H0055B2575 - 11 -
1 members of an individual's family or guardian in 2 support of such goods or services or to individuals 3 who are dependent, neglected or delinquent children, 4 as long as the institution performs duties that would 5 otherwise be the responsibility of government and the 6 institution is restricted in its ability to retain 7 revenue over expenses or voluntary contributions by 8 any one of the following statutes or regulations or 9 by contractual limitations with county children and 10 youth offices in this Commonwealth: 11 (I) Sections 1315(c) and 1905(d) of the 12 Social Security Act (49 Stat. 620, 42 U.S.C. §§ 13 1396d(d) and 1396n(c)). 14 (II) 42 CFR 440.150 (relating to 15 intermediate care facility (ICF/MR) services. 16 (III) 42 CFR Pt. 483 Subpt. I (relating to 17 conditions of participation for intermediate care 18 facilities for the mentally retarded). 19 (IV) The act of October 20, 1966 (3rd 20 Sp.Sess., P.L.96, No.6), known as the Mental 21 Health and Mental Retardation Act of 1966. 22 (V) Articles II, VII, IX and X of the act of 23 June 13, 1967 (P.L.31, No.21), known as the 24 Public Welfare Code. 25 (VI) 23 Pa.C.S. Ch. 63 (relating to child 26 protective services). 27 (VII) 42 Pa.C.S. Ch. 63 (relating to 28 juvenile matters). 29 (VIII) 55 Pa. Code Chs. 3170 (relating to 30 allowable costs and procedures for county 19970H0055B2575 - 12 -
1 children and youth), 3680 (relating to 2 administration and operation of a children and 3 youth social service agency) 4300 (relating to 4 county mental health and mental retardation 5 fiscal manual), 6400 (relating to community homes 6 for individuals with mental retardation), 6500 7 (relating to family living homes), 6210 (relating 8 to participation requirements for the 9 intermediate care facilities for the mentally 10 retarded program), 6211 (relating to allowable 11 cost reimbursement for non-State operated 12 intermediate care facilities for the mentally 13 retarded) and 6600 (relating to intermediate care 14 facilities for the mentally retarded). 15 (vii) Funds to corporations, associations, trusts or 16 other organizations which meet the criteria of this 17 section, funds to government agencies or funds to 18 organizations which qualify under section 501(c)(3) of 19 the Internal Revenue Code of 1986 (Public Law 99-514, 26 20 U.S.C. § 501(c)(3)), if the institution providing the 21 funds is primarily engaged in fundraising on behalf of or 22 making grants to such corporations, associations, trusts, 23 such government agencies or such organizations. 24 (2) The institution may elect to average the applicable 25 data for its five most recently completed fiscal years for 26 the purposes of calculating any formula or meeting any 27 quantitative standard in paragraph (1). 28 (3) For the purposes of calculating the number of 29 individuals for use in the percentage calculations in this 30 subsection, educational institutions may use full time 19970H0055B2575 - 13 -
1 equivalent students as defined by the Department of 2 Education. 3 (4) As used in this subsection, the term "uncompensated 4 goods or services" shall include all benefits provided to the 5 community the institution serves, including, but not limited 6 to, the following: 7 (i) The full cost of all goods or services provided 8 by the institution for which the institution has not 9 received monetary compensation or the difference between 10 the full cost and any lesser fee received for the goods 11 or services, including the cost of the goods or services 12 provided to individuals unable to pay. 13 (ii) The difference between the full cost of 14 education and research programs provided by or 15 participated in by the institution and the payment made 16 to the institution to support the education and research 17 programs. 18 (iii) The difference between the full cost of 19 providing the goods or services and the payment made to 20 the institution under any government program, including 21 individuals covered by Medicare or Medicaid. 22 (iv) The difference between the full cost of the 23 community services which the institution provides or 24 participates in and the payment made to the institution 25 to support such community services. 26 (v) The reasonable value of any moneys, property, 27 goods or services donated by the primary donor to another 28 institution of purely public charity or to a government 29 agency or the reasonable value of the net donation made 30 by a secondary donor to a primary donor. As used in this 19970H0055B2575 - 14 -
1 subparagraph, the following words and phrases shall have 2 the following meanings: 3 "Net donation." In the case of a donation of money, 4 property or identical goods and services made by a 5 secondary donor, the difference between the value of the 6 donation made by the secondary donor and the value of the 7 donation made by the primary donor, provided such value 8 is positive. 9 "Primary donor." An institution which makes a 10 donation of any money, property, goods or services to 11 another institution of purely public charity. 12 "Secondary donor." An institution which receives a 13 donation of any money, property, goods or services from a 14 primary donor and then makes a donation back to that 15 primary donor within three years of having received such 16 donation. 17 (vi) The reasonable value of volunteer assistance 18 donated by individuals to the institution. The reasonable 19 value of volunteer assistance, computed on an hourly 20 basis, shall not exceed the "Statewide average weekly 21 wage" as defined in section 105.1 of the act of June 2, 22 1915 (P.L.736, No.338), known as the Workers' 23 Compensation Act divided by 40. 24 (vii) The cost of goods or services provided to an 25 individual by charitable health care facilities licensed 26 by the Department of Health or the Department of Public 27 Welfare, which are bad debts, as determined in accordance 28 with the generally accepted accounting principles 29 applicable to the institution. 30 (viii) The reasonable value of any moneys, property, 19970H0055B2575 - 15 -
1 goods or services donated to a political subdivision. If 2 the institution of purely public charity donates to a 3 political subdivision an amount equal to or greater than 4 25% of the tax liability the exempt entity would incur if 5 its currently tax-exempt property were taxable, the 6 institution can credit the donation at 200% of the actual 7 value for purposes of meeting the requirements of this 8 subsection. 9 (e) Charity to persons.-- 10 (1) The institution shall benefit a substantial and 11 indefinite class of persons who are legitimate subjects of 12 charity. 13 (2) As used in this subsection, the following words and 14 phrases shall have the meanings given to them in this 15 paragraph: 16 "Legitimate subjects of charity." Those individuals who 17 are unable to provide themselves with what the institution 18 provides for them. 19 "Substantial and indefinite class of persons." Persons 20 not predetermined in number, provided that, where the goods 21 or services are received primarily by members of the 22 institution, membership cannot be predetermined in number and 23 cannot be arbitrarily denied by a vote of the existing 24 members. This section specifically recognizes that the use of 25 admissions criteria and enrollment limitations by educational 26 institutions do not constitute predetermined membership or 27 arbitrary restrictions on membership so as to violate this 28 section and recognizes that an institution may reasonably 29 deny membership based on the types of services it provides, 30 as long as denial is not in violation of Federal or State 19970H0055B2575 - 16 -
1 antidiscrimination laws, such as the Civil Rights Act of 1964 2 (Public Law 88-352, 78 Stat. 241) and the act of October 27, 3 1955 (P.L.744, No.222), known as the Pennsylvania Human 4 Relations Act. 5 (3) An institution shall be considered to benefit a 6 substantial and indefinite class of persons who are 7 legitimate subjects of charity if the institution is 8 primarily engaged in fundraising on behalf of or making 9 grants to: 10 (i) corporations, associations, trusts or other 11 organizations which meet the criteria set forth in this 12 section; 13 (ii) government agencies; or 14 (iii) organizations which qualify under section 15 501(c)(3) of the Internal Revenue Code of 1986 (Public 16 Law 99-514, 26 U.S.C. § 501(c)(3)). 17 (4) An institution shall not be considered to benefit a 18 substantial and indefinite class of persons who are 19 legitimate subjects of charity if: 20 (i) the institution is not qualified under section 21 501(c)(3) of the Internal Revenue Code of 1986; and 22 (ii) the institution is qualified under section 23 501(c)(4), (5), (6), (7), (8) or (9) of the Internal 24 Revenue Code of 1986 as any of the following: 25 (A) An association of employees, the membership 26 of which is limited to the employees of a designated 27 person or persons. 28 (B) A labor organization. 29 (C) An agricultural or horticultural 30 organization. 19970H0055B2575 - 17 -
1 (D) A business league, chamber of commerce, real 2 estate board, board of trade or professional sports 3 league. 4 (E) A club organized for pleasure or recreation. 5 (F) A fraternal beneficiary society, order or 6 association. 7 (f) Government service.--The institution shall relieve the 8 government of some of its burden. This criterion is satisfied if 9 the institution meets any of the following: 10 (1) provides a service to the public that the government 11 would otherwise be obliged to fund or to provide directly or 12 indirectly or assure that a similar organization exists to 13 provide the service; 14 (2) provides services in furtherance of its charitable 15 purpose which are either the responsibility of the government 16 by law or which historically have been assumed or offered or 17 funded by the government; 18 (3) receives on a regular basis payments for services 19 rendered under a government program if the payments are less 20 than the full costs incurred by the institution for the 21 rendering of the services or if the institution can 22 demonstrate that comparable services are more expensive when 23 provided by the government; or 24 (4) provides a service which advances important 25 community, public, spiritual, mental, physical, educational, 26 emotional, civic, historical or cultural objectives. 27 (g) Standards.-- 28 (1) Except as provided in paragraph (2), nothing in this 29 act shall be deemed to prohibit a charitable organization 30 from conducting activities intended to influence legislation. 19970H0055B2575 - 18 -
1 (2) No substantial part of the activities of an 2 institution of purely public charity shall consist of 3 carrying on propaganda or otherwise attempting to influence 4 legislation, except as otherwise provided in section 501(h) 5 of the Internal Revenue Code of 1986 or participating in or 6 intervening in, including the publishing or distributing of 7 statements, any political campaign on behalf of, or in 8 opposition to, any candidate for public office as such 9 limitations are interpreted under section 501 of the Internal 10 Revenue Code of 1986. 11 (3) Nothing in this act shall affect, impair or hinder 12 the responsibilities or prerogatives of the political 13 subdivision responsible for maintaining real property 14 assessment rolls to make a determination whether a parcel of 15 property or a portion of a parcel of property is being used 16 to advance the charitable purpose of an institution of purely 17 public charity, or to assess the parcel or part of the parcel 18 of property as taxable based on the use of the parcel or part 19 of the parcel for purposes other than the charitable purpose 20 of the institution. Such determination and assessment shall 21 be made in accord with applicable status regarding the 22 assessment of real property for taxation purposes and shall 23 be made without regard to the corporate structure of the 24 institution, the subsidiary nature of the use or the form or 25 nature of ownership or acquisition of the property. 26 (4) Nothing in this act shall prohibit a political 27 subdivision from filing challenges to or 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. 19970H0055B2575 - 19 -
1 (5) No additional criteria shall be imposed on any 2 organization in order to be recognized as an institution of 3 purely public charity. 4 Section 6. Multiple jurisdictions. 5 (a) Intent.-- 6 (1) It is the intent of the General Assembly to foster 7 uniformity in the application of the standards contained 8 within this act for determining status as an institution of 9 purely public charity. The General Assembly recognizes that 10 multiple jurisdictions at different levels of government will 11 be required to determine whether an organization requesting 12 tax exemption meets such standards. Because many 13 organizations will be required to seek and receive approval 14 from different governmental entities, the General Assembly 15 believes that an organization which demonstrates compliance 16 with the standards at the State level shall be entitled to a 17 rebuttable presumption that it has met those standards when 18 determining qualification for local property tax exemptions. 19 (2) The General Assembly, recognizing the interest of 20 the taxpayers in a fair and equitable system of property tax 21 assessment and the attendant statutory requirements for the 22 political subdivision responsible for maintaining real 23 property assessment roles to administer the system of 24 property assessment, believes that such a presumption shall 25 not in any way limit the responsibilities, prerogatives or 26 abilities of counties or local jurisdictions with respect to 27 the determination of, or challenges to, the taxable status of 28 a parcel or part of a parcel of property based on the use of 29 the parcel or part of the parcel of property. 30 (b) Presumption.--An organization possessing a valid 19970H0055B2575 - 20 -
1 exemption from the tax imposed by Article II of the Tax Reform 2 Code, pursuant to administrative or judicial determination that 3 the organization qualifies for exemption under section 204(10) 4 of the Tax Reform Code, shall be entitled to assert a 5 presumption that it meets the criteria contained in section 6 5(b), (c), (d), (e) and (f), and any person challenging such 7 presumption before any agency or court shall bear the burden, by 8 the preponderance of evidence, of proving the contrary. The 9 Department of Revenue shall furnish to any institution applying 10 for exemption a written determination of the department's 11 decision including specific information concerning how the 12 applicant does or does not meet each of the criteria in section 13 5. Any organization asserting such a presumption shall be deemed 14 to have waived any right to confidentiality and consented to 15 release of any information supporting the exemption from the tax 16 imposed by Article II of the Tax Reform Code under section 17 204(10), and such information, along with the written 18 determination of the department's decision in support of that 19 exemption, shall be public record which the department shall 20 furnish to any person upon request. Any person challenging such 21 presumption may request from the institution all relevant 22 financial statements, records and documents used to obtain the 23 exemption under section 204(10) of the Tax Reform Code. Failure 24 by the institution to supply, or at its option, to permit 25 inspection of such information in its possession within 30 days 26 shall remove the presumption with respect to that challenge. 27 (c) Applicability of presumption.--The provisions of this 28 section shall apply only to sales and use tax exemptions granted 29 or renewed on or after the effective date of this act. 30 Section 7. Existing agreements. 19970H0055B2575 - 21 -
1 Nothing in this act shall be construed to affect, impair, 2 terminate or supersede any contract, agreement or arrangement in 3 effect on or before the effective date of this act which 4 authorizes or requires payment of taxes, amounts in lieu of 5 taxes, or other charges or fees for the services of a political 6 subdivision of this Commonwealth. Further, nothing in this act 7 shall be construed to impair, or otherwise inhibit, the right or 8 ability of any institution or political subdivision to enter 9 into such agreements after the effective date of this act. 10 Section 8. Unfair competition with small businesses. 11 (a) Intent.--It is the policy of this act that institutions 12 of purely public charity shall not use their tax-exempt status 13 to compete unfairly with small business. 14 (b) Rule.--An institution of purely public charity may not 15 fund, capitalize, guarantee the indebtedness of, lease 16 obligations of, or subsidize a commercial business that is 17 unrelated to the institution's charitable purpose as stated in 18 the institution's charter or governing legal documents. 19 (c) Exceptions.--Institutions of purely public charity are 20 not in violation of subsection (b) if any of the following 21 apply: 22 (1) The commercial business is intended only for the use 23 of its employees, staff, alumni, faculty, members, students, 24 clients, volunteers, patients or residents. For purposes of 25 this paragraph, a person shall not be considered an employee, 26 staff, member, alumnus, faculty, student, client, volunteer, 27 patient or resident if the person's only relationship with 28 the institution is to receive products or services resulting 29 from the commercial business. 30 (2) The commercial business results in sales to the 19970H0055B2575 - 22 -
1 general public that are incidental or periodic rather than 2 permanent and ongoing. 3 (d) Support for other charities.--Nothing in this section 4 shall be construed as prohibiting or limiting the ability of an 5 institution of purely public charity to fund, capitalize, 6 guarantee the indebtedness of or otherwise subsidize another 7 institution of purely public charity. 8 (e) Investments.--An institution of purely public charity 9 that invests in publicly traded stocks and bonds; real estate; 10 or other investments is not in violation of subsection (b). 11 (f) Educational functions.--An institution of purely public 12 charity that uses its facilities to host groups for educational 13 purposes only is not in violation of subsection (b). 14 (g) Government functions.--An institution of purely public 15 charity may engage in a new commercial business that may 16 otherwise be in violation of subsection (b) if the institution 17 is formally requested to do so by the Commonwealth or a 18 political subdivision. 19 (h) Existing arrangements.--An institution of purely public 20 charity that prior to the effective date of this act funded, 21 capitalized, guaranteed the indebtedness of, leased obligations 22 of or subsidized a commercial business may continue to own and 23 operate such businesses without violating subsection (b) as long 24 as the institution does not substantially expand the scope of 25 the commercial business. In the event an injunction is issued 26 under subsection (i), the effect of such injunction shall be 27 limited to restraining the substantial expansion of the scope of 28 the commercial business which was initiated after the effective 29 date of this act. 30 (i) Remedies.--Whenever the Attorney General receives a 19970H0055B2575 - 23 -
1 complaint from an aggrieved small business or has reason to 2 believe that any institution of purely public charity is 3 violating this section and the proceedings would be in the 4 public interest, the Attorney General may bring an action in the 5 name of the Commonwealth against that institution to restrain 6 such violation by temporary or permanent injunction. The 7 Attorney General must either bring an action or issue a written 8 determination to the aggrieved small business within 120 days of 9 the filing of a complaint. 10 (1) If the Attorney General fails to bring an action or 11 to issue a written determination to a small business 12 complainant within 120 days of the filing of a complaint, the 13 small business may petition the Commonwealth Court for a writ 14 of mandamus ordering the Attorney General either to bring an 15 action under this section or to provide the reason or reasons 16 why the Attorney General has declined to do so. 17 (2) Nothing in this subsection shall preclude either an 18 aggrieved small business or an institution of purely public 19 charity that has been affected by a decision of the Attorney 20 General from pursuing an appeal of that decision under 2 21 Pa.C.S. Ch. 7 Subch. A (relating to judicial review of 22 Commonwealth agency action). 23 Section 9. Accountability and disclosure. 24 (a) Intent.--An institution which qualifies for a tax 25 exemption by virtue of being designated an institution of purely 26 public charity has a unique responsibility to periodically 27 demonstrate to the public that it is fulfilling the purpose for 28 which the exemption is granted. The citizens of this 29 Commonwealth expect an organization which is granted tax 30 exemption to adhere to a high standard of accountability and 19970H0055B2575 - 24 -
1 public disclosure. Therefore, the institution should make an 2 annual report in which it makes available certain information 3 about its organization and its charitable activities. The report 4 should be made consistent with the desire of the General 5 Assembly to avoid burdensome reporting requirements which unduly 6 distract the organization from its charitable purposes. 7 (b) Report required.--It shall be the duty of the president, 8 chairman or principal officer of an institution which files, or 9 is required to file, an annual return with the Internal Revenue 10 Service under the Internal Revenue Code of 1986 (Public Law 99- 11 514, 26 U.S.C. § 1 et seq.) to file a report with the bureau no 12 later than the date, including any extensions granted by the 13 Internal Revenue Service, the institution files or is required 14 to file an annual return with the Internal Revenue Service. The 15 following information shall be included in the report required 16 by this section and shall be in a format approved by the 17 Secretary of the Commonwealth: 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 and a reference to any determination of its 22 tax-exempt status under the Internal Revenue Code of 1986, 23 including, if applicable: 24 (i) The institution's Internal Revenue tax exemption 25 number and the tax-exempt purposes as established by the 26 Internal Revenue Service. 27 (ii) A revocation of tax-exempt status by the 28 Internal Revenue Service. 29 (3) The following information on each affiliate of the 30 institution of purely public charity: 19970H0055B2575 - 25 -
1 (i) The name and type of organization. 2 (ii) Whether the affiliate is organized on a for- 3 profit or nonprofit basis. 4 (iii) The relationship of each affiliate to the 5 institution making the report. 6 (4) The institution's relationship with any other 7 nonprofit corporation or unincorporated association if the 8 relationship involves formal governance or the sharing of 9 revenue. 10 (c) Amendments to annual returns.--It shall be the duty of 11 the president, chairman or principal officer of any institution 12 which files an amended annual return with the Internal Revenue 13 Service to file a copy of the amended annual return with the 14 bureau within ten days of its filing with the Internal Revenue 15 Service. 16 (d) Exemption from filing.-- 17 (1) An institution which is not required to file an 18 annual return with the Internal Revenue Service shall be 19 exempt from the requirements of this section. 20 (2) An institution which files a consolidated annual 21 return with the Internal Revenue Service shall not be 22 required to file any report except as otherwise required by 23 this subsection. The institution shall file with the bureau a 24 statement giving the name and tax-exempt number of the 25 organization filing the consolidated annual return. 26 (e) Paperwork reduction.--The Secretary of the Commonwealth 27 shall implement procedures and may modify the reporting 28 requirements of this section in order to reduce or eliminate 29 duplicate filing by institutions subject to this section. The 30 Secretary of the Commonwealth shall allow the president, 19970H0055B2575 - 26 -
1 chairman or principal officer of an institution subject to this 2 section to substitute the registration statement required under 3 section 5 of the act of December 19, 1990 (P.L.1200, No.202), 4 known as the Solicitation of Funds for Charitable Purposes Act, 5 for those portions of the report required under subsection (b) 6 which duplicate the information required under section 5 of the 7 Solicitation of Funds for Charitable Purposes Act. The Secretary 8 of the Commonwealth shall allow the institution to certify that 9 the information required in subsection (b)(2), (3) or (4) has 10 not changed since the prior report in lieu of providing the same 11 information in the report required by subsection (b). The 12 Secretary of the Commonwealth may obtain from the Internal 13 Revenue Service copies of annual returns of institutions which 14 file annual returns with the Internal Revenue Service on 15 computer disk or other electronic or paper media. 16 (f) Retention of records.--The Secretary of the Commonwealth 17 shall retain the reporting information required by this section 18 for three years after the reports are required to be filed. 19 (g) Utilization of reports.--The Secretary of the 20 Commonwealth shall make reports submitted under this section 21 available for public inspection to the extent that the 22 information is available for public inspection under section 23 6104 of the Internal Revenue Code of 1986. The Secretary of the 24 Commonwealth shall provide any government agency a copy of the 25 report filed under this section upon request. Nothing in this 26 subsection shall prevent a government agency from requiring any 27 organization seeking exemption as an institution of purely 28 public charity to provide the information described in 29 subsection (b) to that agency as part of a determination of the 30 tax exempt status of the institution. 19970H0055B2575 - 27 -
1 (h) Definitions.--As used in this section, the following 2 words and phrases shall have the meanings given to them in this 3 subsection: 4 "Affiliate." A domestic or foreign corporation, association, 5 trust or other organization which owns a 10% or greater interest 6 in the institution. A domestic or foreign corporation, 7 association, trust or other organization in which the 8 institution owns a 10% or greater interest. 9 "Annual return." The annual information return required to be 10 filed with the Internal Revenue Service by organizations exempt 11 from tax by virtue of section 501(a) of the Internal Revenue 12 Code of 1986 (Public Law 99-514, 26 U.S.C. §1, et seq.). The 13 annual information return consists of Internal Revenue Service 14 Form 990 or Form 990EZ and Schedule A. 15 "Bureau." The Bureau of Charitable Organizations of the 16 Department of State of the Commonwealth. 17 "Institution." A domestic or foreign nonprofit corporation, 18 association, trust or other organization which qualifies as an 19 institution of purely public charity under the provisions of 20 this act and which receives or claims exemption from the real 21 property tax imposed by any political subdivision in this 22 Commonwealth or which receives or claims exemption from the tax 23 imposed by Article II of the Tax Reform Code. 24 Section 10. Exemption for Federal Government instrumentality. 25 It is the intent of the General Assembly to affirm that all 26 real property owned by any corporation established by an act of 27 the Congress of the United States, that is required to submit 28 annual reports of its activities to Congress containing itemized 29 accounts of all receipts and expenditures after being fully 30 audited by the Department of Defense, for purposes of the 19970H0055B2575 - 28 -
1 Constitution of Pennsylvania and the laws of this Commonwealth 2 relating to the assessment and taxation of real estate, is 3 property of a Federal Government instrumentality and thus exempt 4 from all State and local taxation. 5 Section 11. Repeals. 6 All acts and parts of acts are repealed insofar as they are 7 inconsistent with this act except for section 204(a)(3) of the 8 act of May 22, 1933 (P.L.853, No.155), known as The General 9 County Assessment Law, as it applies to charitable organizations 10 providing residential housing services. 11 Section 12. Applicability. 12 This act shall not apply to nor affect 40 Pa.C.S. § 6103 or 13 6301 or the entities subject to those sections. 14 Section 13. Effective date. 15 This act shall take effect January 1, next following the date 16 of final enactment. 17 SECTION 1. SHORT TITLE. <-- 18 THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE INSTITUTIONS 19 OF PURELY PUBLIC CHARITY ACT. 20 SECTION 2. LEGISLATIVE INTENT. 21 (A) FINDINGS.--THE GENERAL ASSEMBLY FINDS AND DECLARES AS 22 FOLLOWS: 23 (1) IT IS IN THE BEST INTEREST OF THIS COMMONWEALTH AND 24 ITS CITIZENS THAT THE RECOGNITION OF TAX-EXEMPT STATUS BE 25 ACCOMPLISHED IN AN ORDERLY, UNIFORM AND ECONOMICAL MANNER. 26 (2) FOR MORE THAN 100 YEARS, IT HAS BEEN THE POLICY OF 27 THIS COMMONWEALTH TO FOSTER THE ORGANIZATION AND OPERATION OF 28 INSTITUTIONS OF PURELY PUBLIC CHARITY BY EXEMPTING THEM FROM 29 TAXATION. 30 (3) BECAUSE INSTITUTIONS OF PURELY PUBLIC CHARITY 19970H0055B2575 - 29 -
1 CONTRIBUTE TO THE COMMON GOOD OR LESSEN THE BURDEN OF 2 GOVERNMENT, THE HISTORIC POLICY OF EXEMPTING THESE 3 INSTITUTIONS FROM TAXATION SHOULD BE CONTINUED. 4 (4) LACK OF SPECIFIC LEGISLATIVE STANDARDS DEFINING THE 5 TERM "INSTITUTIONS OF PURELY PUBLIC CHARITY" HAS LED TO 6 INCREASING CONFUSION AND CONFRONTATION AMONG TRADITIONALLY 7 TAX-EXEMPT INSTITUTIONS AND POLITICAL SUBDIVISIONS TO THE 8 DETRIMENT OF THE PUBLIC. 9 (5) THERE IS INCREASING CONCERN THAT THE ELIGIBILITY 10 STANDARDS FOR CHARITABLE TAX EXEMPTIONS ARE BEING APPLIED 11 INCONSISTENTLY, WHICH MAY VIOLATE THE UNIFORMITY PROVISION OF 12 THE CONSTITUTION OF PENNSYLVANIA. 13 (6) RECOGNIZING THE INTEREST OF THE TAXPAYERS IN A FAIR 14 AND EQUITABLE SYSTEM OF PROPERTY TAX ASSESSMENT AND THE 15 ATTENDANT STATUTORY REQUIREMENTS FOR THE POLITICAL 16 SUBDIVISION RESPONSIBLE FOR MAINTAINING REAL PROPERTY 17 ASSESSMENT ROLES TO ADMINISTER THE SYSTEM OF PROPERTY 18 ASSESSMENT, THIS ACT SHALL NOT IN ANY WAY LIMIT THE 19 RESPONSIBILITIES, PREROGATIVES OR ABILITIES OF POLITICAL 20 SUBDIVISIONS WITH RESPECT TO THE DETERMINATION OF, OR 21 CHALLENGES TO, THE TAXABLE STATUS OF A PARCEL OF PROPERTY 22 BASED ON THE USE OF THE PARCEL OR PART OF THE PARCEL OF 23 PROPERTY. 24 (7) INSTITUTIONS OF PURELY PUBLIC CHARITY BENEFIT 25 SUBSTANTIALLY FROM LOCAL GOVERNMENT SERVICES. THESE 26 INSTITUTIONS HAVE SIGNIFICANT VALUE TO THE COMMONWEALTH AND 27 ITS CITIZENS AND THE NEED EXISTS FOR REVENUES TO MAINTAIN 28 LOCAL GOVERNMENT SERVICES PROVIDED FOR THE BENEFIT OF ALL 29 CITIZENS, INCLUDING INSTITUTIONS OF PURELY PUBLIC CHARITY. IT 30 IS THE INTENT OF THIS ACT TO ENCOURAGE FINANCIALLY SECURE 19970H0055B2575 - 30 -
1 INSTITUTIONS OF PURELY PUBLIC CHARITY TO ENTER INTO VOLUNTARY 2 AGREEMENTS OR MAINTAIN EXISTING OR CONTINUING AGREEMENTS FOR 3 THE PURPOSE OF DEFRAYING SOME OF THE COST OF VARIOUS LOCAL 4 GOVERNMENT SERVICES. PAYMENTS MADE UNDER SUCH AGREEMENTS 5 SHALL BE DEEMED TO BE IN COMPLIANCE WITH ANY FIDUCIARY 6 OBLIGATION PERTAINING TO SUCH INSTITUTIONS OF PURELY PUBLIC 7 CHARITY, ITS OFFICERS OR DIRECTORS. 8 (B) INTENT.--IT IS THE INTENT OF THE GENERAL ASSEMBLY TO 9 ELIMINATE INCONSISTENT APPLICATION OF ELIGIBILITY STANDARDS FOR 10 CHARITABLE TAX EXEMPTIONS, REDUCE CONFUSION AND CONFRONTATION 11 AMONG TRADITIONALLY TAX-EXEMPT INSTITUTIONS AND POLITICAL 12 SUBDIVISIONS AND ENSURE THAT CHARITABLE AND PUBLIC FUNDS ARE NOT 13 UNNECESSARILY DIVERTED FROM THE PUBLIC GOOD TO LITIGATE 14 ELIGIBILITY FOR TAX-EXEMPT STATUS BY PROVIDING STANDARDS TO BE 15 APPLIED UNIFORMLY IN ALL PROCEEDINGS THROUGHOUT THIS 16 COMMONWEALTH FOR DETERMINING ELIGIBILITY FOR EXEMPTION FROM 17 STATE AND LOCAL TAXATION WHICH ARE CONSISTENT WITH TRADITIONAL 18 LEGISLATIVE AND JUDICIAL APPLICATIONS OF THE CONSTITUTIONAL TERM 19 "INSTITUTIONS OF PURELY PUBLIC CHARITY." 20 SECTION 3. DEFINITIONS. 21 THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ACT SHALL 22 HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE 23 CONTEXT CLEARLY INDICATES OTHERWISE: 24 "AFFILIATE." A DOMESTIC OR FOREIGN CORPORATION, ASSOCIATION, 25 TRUST OR OTHER ORGANIZATION WHICH OWNS A 10% OR GREATER INTEREST 26 IN AN INSTITUTION OF PURELY PUBLIC CHARITY. A DOMESTIC OR 27 FOREIGN CORPORATION, ASSOCIATION, TRUST OR OTHER ORGANIZATION IN 28 WHICH AN INSTITUTION OF PURELY PUBLIC CHARITY OWNS A 10% OR 29 GREATER INTEREST. 30 "ANNUAL RETURN." THE ANNUAL INFORMATION RETURN REQUIRED TO BE 19970H0055B2575 - 31 -
1 FILED WITH THE INTERNAL REVENUE SERVICE BY INSTITUTIONS EXEMPT 2 FROM TAX UNDER SECTION 501(A) OF THE INTERNAL REVENUE CODE OF 3 1986 (PUBLIC LAW 99-514, 26 U.S.C. §1, ET SEQ.). THE ANNUAL 4 INFORMATION RETURN CONSISTS OF INTERNAL REVENUE SERVICE FORM 990 5 OR FORM 990EZ AND SCHEDULE A OR ANY SUCCEEDING FORM USED FOR THE 6 SAME OR SIMILAR PURPOSE. FOR AN INSTITUTION, WHICH IS NOT 7 REQUIRED TO FILE SUCH RETURNS, THE INSTITUTION'S ANNUAL 8 FINANCIAL STATEMENT WITH REPORTED INCOME SHALL CONSTITUTE ITS 9 ANNUAL RETURN. 10 "BUREAU." THE BUREAU OF CHARITABLE ORGANIZATIONS OF THE 11 DEPARTMENT OF STATE OF THE COMMONWEALTH. 12 "COMMERCIAL BUSINESS." THE SALE OF PRODUCTS OR SERVICES THAT 13 ARE PRINCIPALLY THE SAME AS THOSE OFFERED BY AN EXISTING SMALL 14 BUSINESS IN THE SAME COMMUNITY. 15 "CONTRIBUTION." THE PROMISE, GRANT, PLEDGE OR GIFT OF MONEY, 16 PROPERTY, GOODS, SERVICES, FINANCIAL ASSISTANCE OR OTHER SIMILAR 17 REMITTANCE. 18 "GOODS OR SERVICES." GOODS OR SERVICES WHICH PROMOTE ANY OF 19 THE ENUMERATED PURPOSES UNDER SECTION 5(B) AND WHICH ARE VALUED 20 IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES 21 APPLICABLE TO THE INSTITUTION. 22 "GOVERNMENT AGENCY." ANY COMMONWEALTH AGENCY OR ANY 23 POLITICAL SUBDIVISION OR MUNICIPAL OR OTHER LOCAL AUTHORITY OR 24 ANY OFFICER OR AGENCY OF ANY POLITICAL SUBDIVISION OR LOCAL 25 AUTHORITY. 26 "INSTITUTION." A DOMESTIC OR FOREIGN NONPROFIT CORPORATION, 27 ASSOCIATION OR TRUST OR OTHER SIMILAR ENTITY. 28 "INSTITUTION OF PURELY PUBLIC CHARITY." AN INSTITUTION WHICH 29 MEETS THE CRITERIA UNDER SECTION 5. 30 "NET OPERATING INCOME." THE AMOUNT OF FUNDS REMAINING AFTER 19970H0055B2575 - 32 -
1 ALL OPERATING EXPENSES RELATED TO THE PROVISION OF GOODS OR 2 SERVICES ASSOCIATED WITH THE INSTITUTION'S CHARITABLE PURPOSE 3 ARE DEDUCTED FROM PAYMENTS RECEIVED FOR PROVIDING THESE GOODS OR 4 SERVICES, AS DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED 5 ACCOUNTING PRINCIPLES APPLICABLE TO THE INSTITUTION. 6 "POLITICAL SUBDIVISION." ANY COUNTY, CITY, BOROUGH, TOWN, 7 TOWNSHIP, SCHOOL DISTRICT, VOCATIONAL SCHOOL DISTRICT AND COUNTY 8 INSTITUTION DISTRICT. 9 "PROGRAM SERVICE REVENUE." INCOME EARNED FROM THE PROVISION 10 OF GOODS OR SERVICES, INCLUDING GOVERNMENT FEES AND CONTRACTS 11 ASSOCIATED WITH THE INSTITUTION'S CHARITABLE PURPOSE, WHICH IS 12 REPORTED ON THE ANNUAL RETURN. 13 "SMALL BUSINESS." ANY SELF-EMPLOYED INDIVIDUAL, SOLE 14 PROPRIETORSHIP, FIRM, CORPORATION, PARTNERSHIP, ASSOCIATION OR 15 OTHER ENTITY THAT: 16 (1) HAS FEWER THAN 101 FULL-TIME EMPLOYEES; AND 17 (2) IS SUBJECT TO INCOME TAXATION UNDER THE ACT OF MARCH 18 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971. 19 "TOTAL OPERATING EXPENSES." THE COSTS RELATED TO THE 20 PROVISION OF GOODS OR SERVICES ASSOCIATED WITH THE INSTITUTION'S 21 CHARITABLE PURPOSE, AS DETERMINED IN ACCORDANCE WITH GENERALLY 22 ACCEPTED ACCOUNTING PRINCIPLES APPLICABLE TO THE INSTITUTION. 23 "VOLUNTARY AGREEMENT." AN AGREEMENT, CONTRACT OR OTHER 24 ARRANGEMENT FOR THE PURPOSE OF RECEIVING CONTRIBUTIONS PURSUANT 25 TO SECTION 7 BETWEEN A POLITICAL SUBDIVISION AND AN INSTITUTION 26 SEEKING OR POSSESSING AN EXEMPTION AS AN INSTITUTION OF PURELY 27 PUBLIC CHARITY. THESE CONTRIBUTIONS ARE FOR THE PURPOSE OF 28 DEFRAYING SOME OF THE COST OF VARIOUS LOCAL GOVERNMENT SERVICES. 29 THE TERM INCLUDES THE ESTABLISHMENT OF PUBLIC SERVICE 30 FOUNDATIONS BY INSTITUTIONS OF PURELY PUBLIC CHARITY. 19970H0055B2575 - 33 -
1 SECTION 4. STATE-RELATED UNIVERSITIES. 2 (A) GENERAL RULE.--IT IS THE INTENT OF THE GENERAL ASSEMBLY 3 TO RECOGNIZE THAT THE STATE-RELATED UNIVERSITIES PROVIDE A 4 DIRECT PUBLIC BENEFIT AND SERVE THE PUBLIC PURPOSES OF THIS 5 COMMONWEALTH BY DECLARING THE REAL PROPERTY OF STATE-RELATED 6 UNIVERSITIES TO BE PUBLIC PROPERTY FOR PURPOSES OF EXEMPTION 7 FROM STATE AND LOCAL TAXATION WHEN THE PROPERTY IS ACTUALLY AND 8 REGULARLY USED FOR PUBLIC PURPOSES, PROVIDED THAT NOTHING IN 9 THIS SECTION IS INTENDED OR SHALL BE CONSTRUED TO AFFECT THE 10 TITLE TO REAL PROPERTY OF STATE-RELATED UNIVERSITIES OR THE 11 POWER AND AUTHORITY OF THE GOVERNING BODIES OF STATE-RELATED 12 UNIVERSITIES WITH RESPECT TO SUCH REAL PROPERTY. FURTHER, 13 NOTHING IN THIS SECTION IS INTENDED OR SHALL BE CONSTRUED TO 14 AFFECT, IMPAIR OR TERMINATE ANY CONTRACT OR AGREEMENT IN EFFECT 15 ON OR BEFORE THE EFFECTIVE DATE OF THIS SECTION BY AND BETWEEN A 16 STATE-RELATED UNIVERSITY AND ANY POLITICAL SUBDIVISION WHEREIN 17 THE STATE-RELATED UNIVERSITY PAYS REAL ESTATE TAXES, AMOUNTS IN 18 LIEU OF REAL ESTATE TAXES OR OTHER CHARGES, FEES OR 19 CONTRIBUTIONS FOR GOVERNMENT SERVICES. 20 (B) REAL PROPERTY.--ALL REAL PROPERTY OWNED BY STATE-RELATED 21 UNIVERSITIES, OR OWNED BY THE COMMONWEALTH AND USED BY A STATE- 22 RELATED UNIVERSITY, IS AND SHALL BE DEEMED PUBLIC PROPERTY FOR 23 PURPOSES OF THE CONSTITUTION OF PENNSYLVANIA AND THE LAWS OF 24 THIS COMMONWEALTH RELATING TO THE ASSESSMENT, TAXATION AND 25 EXEMPTION OF REAL ESTATE AND SHALL BE EXEMPT FROM ALL STATE AND 26 LOCAL TAXATION WHEN ACTUALLY AND REGULARLY USED FOR PUBLIC 27 PURPOSES. 28 (C) EXCEPTION.--THIS SECTION SHALL NOT INCLUDE THE PROPERTY 29 OF A STATE-RELATED UNIVERSITY THE POSSESSION AND CONTROL OF 30 WHICH HAS BEEN TRANSFERRED TO A FOR-PROFIT ENTITY NOT OTHERWISE 19970H0055B2575 - 34 -
1 ENTITLED TO TAX-EXEMPT STATUS, IRRESPECTIVE OF WHETHER THAT 2 ENTITY IS AFFILIATED WITH THE UNIVERSITY. THE EXECUTION OF A 3 MANAGEMENT SERVICES CONTRACT WITH A THIRD PARTY ENTITY TO 4 PROVIDE OPERATIONAL SERVICES TO THE UNIVERSITY WHICH WOULD 5 OTHERWISE BE PROVIDED OR CONDUCTED DIRECTLY BY THE UNIVERSITY 6 SHALL NOT, HOWEVER, BE CONSIDERED A TRANSFER OF POSSESSION AND 7 CONTROL OF REAL PROPERTY WITHIN THE MEANING OF THIS SECTION. 8 (D) DEFINITIONS.--AS USED IN THIS SECTION, THE FOLLOWING 9 WORDS AND PHRASES SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS 10 SUBSECTION: 11 "PUBLIC PURPOSES." ALL ACTIVITIES RELATING TO THE 12 EDUCATIONAL MISSION OF STATE-RELATED UNIVERSITIES, INCLUDING 13 TEACHING, RESEARCH, SERVICE AND ACTIVITIES INCIDENT OR ANCILLARY 14 THERETO WHICH PROVIDE SERVICES TO OR FOR STUDENTS, EMPLOYEES OR 15 THE PUBLIC. 16 "STATE-RELATED UNIVERSITIES." THE PENNSYLVANIA STATE 17 UNIVERSITY AND ITS AFFILIATE, THE PENNSYLVANIA COLLEGE OF 18 TECHNOLOGY, THE UNIVERSITY OF PITTSBURGH, TEMPLE UNIVERSITY AND 19 ITS SUBSIDIARIES TEMPLE UNIVERSITY HOSPITAL, INC., AND TEMPLE 20 UNIVERSITY CHILDREN'S HOSPITAL, INC., AND LINCOLN UNIVERSITY. 21 SECTION 5. CRITERIA FOR INSTITUTIONS OF PURELY PUBLIC CHARITY. 22 (A) GENERAL RULE.--AN INSTITUTION OF PURELY PUBLIC CHARITY 23 IS AN INSTITUTION WHICH MEETS THE CRITERIA SET FORTH IN 24 SUBSECTIONS (B), (C), (D), (E) AND (F). AN INSTITUTION WHICH 25 MEETS THE CRITERIA SPECIFIED IN THIS SECTION SHALL BE CONSIDERED 26 TO BE FOUNDED, ENDOWED AND MAINTAINED BY PUBLIC OR PRIVATE 27 CHARITY. 28 (B) CHARITABLE PURPOSE.--THE INSTITUTION MUST ADVANCE A 29 CHARITABLE PURPOSE. THIS CRITERION IS SATISFIED IF THE 30 INSTITUTION IS ORGANIZED AND OPERATED PRIMARILY TO FULFILL ANY 19970H0055B2575 - 35 -
1 ONE OR COMBINATION OF THE FOLLOWING PURPOSES: 2 (1) RELIEF OF POVERTY. 3 (2) ADVANCEMENT AND PROVISION OF EDUCATION. THIS 4 PARAGRAPH INCLUDES POSTSECONDARY EDUCATION. 5 (3) ADVANCEMENT OF RELIGION. 6 (4) PREVENTION AND TREATMENT OF DISEASE OR INJURY, 7 INCLUDING MENTAL RETARDATION AND MENTAL DISORDERS. 8 (5) GOVERNMENT OR MUNICIPAL PURPOSES. 9 (6) ACCOMPLISHMENT OF A PURPOSE WHICH IS RECOGNIZED AS 10 IMPORTANT AND BENEFICIAL TO THE PUBLIC AND WHICH ADVANCES 11 SOCIAL, MORAL OR PHYSICAL OBJECTIVES. 12 (C) PRIVATE PROFIT MOTIVE.--THE INSTITUTION MUST OPERATE 13 ENTIRELY FREE FROM PRIVATE PROFIT MOTIVE. NOTWITHSTANDING 14 WHETHER THE INSTITUTION'S REVENUES EXCEED ITS EXPENSES, THIS 15 CRITERION IS SATISFIED IF THE INSTITUTION MEETS ALL OF THE 16 FOLLOWING: 17 (1) NEITHER THE INSTITUTION'S NET EARNINGS NOR DONATIONS 18 WHICH IT RECEIVES INURES TO THE BENEFIT OF PRIVATE 19 SHAREHOLDERS OR OTHER INDIVIDUALS, AS THE PRIVATE INUREMENT 20 STANDARD IS INTERPRETED UNDER SECTION 501(C)(3) OF THE 21 INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 22 501(C)(3)). 23 (2) THE INSTITUTION APPLIES OR RESERVES ALL REVENUE, 24 INCLUDING CONTRIBUTIONS, IN EXCESS OF EXPENSES IN FURTHERANCE 25 OF ITS CHARITABLE PURPOSE OR TO FUNDING OF OTHER INSTITUTIONS 26 WHICH MEET THE PROVISIONS OF THIS SUBSECTION AND SUBSECTION 27 (B). 28 (3) COMPENSATION, INCLUDING BENEFITS, OF ANY DIRECTOR, 29 OFFICER OR EMPLOYEE, IS NOT BASED PRIMARILY UPON THE 30 FINANCIAL PERFORMANCE OF THE INSTITUTION. 19970H0055B2575 - 36 -
1 (4) THE GOVERNING BODY OF THE INSTITUTION OF PURELY 2 PUBLIC CHARITY HAS ADOPTED, AS PART OF ITS ARTICLES OF 3 INCORPORATION, OR IF UNINCORPORATED, OTHER GOVERNING LEGAL 4 DOCUMENTS, A PROVISION THAT EXPRESSLY PROHIBITS THE USE OF 5 ANY SURPLUS FUNDS FOR PRIVATE INUREMENT TO ANY PERSON IN THE 6 EVENT OF A SALE OR DISSOLUTION OF THE INSTITUTION OF PURELY 7 PUBLIC CHARITY. 8 (D) COMMUNITY SERVICE.-- 9 (1) THE INSTITUTION MUST DONATE OR RENDER GRATUITOUSLY A 10 SUBSTANTIAL PORTION OF ITS SERVICES. THIS CRITERION IS 11 SATISFIED IF THE INSTITUTION BENEFITS THE COMMUNITY BY 12 ACTUALLY PROVIDING ANY ONE OF THE FOLLOWING: 13 (I) GOODS OR SERVICES TO ALL WHO SEEK THEM WITHOUT 14 REGARD TO THEIR ABILITY TO PAY FOR WHAT THEY RECEIVE IF 15 ALL OF THE FOLLOWING APPLY: 16 (A) THE INSTITUTION HAS A WRITTEN POLICY TO THIS 17 EFFECT. 18 (B) THE INSTITUTION HAS PUBLISHED THIS POLICY IN 19 A REASONABLE MANNER. 20 (C) THE INSTITUTION PROVIDES UNCOMPENSATED GOODS 21 OR SERVICES AT LEAST EQUAL TO 75% OF THE 22 INSTITUTION'S NET OPERATING INCOME BUT NOT LESS THAN 23 3% OF THE INSTITUTION'S TOTAL OPERATING EXPENSES. 24 (II) GOODS OR SERVICES FOR FEES THAT ARE BASED UPON 25 THE RECIPIENT'S ABILITY TO PAY FOR THEM IF ALL OF THE 26 FOLLOWING APPLY: 27 (A) THE INSTITUTION CAN DEMONSTRATE THAT IT HAS 28 IMPLEMENTED A WRITTEN POLICY AND A WRITTEN SCHEDULE 29 OF FEES BASED ON INDIVIDUAL OR FAMILY INCOME. AN 30 INSTITUTION WILL MEET THE REQUIREMENT OF THIS CLAUSE 19970H0055B2575 - 37 -
1 IF THE INSTITUTION CONSISTENTLY APPLIES A FORMULA TO 2 ALL INDIVIDUALS REQUESTING CONSIDERATION OF REDUCED 3 FEES WHICH IS IN PART BASED ON INDIVIDUAL OR FAMILY 4 INCOME. 5 (B) AT LEAST 20% OF THE INDIVIDUALS RECEIVING 6 GOODS OR SERVICES FROM THE INSTITUTION PAY NO FEE OR 7 A FEE WHICH IS LOWER THAN THE COST OF THE GOODS OR 8 SERVICES PROVIDED BY THE INSTITUTION. 9 (C) AT LEAST 10% OF THE INDIVIDUALS RECEIVING 10 GOODS OR SERVICES FROM THE INSTITUTION RECEIVE A 11 REDUCTION IN FEES OF AT LEAST 10% OF THE COST OF THE 12 GOODS OR SERVICES PROVIDED TO THEM. 13 (D) NO INDIVIDUAL RECEIVING GOODS OR SERVICES 14 FROM THE INSTITUTION PAYS A FEE WHICH IS EQUAL TO OR 15 GREATER THAN THE COST OF THE GOODS OR SERVICES 16 PROVIDED TO THEM, OR THE GOODS OR SERVICES PROVIDED 17 TO THE INDIVIDUALS DESCRIBED IN CLAUSE (B) ARE 18 COMPARABLE IN QUALITY AND QUANTITY TO THE GOODS OR 19 SERVICES PROVIDED TO THOSE INDIVIDUALS WHO PAY A FEE 20 WHICH IS EQUAL TO OR GREATER THAN THE COST OF THE 21 GOODS OR SERVICES PROVIDED TO THEM. 22 (III) WHOLLY GRATUITOUS GOODS OR SERVICES TO AT 23 LEAST 5% OF THOSE RECEIVING SIMILAR GOODS OR SERVICES 24 FROM THE INSTITUTION. 25 (IV) FINANCIAL ASSISTANCE OR UNCOMPENSATED GOODS OR 26 SERVICES TO AT LEAST 20% OF THOSE RECEIVING SIMILAR GOODS 27 OR SERVICES FROM THE INSTITUTION IF AT LEAST 10% OF THE 28 INDIVIDUALS RECEIVING GOODS OR SERVICES FROM THE 29 INSTITUTION EITHER PAID NO FEES OR FEES WHICH WERE 90% OR 30 LESS OF THE COST OF THE GOODS OR SERVICES PROVIDED TO 19970H0055B2575 - 38 -
1 THEM, AFTER CONSIDERATION OF ANY FINANCIAL ASSISTANCE 2 PROVIDED TO THEM BY THE INSTITUTION. 3 (V) UNCOMPENSATED GOODS OR SERVICES WHICH, IN THE 4 AGGREGATE, ARE EQUAL TO AT LEAST 5% OF THE INSTITUTION'S 5 COSTS OF PROVIDING GOODS OR SERVICES. 6 (VI) GOODS OR SERVICES AT NO FEE OR REDUCED FEES TO 7 GOVERNMENT AGENCIES OR GOODS OR SERVICES TO INDIVIDUALS 8 ELIGIBLE FOR GOVERNMENT PROGRAMS IF ANY ONE OF THE 9 FOLLOWING APPLIES: 10 (A) THE INSTITUTION RECEIVES 75% OR MORE OF ITS 11 GROSS OPERATING REVENUE FROM GRANTS OR FEE-FOR- 12 SERVICE PAYMENTS BY GOVERNMENT AGENCIES AND IF THE 13 AGGREGATE AMOUNT OF FEE-FOR-SERVICE PAYMENTS FROM 14 GOVERNMENT AGENCIES DOES NOT EXCEED 95% OF THE 15 INSTITUTION'S COSTS OF PROVIDING GOODS OR SERVICES TO 16 THE INDIVIDUALS FOR WHOM THE FEE-FOR-SERVICES 17 PAYMENTS ARE MADE. 18 (B) THE INSTITUTION PROVIDES GOODS OR SERVICES 19 TO INDIVIDUALS WITH MENTAL RETARDATION, TO 20 INDIVIDUALS WHO NEED MENTAL HEALTH SERVICES, TO 21 MEMBERS OF AN INDIVIDUAL'S FAMILY OR GUARDIAN IN 22 SUPPORT OF SUCH GOODS OR SERVICES OR TO INDIVIDUALS 23 WHO ARE DEPENDENT, NEGLECTED OR DELINQUENT CHILDREN, 24 AS LONG AS THE INSTITUTION PERFORMS DUTIES THAT WOULD 25 OTHERWISE BE THE RESPONSIBILITY OF GOVERNMENT AND THE 26 INSTITUTION IS RESTRICTED IN ITS ABILITY TO RETAIN 27 REVENUE OVER EXPENSES OR VOLUNTARY CONTRIBUTIONS BY 28 ANY ONE OF THE FOLLOWING STATUTES OR REGULATIONS OR 29 BY CONTRACTUAL LIMITATIONS WITH COUNTY CHILDREN AND 30 YOUTH OFFICES IN THIS COMMONWEALTH: 19970H0055B2575 - 39 -
1 (I) SECTIONS 1315(C) AND 1905(D) OF THE 2 SOCIAL SECURITY ACT (49 STAT. 620, 42 U.S.C. §§ 3 1396D(D) AND 1396N(C)). 4 (II) 42 CFR 440.150 (RELATING TO 5 INTERMEDIATE CARE FACILITY (ICF/MR) SERVICES. 6 (III) 42 CFR PT. 483 SUBPT. I (RELATING TO 7 CONDITIONS OF PARTICIPATION FOR INTERMEDIATE CARE 8 FACILITIES FOR THE MENTALLY RETARDED). 9 (IV) THE ACT OF OCTOBER 20, 1966 (3RD 10 SP.SESS., P.L.96, NO.6), KNOWN AS THE MENTAL 11 HEALTH AND MENTAL RETARDATION ACT OF 1966. 12 (V) ARTICLES II, VII, IX AND X OF THE ACT OF 13 JUNE 13, 1967 (P.L.31, NO.21), KNOWN AS THE 14 PUBLIC WELFARE CODE. 15 (VI) 23 PA.C.S. CH. 63 (RELATING TO CHILD 16 PROTECTIVE SERVICES). 17 (VII) 42 PA.C.S. CH. 63 (RELATING TO 18 JUVENILE MATTERS). 19 (VIII) 55 PA. CODE CHS. 3170 (RELATING TO 20 ALLOWABLE COSTS AND PROCEDURES FOR COUNTY 21 CHILDREN AND YOUTH), 3680 (RELATING TO 22 ADMINISTRATION AND OPERATION OF A CHILDREN AND 23 YOUTH SOCIAL SERVICE AGENCY) 4300 (RELATING TO 24 COUNTY MENTAL HEALTH AND MENTAL RETARDATION 25 FISCAL MANUAL), 6400 (RELATING TO COMMUNITY HOMES 26 FOR INDIVIDUALS WITH MENTAL RETARDATION), 6500 27 (RELATING TO FAMILY LIVING HOMES), 6210 (RELATING 28 TO PARTICIPATION REQUIREMENTS FOR THE 29 INTERMEDIATE CARE FACILITIES FOR THE MENTALLY 30 RETARDED PROGRAM), 6211 (RELATING TO ALLOWABLE 19970H0055B2575 - 40 -
1 COST REIMBURSEMENT FOR NON-STATE OPERATED 2 INTERMEDIATE CARE FACILITIES FOR THE MENTALLY 3 RETARDED) AND 6600 (RELATING TO INTERMEDIATE CARE 4 FACILITIES FOR AND 6600 (RELATING TO INTERMEDIATE 5 CARE FACILITIES FOR THE MENTALLY RETARDED). 6 (VII) FUNDRAISING ON BEHALF OF, OR GRANTS TO, AN 7 INSTITUTION OF PURELY PUBLIC CHARITY, AN ENTITY SIMILARLY 8 RECOGNIZED BY ANOTHER STATE OR FOREIGN JURISDICTION, A 9 QUALIFYING RELIGIOUS ORGANIZATION OR A GOVERNMENT AGENCY 10 AND ACTUAL CONTRIBUTION OF A SUBSTANTIAL PORTION OF THE 11 FUNDS RAISED OR CONTRIBUTIONS RECEIVED TO AN INSTITUTION 12 OF PURELY PUBLIC CHARITY, AN ENTITY SIMILARLY RECOGNIZED 13 BY ANOTHER STATE OR FOREIGN JURISDICTION, A QUALIFYING 14 RELIGIOUS ORGANIZATION OR A GOVERNMENT AGENCY. 15 (2) THE INSTITUTION MAY ELECT TO AVERAGE THE APPLICABLE 16 DATA FOR ITS FIVE MOST RECENTLY COMPLETED FISCAL YEARS FOR 17 THE PURPOSES OF CALCULATING ANY FORMULA OR MEETING ANY 18 QUANTITATIVE STANDARD IN PARAGRAPH (1). 19 (3) FOR THE PURPOSES OF CALCULATING THE NUMBER OF 20 INDIVIDUALS FOR USE IN THE PERCENTAGE CALCULATIONS IN THIS 21 SUBSECTION, EDUCATIONAL INSTITUTIONS MAY USE FULL TIME 22 EQUIVALENT STUDENTS AS DEFINED BY THE DEPARTMENT OF 23 EDUCATION. 24 (4) FOR PURPOSES OF THIS SUBSECTION, THE TERM 25 "UNCOMPENSATED GOODS OR SERVICES" SHALL BE LIMITED TO ANY OF 26 THE FOLLOWING: 27 (I) THE FULL COST OF ALL GOODS OR SERVICES PROVIDED 28 BY THE INSTITUTION FOR WHICH THE INSTITUTION HAS NOT 29 RECEIVED MONETARY COMPENSATION OR THE DIFFERENCE BETWEEN 30 THE FULL COST AND ANY LESSER FEE RECEIVED FOR THE GOODS 19970H0055B2575 - 41 -
1 OR SERVICES, INCLUDING THE COST OF THE GOODS OR SERVICES 2 PROVIDED TO INDIVIDUALS UNABLE TO PAY. 3 (II) THE DIFFERENCE BETWEEN THE FULL COST OF 4 EDUCATION AND RESEARCH PROGRAMS PROVIDED BY OR 5 PARTICIPATED IN BY THE INSTITUTION AND THE PAYMENT MADE 6 TO THE INSTITUTION TO SUPPORT THE EDUCATION AND RESEARCH 7 PROGRAMS. 8 (III) THE DIFFERENCE BETWEEN THE FULL COST OF 9 PROVIDING THE GOODS OR SERVICES AND THE PAYMENT MADE TO 10 THE INSTITUTION UNDER ANY GOVERNMENT PROGRAM, INCLUDING 11 INDIVIDUALS COVERED BY MEDICARE OR MEDICAID. 12 (IV) THE DIFFERENCE BETWEEN THE FULL COST OF THE 13 COMMUNITY SERVICES WHICH THE INSTITUTION PROVIDES OR 14 PARTICIPATES IN AND THE PAYMENT MADE TO THE INSTITUTION 15 TO SUPPORT SUCH COMMUNITY SERVICES. 16 (V) THE REASONABLE VALUE OF ANY MONEYS, PROPERTY, 17 GOODS OR SERVICES DONATED BY A PRIMARY DONOR TO AN 18 INSTITUTION OF PURELY PUBLIC CHARITY OR TO A GOVERNMENT 19 AGENCY OR THE REASONABLE VALUE OF THE NET DONATION MADE 20 BY A SECONDARY DONOR TO A PRIMARY DONOR. AS USED IN THIS 21 SUBPARAGRAPH, THE FOLLOWING WORDS AND PHRASES SHALL HAVE 22 THE FOLLOWING MEANINGS: 23 "NET DONATION." IN THE CASE OF A DONATION OF MONEY, 24 PROPERTY OR IDENTICAL GOODS AND SERVICES MADE BY A 25 SECONDARY DONOR, THE DIFFERENCE BETWEEN THE VALUE OF THE 26 DONATION MADE BY THE SECONDARY DONOR AND THE VALUE OF THE 27 DONATION MADE BY THE PRIMARY DONOR, PROVIDED SUCH VALUE 28 IS POSITIVE. 29 "PRIMARY DONOR." AN INSTITUTION WHICH MAKES A 30 DONATION OF ANY MONEY, PROPERTY, GOODS OR SERVICES TO AN 19970H0055B2575 - 42 -
1 INSTITUTION OF PURELY PUBLIC CHARITY. 2 "SECONDARY DONOR." AN INSTITUTION WHICH RECEIVES A 3 DONATION OF ANY MONEY, PROPERTY, GOODS OR SERVICES FROM A 4 PRIMARY DONOR AND THEN MAKES A DONATION BACK TO THAT 5 PRIMARY DONOR WITHIN THREE YEARS OF HAVING RECEIVED SUCH 6 DONATION. 7 (VI) THE REASONABLE VALUE OF VOLUNTEER ASSISTANCE 8 DONATED BY INDIVIDUALS WHO ARE INVOLVED OR ASSIST IN THE 9 PROVISION OF GOODS OR SERVICES BY THE INSTITUTION. THE 10 REASONABLE VALUE OF VOLUNTEER ASSISTANCE, COMPUTED ON AN 11 HOURLY BASIS, SHALL NOT EXCEED THE "STATEWIDE AVERAGE 12 WEEKLY WAGE" AS DEFINED IN SECTION 105.1 OF THE ACT OF 13 JUNE 2, 1915 (P.L.736, NO.338), KNOWN AS THE WORKERS' 14 COMPENSATION ACT DIVIDED BY 40. 15 (VII) THE COST OF GOODS OR SERVICES PROVIDED BY AN 16 INSTITUTION LICENSED BY THE DEPARTMENT OF HEALTH OR THE 17 DEPARTMENT OF PUBLIC WELFARE TO INDIVIDUALS WHO ARE 18 UNABLE TO PAY PROVIDED THAT REASONABLE AND CUSTOMARY 19 COLLECTION EFFORTS HAVE BEEN MADE BY THE INSTITUTION. 20 (VIII) THE VALUE OF ANY VOLUNTARY AGREEMENT AS SET 21 FORTH IN SECTION 7(C). 22 (E) CHARITY TO PERSONS.-- 23 (1) THE INSTITUTION MUST BENEFIT A SUBSTANTIAL AND 24 INDEFINITE CLASS OF PERSONS WHO ARE LEGITIMATE SUBJECTS OF 25 CHARITY. 26 (2) AS USED IN THIS SUBSECTION, THE FOLLOWING WORDS AND 27 PHRASES SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS 28 PARAGRAPH: 29 "LEGITIMATE SUBJECTS OF CHARITY." THOSE INDIVIDUALS WHO 30 ARE UNABLE TO PROVIDE THEMSELVES WITH WHAT THE INSTITUTION 19970H0055B2575 - 43 -
1 PROVIDES FOR THEM. 2 "SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS." PERSONS 3 NOT PREDETERMINED IN NUMBER, PROVIDED THAT, WHERE THE GOODS 4 OR SERVICES ARE RECEIVED PRIMARILY BY MEMBERS OF THE 5 INSTITUTION, MEMBERSHIP CANNOT BE PREDETERMINED IN NUMBER AND 6 CANNOT BE ARBITRARILY DENIED BY A VOTE OF THE EXISTING 7 MEMBERS. THIS SUBSECTION SPECIFICALLY RECOGNIZES THAT THE USE 8 OF ADMISSIONS CRITERIA AND ENROLLMENT LIMITATIONS BY 9 EDUCATIONAL INSTITUTIONS DO NOT CONSTITUTE PREDETERMINED 10 MEMBERSHIP OR ARBITRARY RESTRICTIONS ON MEMBERSHIP SO AS TO 11 VIOLATE THIS SECTION AND RECOGNIZES THAT AN INSTITUTION MAY 12 REASONABLY DENY MEMBERSHIP BASED ON THE TYPES OF SERVICES IT 13 PROVIDES, AS LONG AS DENIAL IS NOT IN VIOLATION OF FEDERAL OR 14 STATE ANTIDISCRIMINATION LAWS, SUCH AS THE CIVIL RIGHTS ACT 15 OF 1964 (PUBLIC LAW 88-352, 78 STAT. 241) AND THE ACT OF 16 OCTOBER 27, 1955 (P.L.744, NO.222), KNOWN AS THE PENNSYLVANIA 17 HUMAN RELATIONS ACT. 18 (3) AN INSTITUTION SHALL BE CONSIDERED TO BENEFIT A 19 SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS WHO ARE 20 LEGITIMATE SUBJECTS OF CHARITY IF THE INSTITUTION IS 21 PRIMARILY ENGAGED IN FUNDRAISING ON BEHALF OF OR MAKING 22 GRANTS TO AN INSTITUTION OF PURELY PUBLIC CHARITY, AN ENTITY 23 SIMILARLY RECOGNIZED BY ANOTHER STATE OR FOREIGN 24 JURISDICTION, A QUALIFYING RELIGIOUS ORGANIZATION OR A 25 GOVERNMENT AGENCY AND THERE IS ACTUAL CONTRIBUTION OF A 26 SUBSTANTIAL PORTION OF THE FUNDS RAISED OR CONTRIBUTIONS 27 RECEIVED TO AN INSTITUTION OF PURELY PUBLIC CHARITY, AN 28 ENTITY SIMILARLY RECOGNIZED BY ANOTHER STATE OR FOREIGN 29 JURISDICTION, A QUALIFYING RELIGIOUS ORGANIZATION OR A 30 GOVERNMENT AGENCY. 19970H0055B2575 - 44 -
1 (4) AN INSTITUTION WHICH OPERATES EXCLUSIVELY ON A 2 VOLUNTARY BASIS TO PROVIDE EMERGENCY HEALTH AND SAFETY 3 SERVICES TO THE COMMUNITY OR AN INSTITUTION WHICH PROVIDES 4 FUNDS AND SUPPORT EXCLUSIVELY TO VOLUNTEER INSTITUTIONS WHICH 5 PROVIDE EMERGENCY HEALTH AND SAFETY SERVICES TO THE COMMUNITY 6 SHALL BE CONSIDERED TO BENEFIT A SUBSTANTIAL AND INDEFINITE 7 CLASS OF PERSONS WHO ARE LEGITIMATE SUBJECTS OF CHARITY. 8 (5) AN INSTITUTION SHALL NOT BE CONSIDERED TO BENEFIT A 9 SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS WHO ARE 10 LEGITIMATE SUBJECTS OF CHARITY IF: 11 (I) THE INSTITUTION IS NOT QUALIFIED UNDER SECTION 12 501(C)(3) OF THE INTERNAL REVENUE CODE OF 1986 (26 U.S.C. 13 § 501(C)(3)); AND 14 (II) THE INSTITUTION IS QUALIFIED UNDER SECTION 15 501(C)(4), (5), (6), (7), (8) OR (9) OF THE INTERNAL 16 REVENUE CODE OF 1986 (26 U.S.C. § 501(C)(4), (5), (6), 17 (7), (8) OR (9)) AS ANY OF THE FOLLOWING: 18 (A) AN ASSOCIATION OF EMPLOYEES, THE MEMBERSHIP 19 OF WHICH IS LIMITED TO THE EMPLOYEES OF A DESIGNATED 20 PERSON OR PERSONS. 21 (B) A LABOR ORGANIZATION. 22 (C) AN AGRICULTURAL OR HORTICULTURAL 23 ORGANIZATION. 24 (D) A BUSINESS LEAGUE, CHAMBER OF COMMERCE, REAL 25 ESTATE BOARD, BOARD OF TRADE OR PROFESSIONAL SPORTS 26 LEAGUE. 27 (E) A CLUB ORGANIZED FOR PLEASURE OR RECREATION. 28 (F) A FRATERNAL BENEFICIARY SOCIETY, ORDER OR 29 ASSOCIATION. 30 (F) GOVERNMENT SERVICE.--THE INSTITUTION MUST RELIEVE THE 19970H0055B2575 - 45 -
1 GOVERNMENT OF SOME OF ITS BURDEN. THIS CRITERION IS SATISFIED IF 2 THE INSTITUTION MEETS ANY ONE OF THE FOLLOWING: 3 (1) PROVIDES A SERVICE TO THE PUBLIC THAT THE GOVERNMENT 4 WOULD OTHERWISE BE OBLIGED TO FUND OR TO PROVIDE DIRECTLY OR 5 INDIRECTLY OR TO ASSURE THAT A SIMILAR INSTITUTION EXISTS TO 6 PROVIDE THE SERVICE. 7 (2) PROVIDES SERVICES IN FURTHERANCE OF ITS CHARITABLE 8 PURPOSE WHICH ARE EITHER THE RESPONSIBILITY OF THE GOVERNMENT 9 BY LAW OR WHICH HISTORICALLY HAVE BEEN ASSUMED OR OFFERED OR 10 FUNDED BY THE GOVERNMENT. 11 (3) RECEIVES ON A REGULAR BASIS PAYMENTS FOR SERVICES 12 RENDERED UNDER A GOVERNMENT PROGRAM IF THE PAYMENTS ARE LESS 13 THAN THE FULL COSTS INCURRED BY THE INSTITUTION, AS 14 DETERMINED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 15 (4) PROVIDES A SERVICE TO THE PUBLIC WHICH DIRECTLY OR 16 INDIRECTLY REDUCES DEPENDENCE ON GOVERNMENT PROGRAMS OR 17 RELIEVES OR LESSENS THE BURDEN BORNE BY GOVERNMENT FOR THE 18 ADVANCEMENT OF SOCIAL, MORAL, EDUCATIONAL OR PHYSICAL 19 OBJECTIVES. 20 (5) ADVANCES OR PROMOTES RELIGION AND IS OWNED AND 21 OPERATED BY A CORPORATION OR OTHER ENTITY AS A RELIGIOUS 22 MINISTRY AND OTHERWISE SATISFIES THE CRITERIA SET FORTH IN 23 SECTION 5. 24 (6) HAS A VOLUNTARY AGREEMENT UNDER SECTION 7. 25 (G) OTHER NONPROFIT ENTITIES.--A NONPROFIT PARENT 26 CORPORATION, TOGETHER WITH ALL OF ITS SUBSIDIARY NONPROFIT 27 CORPORATIONS, MAY ELECT TO BE CONSIDERED AS A SINGLE INSTITUTION 28 IN MEETING THE CRITERIA SET FORTH IN THIS SECTION AS LONG AS ALL 29 OF THE FOLLOWING ARE MET: 30 (1) EACH SUBSIDIARY: 19970H0055B2575 - 46 -
1 (I) IS A NONSTOCK CORPORATION OF WHICH THE NONPROFIT 2 PARENT CORPORATION IS THE ONLY MEMBER; AND 3 (II) MEETS THE REQUIREMENTS OF THIS SECTION. 4 (2) THE PARENT: 5 (I) IS A NONSTOCK CORPORATION; 6 (II) IS QUALIFIED BY THE INTERNAL REVENUE SERVICE AS 7 MEETING THE REQUIREMENTS OF SECTION 501(C)(3) OF THE 8 INTERNAL REVENUE CODE OF 1986 (26 U.S.C. § 501(C)(3)); 9 (III) MEETS THE REQUIREMENTS OF SUBSECTION (B) AND 10 (C); AND 11 (IV) EXCEPT FOR SERVICES THAT MEET THE REQUIREMENTS 12 OF THIS SECTION, DOES NOT RENDER SERVICES FOR A FEE TO AN 13 INDIVIDUAL OR ENTITY THAT DOES NOT MEET THE REQUIREMENTS 14 OF PARAGRAPH (1). 15 (H) PARCEL REVIEW.-- 16 (1) NOTHING IN THIS ACT SHALL AFFECT, IMPAIR OR HINDER 17 THE RESPONSIBILITIES OR PREROGATIVES OF THE POLITICAL 18 SUBDIVISION RESPONSIBLE FOR MAINTAINING REAL PROPERTY 19 ASSESSMENT ROLLS TO MAKE A DETERMINATION WHETHER A PARCEL OF 20 PROPERTY OR A PORTION OF A PARCEL OF PROPERTY IS BEING USED 21 TO ADVANCE THE CHARITABLE PURPOSE OF AN INSTITUTION OF PURELY 22 PUBLIC CHARITY, OR TO ASSESS THE PARCEL OR PART OF THE PARCEL 23 OF PROPERTY AS TAXABLE BASED ON THE USE OF THE PARCEL OR PART 24 OF THE PARCEL FOR PURPOSES OTHER THAN THE CHARITABLE PURPOSE 25 OF THAT INSTITUTION. 26 (2) NOTHING IN THIS ACT SHALL PROHIBIT AN AGGRIEVED <-- 27 PERSON OR A POLITICAL SUBDIVISION FROM FILING CHALLENGES TO, <-- 28 OR PROHIBIT A POLITICAL SUBDIVISION FROM MAKING <-- 29 DETERMINATIONS AS TO, WHETHER A PARTICULAR PARCEL OF PROPERTY <-- 30 IS BEING USED TO ADVANCE THE CHARITABLE PURPOSE OF AN 19970H0055B2575 - 47 -
1 INSTITUTION OF PURELY PUBLIC CHARITY. 2 (I) STANDARDS.--AN INSTITUTION OF PURELY PUBLIC CHARITY MAY 3 CONDUCT ACTIVITIES INTENDED TO INFLUENCE LEGISLATION PROVIDED 4 THAT NO SUBSTANTIAL PART OF THE ACTIVITIES OF AN INSTITUTION OF 5 PURELY PUBLIC CHARITY SHALL CONSIST OF CARRYING ON PROPAGANDA, 6 EXCEPT AS OTHERWISE PROVIDED IN SECTION 501(H) OF THE INTERNAL 7 REVENUE CODE OF 1986 (26 U.S.C. § 501(H)) OR PARTICIPATING IN OR 8 INTERVENING IN, INCLUDING THE PUBLISHING OR DISTRIBUTING OF 9 STATEMENTS, ANY POLITICAL CAMPAIGN ON BEHALF OF, OR IN 10 OPPOSITION TO, ANY CANDIDATE FOR PUBLIC OFFICE AS SUCH 11 LIMITATIONS ARE INTERPRETED UNDER SECTION 501 OF THE INTERNAL 12 REVENUE CODE OF 1986 (26 U.S.C. § 501). 13 SECTION 6. PRESUMPTION PROCESS. 14 (A) PRESUMPTION DETERMINATION.--AN INSTITUTION OF PURELY 15 PUBLIC CHARITY POSSESSING A VALID EXEMPTION FROM THE TAX IMPOSED 16 BY ARTICLE II OF THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN 17 AS THE TAX REFORM CODE OF 1971, SHALL BE ENTITLED TO ASSERT A 18 REBUTTABLE PRESUMPTION REGARDING THAT INSTITUTION'S COMPLIANCE 19 WITH THE CRITERIA SET FORTH IN SECTION 5 AS FOLLOWS: 20 (1) AN INSTITUTION OF PURELY PUBLIC CHARITY THAT HAS 21 ANNUAL PROGRAM SERVICE REVENUE LESS THAN $10,000,000 SHALL BE 22 ENTITLED TO ASSERT THE PRESUMPTION IF THE INSTITUTION 23 POSSESSES A VALID EXEMPTION UNDER SECTION 204(10) OF THE TAX 24 REFORM CODE OF 1971. 25 (2) AN INSTITUTION OF PURELY PUBLIC CHARITY THAT HAS 26 ANNUAL PROGRAM SERVICE REVENUE EQUAL TO OR EXCEEDING 27 $10,000,000 SHALL BE ENTITLED TO ASSERT THE PRESUMPTION IF 28 ALL OF THE FOLLOWING APPLY: 29 (I) THE INSTITUTION POSSESSES A VALID EXEMPTION 30 UNDER SECTION 204(10) OF THE TAX REFORM CODE OF 1971; AND 19970H0055B2575 - 48 -
1 (II) THE INSTITUTION HAS A VOLUNTARY AGREEMENT AS 2 PROVIDED UNDER SECTION 7 WITH A POLITICAL SUBDIVISION IN 3 WHICH THAT INSTITUTION CONDUCTS SUBSTANTIAL BUSINESS 4 OPERATIONS. 5 (3) THE PRESUMPTION PURSUANT TO PARAGRAPH (2) MAY BE 6 ASSERTED BY AN INSTITUTION OF PURELY PUBLIC CHARITY ONLY WITH 7 REGARD TO A CHALLENGE MADE CONCERNING OR BY A POLITICAL <-- 8 SUBDIVISION WITH WHICH THAT INSTITUTION HAS A VOLUNTARY 9 AGREEMENT IN EFFECT PURSUANT TO SECTION 7. 10 (4) FOR THE PURPOSE OF CALCULATING ANNUAL PROGRAM 11 SERVICE REVENUE UNDER THIS SECTION, AN INSTITUTION OF PURELY 12 PUBLIC CHARITY MAY ELECT TO AVERAGE ANNUAL PROGRAM SERVICE 13 REVENUE FOR ITS TWO MOST RECENTLY COMPLETED FISCAL YEARS. 14 (5) COMMENCING JULY 1, 1999, AND EVERY YEAR THEREAFTER, 15 THE DEPARTMENT OF REVENUE SHALL INCREASE THE AMOUNT SET FORTH 16 IN PARAGRAPHS (1) AND (2) BY 1%. THE DEPARTMENT SHALL 17 TRANSMIT NOTICE OF THE ADJUSTMENT TO THE LEGISLATIVE 18 REFERENCE BUREAU FOR PUBLICATION IN THE PENNSYLVANIA 19 BULLETIN. 20 (B) BURDEN OF PROOF.--IF AN INSTITUTION OF PURELY PUBLIC 21 CHARITY ASSERTS A PRESUMPTION UNDER SUBSECTION (A), AN AGGRIEVED <-- 22 PERSON OR A POLITICAL SUBDIVISION CHALLENGING THAT INSTITUTION 23 BEFORE A GOVERNMENT AGENCY OR COURT SHALL BEAR THE BURDEN, BY A 24 PREPONDERANCE OF THE EVIDENCE, OF PROVING THAT THE INSTITUTION 25 OF PURELY PUBLIC CHARITY DOES NOT COMPLY WITH THE REQUIREMENTS 26 OF SECTION 5. 27 (C) ISSUANCE OF WRITTEN ORDER.--THE DEPARTMENT SHALL FURNISH 28 A WRITTEN ORDER TO ANY INSTITUTION APPLYING FOR EXEMPTION UNDER 29 SECTION 204(10) OF THE TAX REFORM CODE OF 1971 APPROVING OR 30 DENYING THE EXEMPTION. AN ORDER DENYING AN EXEMPTION SHALL 19970H0055B2575 - 49 -
1 INCLUDE SPECIFIC INFORMATION CONCERNING THAT INSTITUTION'S
2 FAILURE TO COMPLY WITH AT LEAST ONE OF THE CRITERIA UNDER
3 SECTION 5.
4 (D) WAIVER OF CONFIDENTIALITY.--AN INSTITUTION OF PURELY
5 PUBLIC CHARITY ASSERTING A PRESUMPTION UNDER SUBSECTION (A)
6 SHALL BE DEEMED TO HAVE WAIVED ANY RIGHT TO CONFIDENTIALITY WITH
7 REGARD TO ALL RECORDS IN THE POSSESSION OF THE DEPARTMENT
8 RELATING TO THE APPLICATION FOR EXEMPTION. THESE RECORDS SHALL
9 BE DEEMED PUBLIC RECORDS THAT THE DEPARTMENT MUST FURNISH TO ANY
10 PERSON UPON REQUEST. A POLITICAL SUBDIVISION CHALLENGING SUCH
11 PRESUMPTION MAY REQUEST FROM THE INSTITUTION OF PURELY PUBLIC
12 CHARITY ALL RELEVANT FINANCIAL STATEMENTS, RECORDS AND DOCUMENTS
13 USED TO OBTAIN THE EXEMPTION UNDER SECTION 204(10) OF THE TAX
14 REFORM CODE OF 1971. FAILURE BY THAT INSTITUTION TO SUPPLY OR,
15 AT ITS OPTION, TO PERMIT INSPECTION OF SUCH INFORMATION IN ITS
16 POSSESSION WITHIN 30 DAYS SHALL ELIMINATE THE PRESUMPTION WITH
17 RESPECT TO THAT CHALLENGE.
18 (E) DEPARTMENT INVOLVEMENT.--A DETERMINATION MADE UNDER THIS
19 SECTION SHALL NOT, IN ANY WAY, SUBJECT THE DEPARTMENT TO
20 PARTICIPATION IN ANY CONTROVERSY, DISCOVERY OR LITIGATION
21 BETWEEN AN AGGRIEVED PERSON OR A POLITICAL SUBDIVISION AND AN <--
22 INSTITUTION CLAIMING THE EXEMPTION AS AN INSTITUTION OF PURELY
23 PUBLIC CHARITY, OTHER THAN PROVIDING A COPY OF ITS WRITTEN ORDER
24 AND ANY SUPPORTING DOCUMENTATION SUPPLIED TO THE DEPARTMENT BY
25 THAT INSTITUTION.
26 SECTION 7. VOLUNTARY AGREEMENTS.
27 (A) GENERAL RULE.--A POLITICAL SUBDIVISION MAY EXECUTE A
28 VOLUNTARY AGREEMENT WITH AN INSTITUTION THAT OWNS REAL PROPERTY
29 WITHIN THE POLITICAL SUBDIVISION. ALL CONTRIBUTIONS RECEIVED
30 FROM SUCH VOLUNTARY AGREEMENTS SHALL BE USED TO HELP ENSURE THAT
19970H0055B2575 - 50 -
1 ESSENTIAL GOVERNMENTAL, PUBLIC OR COMMUNITY SERVICES WILL 2 CONTINUE TO BE PROVIDED IN A MANNER THAT WILL PERMIT AN 3 INSTITUTION TO CONTINUE TO FULFILL ITS CHARITABLE MISSION. 4 NOTHING IN THIS SECTION SHALL BE CONSTRUED TO PROHIBIT A 5 POLITICAL SUBDIVISION FROM SHARING WITH ANOTHER POLITICAL 6 SUBDIVISION A PORTION OF THE PROCEEDS DERIVED FROM A VOLUNTARY 7 AGREEMENT UPON THE MUTUAL AGREEMENT OF ALL AFFECTED PARTIES. 8 (B) PUBLIC SERVICE FOUNDATIONS.--INSTITUTIONS OF PURELY 9 PUBLIC CHARITY MAY ESTABLISH A PUBLIC SERVICE FOUNDATION, UPON 10 MUTUAL AGREEMENT WITH A POLITICAL SUBDIVISION, FOR THE PURPOSE 11 OF RECEIVING CONTRIBUTIONS FROM INSTITUTIONS OF PURELY PUBLIC 12 CHARITY. UPON AGREEMENT, THE FOUNDATION SHALL MAKE DISTRIBUTIONS 13 OR GRANTS TO A PARTICIPATING POLITICAL SUBDIVISION TO HELP 14 ENSURE THAT ESSENTIAL GOVERNMENTAL, PUBLIC OR COMMUNITY SERVICES 15 WILL CONTINUE TO BE PROVIDED IN A MANNER THAT WILL PERMIT AN 16 INSTITUTION TO CONTINUE TO FULFILL ITS CHARITABLE MISSION. A 17 POLITICAL SUBDIVISION WHICH RECEIVES A DISTRIBUTION OR GRANT 18 FROM A PUBLIC SERVICE FOUNDATION SHALL NOT ASSESS OR SEEK A 19 SEPARATE CONTRIBUTION FOR SERVICES FROM INSTITUTIONS OF PURELY 20 PUBLIC CHARITY PARTICIPATING IN A FOUNDATION. 21 (C) ADDITIONAL CREDIT FOR VOLUNTARY AGREEMENTS.--AN 22 INSTITUTION WHICH HAS ENTERED INTO A VOLUNTARY AGREEMENT MAY 23 CREDIT THE FOLLOWING PERCENTAGE OF THE REASONABLE VALUE OF ITS 24 CONTRIBUTION FOR PURPOSES OF COMPUTING THE COMMUNITY SERVICE 25 CRITERIA SET FORTH IN SECTION 5(D)(4)(VIII): 26 (1) IF THE REASONABLE VALUE OF THE INSTITUTION'S 27 CONTRIBUTION IS EQUAL TO OR LESS THAN 0.15% OF ITS PROGRAM 28 SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE ENTIRE 29 CONTRIBUTION AT 150% OF ITS VALUE. 30 (2) IF THE REASONABLE VALUE OF THE INSTITUTION'S 19970H0055B2575 - 51 -
1 CONTRIBUTION IS GREATER THAN 0.15% BUT LESS THAN 0.25% OF ITS 2 PROGRAM SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE 3 ENTIRE CONTRIBUTION AT 250% OF ITS VALUE. 4 (3) IF THE REASONABLE VALUE OF THE INSTITUTION'S 5 CONTRIBUTION IS EQUAL TO OR GREATER THAN 0.25% OF ITS PROGRAM 6 SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE ENTIRE 7 CONTRIBUTION AT 350% OF ITS VALUE. 8 (D) EXISTING AGREEMENTS.--NOTHING IN THIS ACT SHALL BE 9 CONSTRUED TO AFFECT, IMPAIR, TERMINATE OR SUPERSEDE ANY 10 CONTRACT, AGREEMENT OR OTHER ARRANGEMENT IN EFFECT ON OR BEFORE 11 THE EFFECTIVE DATE OF THIS SECTION BETWEEN AN INSTITUTION AND A 12 POLITICAL SUBDIVISION, WHICH AUTHORIZES OR REQUIRES PAYMENT OF 13 TAXES, AMOUNTS IN LIEU OF TAXES OR OTHER CHARGES OR FEES FOR THE 14 SERVICES OF A POLITICAL SUBDIVISION. 15 (E) NEW AGREEMENTS.--NOTHING IN THIS ACT SHALL BE CONSTRUED 16 TO IMPAIR OR OTHERWISE INHIBIT THE RIGHT OR ABILITY OF ANY 17 INSTITUTION SEEKING OR POSSESSING AN EXEMPTION AS AN INSTITUTION 18 OF PURELY PUBLIC CHARITY, A PUBLIC SERVICE FOUNDATION OR A 19 POLITICAL SUBDIVISION FROM EXECUTING VOLUNTARY AGREEMENTS AFTER 20 THE EFFECTIVE DATE OF THIS SECTION. 21 SECTION 8. UNFAIR COMPETITION WITH SMALL BUSINESSES. 22 (A) INTENT.--IT IS THE POLICY OF THIS ACT THAT INSTITUTIONS 23 OF PURELY PUBLIC CHARITY SHALL NOT USE THEIR TAX-EXEMPT STATUS 24 TO COMPETE UNFAIRLY WITH SMALL BUSINESS. 25 (B) GENERAL RULE.--AN INSTITUTION OF PURELY PUBLIC CHARITY 26 MAY NOT FUND, CAPITALIZE, GUARANTEE THE INDEBTEDNESS OF, LEASE 27 OBLIGATIONS OF, OR SUBSIDIZE A COMMERCIAL BUSINESS THAT IS 28 UNRELATED TO THE INSTITUTION'S CHARITABLE PURPOSE AS STATED IN 29 THE INSTITUTION'S CHARTER OR GOVERNING LEGAL DOCUMENTS. 30 (C) EXCEPTIONS.--INSTITUTIONS OF PURELY PUBLIC CHARITY ARE 19970H0055B2575 - 52 -
1 NOT IN VIOLATION OF SUBSECTION (B) IF ANY OF THE FOLLOWING 2 APPLY: 3 (1) THE COMMERCIAL BUSINESS IS INTENDED ONLY FOR THE USE 4 OF ITS EMPLOYEES, STAFF, ALUMNI, FACULTY, MEMBERS, STUDENTS, 5 CLIENTS, VOLUNTEERS, PATIENTS OR RESIDENTS. FOR PURPOSES OF 6 THIS PARAGRAPH, A PERSON SHALL NOT BE CONSIDERED AN EMPLOYEE, 7 STAFF, MEMBER, ALUMNUS, FACULTY, STUDENT, CLIENT, VOLUNTEER, 8 PATIENT OR RESIDENT IF THE PERSON'S ONLY RELATIONSHIP WITH 9 THE INSTITUTION OF PURELY PUBLIC CHARITY IS TO RECEIVE 10 PRODUCTS OR SERVICES RESULTING FROM THE COMMERCIAL BUSINESS. 11 (2) THE COMMERCIAL BUSINESS RESULTS IN SALES TO THE 12 GENERAL PUBLIC THAT ARE INCIDENTAL OR PERIODIC RATHER THAN 13 PERMANENT AND ONGOING. 14 (D) SUPPORT FOR OTHER CHARITIES.--NOTHING IN THIS SECTION 15 SHALL BE CONSTRUED AS PROHIBITING OR LIMITING THE ABILITY OF AN 16 INSTITUTION OF PURELY PUBLIC CHARITY TO FUND, CAPITALIZE, 17 GUARANTEE THE INDEBTEDNESS OF OR OTHERWISE SUBSIDIZE ANOTHER 18 INSTITUTION OF PURELY PUBLIC CHARITY. 19 (E) INVESTMENTS.--THE INVESTMENT IN PUBLICLY TRADED STOCKS 20 AND BONDS; REAL ESTATE, WHETHER DIRECTLY OR INDIRECTLY; OR OTHER 21 INVESTMENTS BY AN INSTITUTION OF PURELY PUBLIC CHARITY DOES NOT 22 VIOLATE SUBSECTION (B). 23 (F) EDUCATIONAL FUNCTIONS.--USE OF FACILITIES TO HOST GROUPS 24 FOR EDUCATIONAL PURPOSES BY AN INSTITUTION OF PURELY PUBLIC 25 CHARITY DOES NOT VIOLATE SUBSECTION (B). 26 (G) GOVERNMENT FUNCTIONS.--AN INSTITUTION OF PURELY PUBLIC 27 CHARITY MAY ENGAGE IN A NEW COMMERCIAL BUSINESS THAT MAY 28 OTHERWISE BE IN VIOLATION OF SUBSECTION (B) IF THE INSTITUTION 29 IS FORMALLY REQUESTED TO DO SO BY THE COMMONWEALTH OR A 30 POLITICAL SUBDIVISION. 19970H0055B2575 - 53 -
1 (H) EXISTING BUSINESS ARRANGEMENTS.--AN INSTITUTION OF 2 PURELY PUBLIC CHARITY THAT PRIOR TO THE EFFECTIVE DATE OF THIS 3 SECTION FUNDED, CAPITALIZED, GUARANTEED THE INDEBTEDNESS OF, 4 LEASED OBLIGATIONS OF OR SUBSIDIZED A COMMERCIAL BUSINESS MAY 5 CONTINUE TO OWN AND OPERATE SUCH BUSINESSES WITHOUT VIOLATING 6 SUBSECTION (B) AS LONG AS THE INSTITUTION DOES NOT SUBSTANTIALLY 7 EXPAND THE SCOPE OF THE COMMERCIAL BUSINESS. IN THE EVENT AN 8 INJUNCTION IS ISSUED UNDER SUBSECTION (I), THE EFFECT OF SUCH 9 INJUNCTION SHALL BE LIMITED TO RESTRAINING THE SUBSTANTIAL 10 EXPANSION OF THE SCOPE OF THE COMMERCIAL BUSINESS WHICH WAS 11 INITIATED AFTER THE EFFECTIVE DATE OF THIS SECTION. 12 (I) REMEDIES.--THE DEPARTMENT OF STATE SHALL ESTABLISH A 13 SYSTEM OF MANDATORY ARBITRATION FOR THE PURPOSE OF RECEIVING ALL 14 COMPLAINTS FROM AGGRIEVED SMALL BUSINESSES RELATING TO AN 15 INSTITUTION OF PURELY PUBLIC CHARITY'S ALLEGED VIOLATION OF 16 THIS SECTION. UPON RECEIPT OF SUCH COMPLAINT, THE DEPARTMENT 17 SHALL DIRECT THAT THE COMPLAINT BE RESOLVED AS PROVIDED IN THIS 18 SUBSECTION. 19 (1) ALL COMPLAINTS SHALL BE IN THE FORM OF A SWORN 20 STATEMENT SETTING FORTH ALL ALLEGATIONS AND REQUESTS FOR 21 RELIEF, AND SHALL BE FILED WITH THE DEPARTMENT, TOGETHER WITH 22 A FEE AS PRESCRIBED BY THE DEPARTMENT. 23 (2) WITHIN TEN DAYS OF FILING THE COMPLAINT WITH THE 24 DEPARTMENT, THE AGGRIEVED SMALL BUSINESS SHALL SERVE A COPY 25 OF THE COMPLAINT ON THE INSTITUTION OF PURELY PUBLIC CHARITY 26 AGAINST WHICH THE COMPLAINT IS FILED. THE INSTITUTION OF 27 PURELY PUBLIC CHARITY MUST RESPOND TO THE COMPLAINT WITHIN 30 28 DAYS OF ITS RECEIPT BY THE INSTITUTION OF THE PURELY PUBLIC 29 CHARITY. 30 (3) WITHIN 30 DAYS FOLLOWING THE PERIOD OF TIME ALLOTTED 19970H0055B2575 - 54 -
1 TO THE INSTITUTION OF PURELY PUBLIC CHARITY TO RESPOND TO THE
2 COMPLAINT, THE DEPARTMENT SHALL PROVIDE AN UNBIASED AND
3 QUALIFIED ARBITRATOR WHO POSSESSES SUFFICIENT KNOWLEDGE
4 REGARDING SUCH INSTITUTIONS TO ADJUDICATE THE MATTER. IF THE
5 INSTITUTION OF PURELY PUBLIC CHARITY DOES NOT PARTICIPATE IN
6 THE ARBITRATION, THE ARBITRATOR MAY ISSUE AN ORDER TO COMPEL
7 SUCH PARTICIPATION. SUCH AN ORDER SHALL BE ENFORCEABLE BY THE
8 COURT OF COMMON PLEAS IN THE JUDICIAL DISTRICT WHERE THE
9 ARBITRATION TAKES PLACE.
10 (4) THE ARBITRATION SHALL TAKE PLACE IN THE JUDICIAL
11 DISTRICT IN WHICH THE INSTITUTION OF PURELY PUBLIC CHARITY <--
12 AGGRIEVED SMALL BUSINESS IS LOCATED. THE DEPARTMENT SHALL <--
13 PROVIDE THE ARBITRATOR ALL RELEVANT MATERIAL REGARDING THE
14 COMPLAINT, INCLUDING THE ORIGINAL COMPLAINT, THE INSTITUTION
15 OF PURELY PUBLIC CHARITY'S RESPONSE TO THE COMPLAINT AND
16 COPIES OF ANY OTHER RELEVANT INFORMATION WHICH THE DEPARTMENT
17 MAY POSSESS. THE ARBITRATION SHALL BE COMPLETED WITHIN ONE
18 YEAR FROM THE DATE ON WHICH THE ARBITRATOR WAS ASSIGNED.
19 (5) WITHIN 30 DAYS OF THE ARBITRATOR'S ASSIGNMENT, THE
20 ARBITRATOR SHALL DETERMINE IF THE COMPLAINT SETS FORTH PRIMA
21 FACIE EVIDENCE THAT A VIOLATION OF THIS SECTION HAS OCCURRED.
22 IF THE ARBITRATOR DETERMINES THAT THE COMPLAINT DOES NOT
23 CONTAIN PRIMA FACIE EVIDENCE, THE ARBITRATOR SHALL ISSUE A
24 WRITTEN REPORT DETAILING THE FINDINGS AND SHALL TERMINATE THE
25 ARBITRATION. A SMALL BUSINESS MAY APPEAL SUCH A DETERMINATION
26 AS PROVIDED IN PARAGRAPH (9).
27 (6) THE ARBITRATOR SHALL DETERMINE IF THE ACTIVITY OF
28 THE INSTITUTION OF PURELY PUBLIC CHARITY IS IN VIOLATION OF
29 THIS SECTION. IN MAKING THIS DETERMINATION, THE ARBITRATOR
30 SHALL REVIEW ALL RELEVANT LAW, INCLUDING PREVIOUS
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1 ARBITRATORS' DECISIONS; REGULATIONS; AND THE CHARTER OR 2 GOVERNING LEGAL DOCUMENTS OF THE INSTITUTION OF PURELY PUBLIC 3 CHARITY. 4 (7) THE DECISION OF THE ARBITRATOR SHALL BE SET FORTH IN 5 A WRITTEN DECISION ISSUED TO EACH PARTY, SPECIFYING FINDINGS 6 OF FACT AND CONCLUSIONS OF LAW. IF THE ARBITRATOR FINDS A 7 VIOLATION OF THIS SECTION, THE ARBITRATOR MAY INCLUDE AN 8 ORDER OR INJUNCTION AS PART OF THE DECISION, PROVIDED THAT NO 9 DAMAGES MAY BE ASSESSED AGAINST AN INSTITUTION OF PURELY 10 PUBLIC CHARITY. 11 (8) UPON AGREEMENT OF THE PARTIES, THE DECISION OF THE 12 ARBITRATOR SHALL BE FINAL AND BINDING AS TO ALL MATTERS OF 13 FACT AND LAW AND SHALL BE ENTERED BY THE ARBITRATOR AS A 14 FINAL JUDGMENT IN THE COURT OF COMMON PLEAS OF THE JUDICIAL 15 DISTRICT IN WHICH THE ARBITRATION TOOK PLACE. A COPY OF THE 16 ARBITRATOR'S FINAL DECISION SHALL ALSO BE FILED WITH THE 17 DEPARTMENT. 18 (9) EITHER PARTY MAY INITIATE A DE NOVO APPEAL FROM THE 19 ARBITRATOR'S DECISION IN THE COURT OF COMMON PLEAS OF THE 20 JUDICIAL DISTRICT IN WHICH THE ARBITRATION TOOK PLACE WITHIN 21 30 DAYS OF THE ARBITRATOR'S DECISION. 22 (10) THE DEPARTMENT MAY PROVIDE FOR THE SYSTEM OF 23 ARBITRATION BY MAINTAINING A LIST OF QUALIFIED ARBITRATORS OR 24 BY CONTRACTING FOR QUALIFIED ARBITRATION SERVICES. 25 (11) THE DEPARTMENT MAY ADOPT REGULATIONS NECESSARY TO 26 IMPLEMENT THIS SECTION. 27 (12) THE COST OF AN ARBITRATION PROCEEDING, INCLUDING 28 THE ARBITRATOR'S FEE, SHALL BE BORNE BY THE COMPLAINANT, 29 UNLESS THE ARBITRATOR DIRECTS OTHERWISE. EACH PARTY SHALL BE 30 RESPONSIBLE FOR ITS ATTORNEY FEES AND OTHER COSTS INCURRED. 19970H0055B2575 - 56 -
1 (13) EXCEPT AS SET FORTH IN THIS SECTION OR IN 2 REGULATIONS PROMULGATED BY THE DEPARTMENT UNDER THIS SECTION, 3 THE ARBITRATION SHALL BE GOVERNED BY 42 PA.C.S. CH. 73 SUBCH. 4 A (RELATING TO STATUTORY ARBITRATION). 5 (14) THE REMEDIES SET FORTH IN THIS SUBSECTION SHALL BE 6 THE EXCLUSIVE REMEDIES AVAILABLE TO AN AGGRIEVED SMALL 7 BUSINESS. 8 SECTION 9. ACCOUNTABILITY AND DISCLOSURE. 9 (A) REPORTING.--AN INSTITUTION OF PURELY PUBLIC CHARITY THAT 10 DOES NOT REGISTER WITH THE DEPARTMENT OF STATE UNDER THE ACT OF 11 DECEMBER 19, 1990 (P.L.1200, NO.202), KNOWN AS THE SOLICITATION 12 OF FUNDS FOR CHARITABLE PURPOSES ACT, INCLUDING INSTITUTIONS 13 EXEMPTED FROM REGISTRATION UNDER SECTION 6(A) OF THE 14 SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES ACT, SHALL FILE AN 15 ANNUAL REPORT WITH THE BUREAU. THE REPORT SHALL BE FILED WITHIN 16 135 DAYS AFTER THE CLOSE OF THE INSTITUTION'S FISCAL YEAR UNLESS 17 AN EXTENSION IS GRANTED BY THE DEPARTMENT. THE REPORT SHALL BE 18 IN A FORMAT APPROVED BY THE DEPARTMENT AND SHALL INCLUDE: 19 (1) A COPY OF THE ANNUAL RETURN FILED OR REQUIRED TO BE 20 FILED WITH THE INTERNAL REVENUE SERVICE. 21 (2) THE DATE THE INSTITUTION OF PURELY PUBLIC CHARITY <-- 22 WAS ORGANIZED UNDER APPLICABLE LAW. 23 (3) ANY REVOCATION OF TAX-EXEMPT STATUS BY THE INTERNAL 24 REVENUE SERVICE. 25 (4) THE FOLLOWING INFORMATION ON EACH AFFILIATE OF THE 26 INSTITUTION OF PURELY PUBLIC CHARITY: 27 (I) THE NAME AND TYPE OF ORGANIZATION. 28 (II) WHETHER THE AFFILIATE IS ORGANIZED ON A FOR- 29 PROFIT OR NONPROFIT BASIS. 30 (III) THE RELATIONSHIP OF EACH AFFILIATE TO THE 19970H0055B2575 - 57 -
1 INSTITUTION OF PURELY PUBLIC CHARITY MAKING THE REPORT. 2 (5) THE RELATIONSHIP OF THE INSTITUTION OF PURELY PUBLIC 3 CHARITY WITH ANY OTHER NONPROFIT CORPORATION OR 4 UNINCORPORATED ASSOCIATION IF THE RELATIONSHIP INVOLVES 5 FORMAL GOVERNANCE OR THE SHARING OF REVENUE. 6 (B) REGULATIONS.--THE DEPARTMENT SHALL PROMULGATE 7 REGULATIONS TO REQUIRE INSTITUTIONS OF PURELY PUBLIC CHARITY 8 WHICH REGISTER UNDER SECTION 5 OF THE SOLICITATION OF FUNDS FOR 9 CHARITABLE PURPOSES ACT TO INCLUDE THE INFORMATION SET FORTH IN 10 SUBSECTION (A). 11 (C) AMENDMENTS TO ANNUAL RETURNS.--AN INSTITUTION OF PURELY <-- 12 PUBLIC CHARITY WHICH FILES AN AMENDED ANNUAL RETURN WITH THE 13 INTERNAL REVENUE SERVICE SHALL FILE A COPY OF THE AMENDED ANNUAL 14 RETURN WITH THE BUREAU WITHIN TEN DAYS OF ITS FILING WITH THE 15 INTERNAL REVENUE SERVICE. 16 (D) EXEMPTION FROM FILING.--EACH OF THE FOLLOWING 17 INSTITUTIONS OF PURELY PUBLIC CHARITY SHALL BE EXEMPT FROM THE <-- 18 REPORTING REQUIREMENTS OF THIS SECTION: 19 (1) A BONA FIDE DULY CONSTITUTED RELIGIOUS INSTITUTION 20 AND SUCH SEPARATE GROUPS OR CORPORATIONS WHICH FORM AN 21 INTEGRAL PART OF A RELIGIOUS INSTITUTION AND ARE EXEMPT FROM 22 FILING AN ANNUAL RETURN PURSUANT TO THE INTERNAL REVENUE CODE 23 OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 1 ET SEQ.). 24 (2) AN INSTITUTION OF PURELY PUBLIC CHARITY WHICH 25 RECEIVES CONTRIBUTIONS OF LESS THAN $25,000 PER YEAR PROVIDED 26 THAT THE INSTITUTION'S PROGRAM SERVICE REVENUE DOES NOT EQUAL 27 OR EXCEED $5,000,000. 28 (E) FILING FEE.--AN INSTITUTION OF PURELY PUBLIC CHARITY 29 WHICH IS REQUIRED TO FILE A REPORT UNDER SUBSECTION (A) SHALL 30 PAY AN ANNUAL FILING FEE OF $15. ALL FEES COLLECTED UNDER THIS 19970H0055B2575 - 58 -
1 ACT AND UNDER THE SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES 2 ACT SHALL BE DEPOSITED IN THE STATE TREASURY. THE AMOUNT OF THE 3 FILING FEE UNDER THIS SUBSECTION MAY BE ADJUSTED BY THE 4 DEPARTMENT BY REGULATION. ALL FINES, PENALTIES, ATTORNEY FEES 5 AND COSTS OF INVESTIGATION COLLECTED UNDER THIS ACT AND UNDER 6 THE SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES ACT SHALL BE 7 PAID AS FOLLOWS: 8 (1) AMOUNTS COLLECTED BY THE BUREAU SHALL BE PAID TO THE 9 STATE TREASURY. 10 (2) AMOUNTS COLLECTED BY THE ACTION OR LITIGATION OF 11 ANOTHER GOVERNMENT AGENCY SHALL BE PAID DIRECTLY TO THAT 12 AGENCY. 13 (F) PAPERWORK REDUCTION.--THE DEPARTMENT SHALL ALLOW AN 14 INSTITUTION OF PURELY PUBLIC CHARITY TO CERTIFY THAT THE 15 INFORMATION REQUIRED IN SUBSECTION (A)(2) THROUGH (5) HAS NOT 16 CHANGED SINCE THE PRIOR REPORT IN LIEU OF PROVIDING THE SAME 17 INFORMATION IN THE REPORT REQUIRED BY SUBSECTION (A). THE 18 DEPARTMENT MAY OBTAIN FROM THE INTERNAL REVENUE SERVICE COPIES 19 OF ANNUAL RETURNS OF INSTITUTIONS OF PURELY PUBLIC CHARITY WHICH <-- 20 FILE ANNUAL RETURNS WITH THE INTERNAL REVENUE SERVICE ON 21 COMPUTER DISK OR OTHER ELECTRONIC OR PAPER MEDIA. 22 (G) RETENTION OF RECORDS.--THE DEPARTMENT SHALL RETAIN THE 23 REPORTING INFORMATION REQUIRED BY THIS SECTION FOR THREE YEARS 24 FROM THE DATE THE REPORTS ARE REQUIRED TO BE FILED. 25 (H) UTILIZATION OF REPORTS.--THE DEPARTMENT SHALL MAKE 26 REPORTS SUBMITTED UNDER THIS SECTION AVAILABLE FOR PUBLIC 27 INSPECTION TO THE EXTENT THAT THE INFORMATION IS AVAILABLE FOR 28 PUBLIC INSPECTION UNDER SECTION 6104 OF THE INTERNAL REVENUE 29 CODE OF 1986 (26 U.S.C. § 6104). THE DEPARTMENT SHALL PROVIDE 30 ANY GOVERNMENT AGENCY A COPY OF THE REPORT FILED UNDER THIS 19970H0055B2575 - 59 -
1 SECTION UPON REQUEST. NOTHING IN THIS SUBSECTION SHALL PREVENT A 2 GOVERNMENT AGENCY FROM REQUIRING ANY INSTITUTION SEEKING 3 EXEMPTION AS AN INSTITUTION OF PURELY PUBLIC CHARITY TO PROVIDE 4 THE INFORMATION DESCRIBED IN SUBSECTION (A) TO THAT AGENCY AS 5 PART OF A DETERMINATION OF THE TAX EXEMPT STATUS OF THE 6 INSTITUTION. 7 (I) ADMINISTRATIVE PENALTY.--THE DEPARTMENT MAY IMPOSE AN 8 ADMINISTRATIVE PENALTY NOT TO EXCEED $500 FOR ANY OF THE 9 FOLLOWING: 10 (1) KNOWINGLY FAILING TO FILE THE REPORT REQUIRED BY 11 THIS SECTION. 12 (2) KNOWINGLY MAKING A FALSE STATEMENT WHICH IS MATERIAL 13 IN A REPORT REQUIRED BY THIS SECTION. 14 SECTION 10. EXEMPTION FOR FEDERAL GOVERNMENT INSTRUMENTALITY. 15 ALL REAL PROPERTY OWNED BY ANY CORPORATION ESTABLISHED BY AN 16 ACT OF THE CONGRESS OF THE UNITED STATES, THAT IS REQUIRED TO 17 SUBMIT ANNUAL REPORTS OF ITS ACTIVITIES TO CONGRESS CONTAINING 18 ITEMIZED ACCOUNTS OF ALL RECEIPTS AND EXPENDITURES AFTER BEING 19 FULLY AUDITED BY THE DEPARTMENT OF DEFENSE, FOR PURPOSES OF THE 20 CONSTITUTION OF PENNSYLVANIA AND THE LAWS OF THIS COMMONWEALTH 21 RELATING TO THE ASSESSMENT AND TAXATION OF REAL ESTATE, IS 22 DEEMED TO BE PROPERTY OF A FEDERAL GOVERNMENT INSTRUMENTALITY 23 AND THUS EXEMPT FROM ALL STATE AND LOCAL TAXATION. 24 SECTION 11. PROHIBITED ACT. 25 NO INSTITUTION MAY CLAIM AN EXEMPTION FROM SALES AND USE TAX 26 AS AN INSTITUTION OF PURELY PUBLIC CHARITY UNLESS THE 27 INSTITUTION HAS RECEIVED AN ORDER FROM THE DEPARTMENT OF REVENUE 28 APPROVING AND AUTHORIZING THE EXEMPTION. 29 SECTION 12. COMPLIANCE. 30 INSTITUTIONS OF PURELY PUBLIC CHARITY SHALL COMPLY WITH THE 19970H0055B2575 - 60 -
1 PROVISIONS OF THIS ACT AND WITH THE PROVISIONS OF ARTICLE II OF 2 THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM 3 CODE OF 1971. 4 SECTION 13. CIVIL PENALTY. 5 IN ADDITION TO ANY PENALTIES AUTHORIZED BY THE ACT OF MARCH 6 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, FOR 7 VIOLATIONS OF THAT ACT, THE DEPARTMENT OF REVENUE MAY IMPOSE AN 8 ADMINISTRATIVE PENALTY NOT TO EXCEED $500 FOR ANY WILLFUL AND 9 KNOWING VIOLATION OF THIS ACT. THIS SECTION SHALL NOT APPLY TO 10 ANY VIOLATION OF SECTION 8. 11 SECTION 14. REPEALS. 12 (A) ABSOLUTE.--SECTION 24 OF THE ACT OF DECEMBER 19, 1990 13 (P.L.1200, NO. 202), KNOWN AS THE SOLICITATION OF FUNDS FOR 14 CHARITABLE PURPOSES ACT, IS REPEALED. 15 (B) GENERAL.--ALL OTHER ACTS AND PARTS OF ACTS ARE REPEALED 16 INSOFAR AS THEY ARE INCONSISTENT WITH THIS ACT EXCEPT FOR 17 SECTION 204(A)(3) OF THE ACT OF MAY 22, 1933 (P.L.853, NO.155), 18 KNOWN AS THE GENERAL COUNTY ASSESSMENT LAW, AS IT APPLIES TO 19 CHARITABLE ORGANIZATIONS PROVIDING RESIDENTIAL HOUSING SERVICES. 20 SECTION 15. APPLICABILITY. 21 (A) GENERAL.--THIS ACT SHALL NOT APPLY TO NOR AFFECT 40 22 PA.C.S. § 6103 (RELATING TO EXEMPTIONS APPLICABLE TO CERTIFIED 23 HOSPITAL PLAN CORPORATIONS) OR 6307 (RELATING TO EXEMPTIONS 24 APPLICABLE TO CERTIFICATED PROFESSIONAL HEALTH SERVICE 25 CORPORATIONS) OR THE ENTITIES SUBJECT TO THOSE SECTIONS. 26 (B) EXISTING SALES AND USE TAX EXEMPTIONS.--AN EXEMPTION 27 FROM TAX UNDER SECTION 204(10) OF THE ACT OF MARCH 4, 1971 28 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, EXISTING ON 29 THE EFFECTIVE DATE OF THIS SECTION SHALL REMAIN IN EFFECT UNTIL 30 THE EXPIRATION OF THAT EXEMPTION. 19970H0055B2575 - 61 -
1 (C) PRESUMPTION.--NO INSTITUTION OF PURELY PUBLIC CHARITY 2 MAY ASSERT A PRESUMPTION PURSUANT TO SECTION 6 UNTIL THAT 3 INSTITUTION'S EXEMPTION UNDER SECTION 204(10) OF THE TAX REFORM 4 CODE OF 1971 IS GRANTED OR RENEWED ON OR AFTER THE EFFECTIVE 5 DATE OF THIS SECTION. 6 SECTION 16. EFFECTIVE DATE. 7 THIS ACT SHALL TAKE EFFECT AS FOLLOWS: 8 (1) SECTIONS 8 AND 9 SHALL TAKE EFFECT IN 120 DAYS. 9 (2) THE REMAINDER OF THIS ACT SHALL TAKE EFFECT 10 IMMEDIATELY. A15L72DGS/19970H0055B2575 - 62 -