52 A.3d 408
Pa. Commw. Ct.2012Background
- Dunwoody Village, Inc. (DVI) is a not-for-profit operating a continuing care retirement community on an 85.5-acre Newtown Township property and was denied real estate tax exemption after an appeals process.
- DVI seeks exemption as an institution of purely public charity under Article VIII, Section 2(a)(v) of the Pennsylvania Constitution and Act 55, arguing it satisfies HUP’s five-prong test or, alternatively, Act 55 criteria.
- The Appeals Board initially denied the exemption; the trial court later affirmed, finding DVI failed the HUP test and failed Act 55’s requirements, including no complete absence of private profit motive.
- DVI’s admissions require substantial entrance fees and ongoing monthly charges; residents sign life care contracts, and the Village emphasizes financial self-sufficiency of residents for admission.
- DVI maintains a Dunwoody Trust to provide financial assistance, but DVI itself does not contribute to that fund; some charitable care occurs, but is limited and discretionary.
- Key issues center on whether DVI advances a public charitable purpose, donates gratuitously a substantial portion of services, benefits a substantial indefinite class, relieves government burden, and operates free from private profit motive, including consideration of Act 55 in relation to HUP.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does DVI advance a public charitable purpose under HUP? | DVI asserts it serves elderly needs and opens access beyond the poor, citing Grace Center and Presbyterian line of cases. | Court should view DVI as primarily serving financially capable residents; not a broad public use. | DVI fails the public purpose prong. |
| Does DVI donate or render gratuitously a substantial portion of its services (Act 55, Section 5(d)(1)(v))? | DVI provided uncompensated care and charitable support via the Dunwoody Trust totaling millions over years. | Totality of circumstances shows the gratuitous portion is not substantial; high entrance and ongoing fees limit broader charity. | DVI fails the gratuitous services prong; not substantial under Act 55. |
| Does DVI benefit a substantial, indefinite class of persons who are legitimate subjects of charity? | Charity can extend to those who cannot afford care; Medicaid-eligible individuals are legitimate charity subjects. | DVI primarily serves well-to-do seniors who can afford admission; Medicaid access is limited or absent. | DVI does not benefit a substantial indefinite class; fails this prong. |
| Does DVI relieve the government of some of its burden? | DVI’s services resemble those historically provided by county facilities; it indirectly alleviates government burden. | Most residents would not rely on government facilities; no substantial relief to government burden. | DVI fails to relieve government burden. |
| Does DVI operate entirely free from private profit motive (Act 55, Section 5(c)) and thus satisfy HUP’s fifth prong? | DVI’s articles show no private inurement and revenues are reinvested to charitable purposes. | Executive compensation is incentive-based tied to financial performance; indicates private profit motive. | DVI fails the private profit motive prong; not entirely free from private profit motive. |
Key Cases Cited
- Hospital Utilization Project v. Commonwealth, 507 Pa. 1 (Pa. 1985) (five-prong HUP test for purely public charity)
- Marple Newtown School District, 455 A.2d 98 (Pa. 1982) (financial security prerequisite; later context for charity analysis)
- Grace Center Community Living Corp. v. County of Indiana, A.2d 1008 (Pa. Cmwlth. 2002) (charity not confined to the poor; public use concept)
- Menno Haven, Inc. v. Franklin County Board of Assessment and Revision of Taxes, 919 A.2d 333 (Pa. Cmwlth. 2007) (totality of circumstances; high entry fees do not automatically prove charity)
- St. Margaret Seneca Place v. Board of Assessment Appeals, 640 A.2d 380 (Pa. 1994) (government burden relief; Medicaid sharing as measure)
- Alliance Home of Carlisle, PA v. Board of Assessment Appeals, 919 A.2d 206 (Pa. 2007) (Act 55's role vis-à-vis HUP; constitutional considerations)
- Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, 44 A.3d 3 (Pa. 2012) (Act 55 cannot override constitutional minimum; HUP controls)
- Guthrie Clinic, Ltd. v. Sullivan County Bd. of Assessment Appeals, 898 A.2d 1194 (Pa. Cmwlth. 2006) (binding framework for charitable exemption analysis)