Monday, July 25, 2022
Do Federally Exempt Nursing Homes, Assisted Living, and Continuing Care Communities Also Qualify as "Institutions of Purely Public Charity?"
The latest in a series of senior-care related cases is making its way through the Pennsylvania appellate courts, asking whether a federally tax exempt senior living facility -- one that offers a range of options including independent living, "supported" independent living, personal care, and skilled care, although it isn't licensed as a CCRC -- can also qualify for state property and sales tax exemptions.
Pennsylvania, in ways similar to many states, allows a federal charitable tax exemption under Rev. Code Section 501(c)(3) to serve as the basis for state exemptions from income taxes, but a separate state statute sets tougher requirements to qualify as a "purely public charity" in order to avoid responsibilities to pay real property, sales and use taxes. Nursing homes, intermediate care settings (such as personal care or assisted living), and continuing care retirement communities (CCRCs) often rely on federal revenue rulings that recognize historical grounds to exempt "homes for the aged" from taxation. See e.g., Rev. Rul. 72-124 (also available at 1972 WL 30720). But on a fairly regular basis, Pennsylvania taxing authorities have challenged such enterprises as not being "sufficiently" charitable. Compare, for example In re St. Margaret Seneca Place, 640 A.2d 380 (Pa. 1994) (upholding state tax exemptions for a nursing home) with Appeal of Dunwoody Village, 52 A.3d 408 (Pa. Commw. 2012) (denying state tax exemption for a CCRC). In September 2021, a panel of the Commonwealth Court of Pennsylvania, using a "totality of the circumstances" approach concluded that the facility failed to donate a substantial portion of its services, and failed to show it benefits a substantial and indefinite class of persons who are subjects of charity. See Friends Boarding Home of Western Quarterly Meeting v. Commonwealth, 260 A.3d. 1064 (Pa. Commw. 2021).
The case is now under review for en banc consideration by the full Commonwealth Court, and there are indications the case might go all the way to the Pennsylvania Supreme Court. Working with my former Elder Protection Clinic colleague, Douglas Roeder, Esq., we examine a series of cases and trends under Pennsylvania law, including those involving senior living enterprises, as reasons to consider larger implications for federal and state exemptions based on charitable grounds. See Putting the Charity Back in Purely Public Charities (July 2022).