PA Nonprofit Property Tax Exemption

This week, Pennsylvania legislators are voting on an initiative that would change Pennsylvania’s state constitution. And, it has to do with nonprofit property tax exemption – how exciting!

The piece of legislation, called Senate Bill 4, was introduced by local Landisville senator Ryan Aument. The bill would give legislators the authority to determine which nonprofits get property tax breaks. More specifically, it would allow PA lawmakers to redefine the criteria for institutions entitled to property tax exemptions. While the General Assembly already approved this decision in 2013, the Senate has yet to decide. The bill must pass two consecutive legislative sessions before going for voter approval. Importantly, voters get the final say in determining how their favorite charities are regulated.

As it currently stands, the Pennsylvania Supreme Court issued a decision (2012) mandating that a charity meet five specific criteria. The two largest are that the charity “operate entirely free from profit motive,” and that it “donate a substantial portion of its services.” However, lawmakers believe the power to decide nonprofit property tax exemption, and the criteria for it, should be a legislative, not judicial decision.

Lawmakers argue that without the chance to define more clearly, and to expand as necessary the criteria for nonprofit property tax exemption, Pennsylvania will be without a transparent, consistent system of regulation.

Part of the bill may scrap a statute giving municipalities the ability to determine which organizations in their area are legitimate charities. Doing so would lead to less tax revenue to already hurting local municipal governments. Aument, the bill’s instigator, promises that nonprofit and municipal leaders will have a seat at the table if the amendment is approved.

You can read the original article on Lancaster Online’s website.

What does this mean for my charity?

By default, nonprofit organizations face a higher level of regulation and scrutiny than for-profit organizations. Pennsylvania’s proposed change to nonprofit property tax exemption is yet another example. To this author it seems that organizations whose activities are clearly defined and purely charitable, and are thoroughly documented and registered, will be able to weather the legislative change, and perhaps even benefit from it. And, while this is a Pennsylvania-specific example, the same principles can be applied to your organization in another state. As the legislative environment so quickly changes, it is extremely important to stay on top of your compliance requirements. If you need assistance with reviewing your activities, and becoming compliant, contact Harbor Compliance today.