Fayette Resources, Inc. v. Fayette County Board of Assessment Appeals
107 A.3d 839
Pa. Commw. Ct.2014Background
- Fayette Resources, a 501(c)(3) nonprofit, operates ~80 staffed group homes and a training center for intellectually disabled adults in Fayette County; most funding comes from state Medicaid payments under contract with the Department of Public Welfare.
- In 2012 Resources sought real estate tax exemptions for 15 properties (mostly group homes); the Fayette County Board of Assessment Appeals denied the requests and Resources appealed to the Court of Common Pleas; the trial court granted exemptions as a “purely public charity.”
- The Board appealed, arguing Resources failed to prove it met constitutional and statutory standards for charitable tax exemption.
- At the evidentiary hearing Resources offered testimony (Director of Operations), corporate charter/bylaws, and the IRS 501(c)(3) determination; it did not introduce financial statements, Form 990, evidence of donations, or documentary proof that government payments were less than the cost of services.
- The trial court found Resources met most HUP factors (charitable purpose; benefits indefinite class; relieves government burden; no private profit motive) but the appellate court concluded Resources failed to prove the HUP second prong (donation/gratuitous services).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Resources qualifies as a "purely public charity" under the HUP test | Resources: provides charitable housing/services to legitimate charity subjects and thus satisfies HUP | Board: Resources failed to prove all HUP prongs, especially donation/gratuitous services | Court: Resources failed to meet its burden on HUP because it did not prove donation/gratuitous services; reversal of trial court order |
| Whether Resources donates or renders gratuitously a substantial portion of its services (HUP prong 2) | Resources: government funding and occasional use of surplus for homes shows charitable operation akin to other cases | Board: No evidence that services are provided at cost or below cost; no donations or volunteers shown | Court: No evidence on cost vs. payments or donations; HUP prong 2 not satisfied |
| Whether Resources relieves government of a burden (HUP prong 4) | Resources: provides services the government is statutorily obliged to provide | Board: Government payments fully compensate Resources so no burden relief | Court: Relieving the government of burden is satisfied despite government funding (following Community Options) |
| Whether Resources operates free from private profit motive (HUP prong 5) | Resources: surplus is reinvested; bylaws prohibit private inurement; officers receive only salaries | Board: Surplus suggests private profit motive | Court: Absence of private profit motive satisfied where surplus is used for charitable purposes and bylaws restrict private benefit |
Key Cases Cited
- Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. 1985) (establishes five‑part HUP test for "purely public charity")
- Community Options, Inc. v. Board of Property Assessment, 813 A.2d 680 (Pa. 2002) (nonprofit group‑home operator relieves government burden even if largely government‑funded)
- St. Margaret Seneca Place v. Board of Property Assessment, Appeals and Review, 640 A.2d 380 (Pa. 1994) (gratuitous/donative requirement may be met where payments cover only part of cost)
- Wilson School District v. Easton Hospital, 747 A.2d 877 (Pa. 2000) (surplus revenue does not preclude absence of private profit motive)
- Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, 44 A.3d 3 (Pa. 2012) (reaffirms HUP requirements and constitutional prerequisite for tax exemption)