Earlier this week, the Pittsburgh Post-Gazette published an article on the impact of Allegheny County’s review of entities claiming property tax exemptions.
“After the county sent out two letters in 2013 asking the owners of 2,800 parcels that claimed a charitable tax exemption to respond and tell it why they deserved an exemption, 20 owners self-reported they were taxable, and another 170 didn’t respond and automatically went back on the tax rolls as a result.”
Unfortunately, non-response is an all too common reaction to these types of communications, especially for older non-profits. They may never have had to justify themselves in such a way in recent memory, and are now faced with the “HUP Test,” a five-part test implemented by the Supreme Court of Pennsylvania in 1985, which provides that
“an entity qualifies as a purely public charity if it possesses the following characteristics.
(a) Advances a charitable purpose;
(b) Donates or renders gratuitously a substantial portion of its services;
(c) Benefits a substantial and indefinite class of persons who are legitimate subjects of charity;
(d) Relieves the government of some of its burden; and
(e) Operates entirely free from private profit motive.”
While larger nonprofits are better situated to field a strong response to such requirements, many smaller ones are not, and have either lost their status or been automatically placed back on the tax rolls as a result.
“’I mean, this HUP test, who understands it?’ asked Robin Pascarella, a board member for the Fairhill Recreation Center in Sewickley Hills, which lost its tax exemption last year and had to give its property to a conservation group. ‘We’d have to hire a lawyer to defend us, and many small non-profits can’t afford that.'”
Don’t let fear of legal costs keep you from moving forward with your organization’s mission. Most importantly, don’t let anxiety over these types of letters and requirements cause you to avoid responding at all. I started my practice to help people in just these types of circumstances, and if your organization finds itself in uncertain territory, I would like to work with you toward a solution that works for your budget.
Have any questions on this post? Contact me at firstname.lastname@example.org.
Please note: This blog is intended as general educational information only, and should not be considered legal advice or a substitute for consulting a lawyer.