5 Pa. Commw. 648 | Pa. Commw. Ct. | 1972
Opinion by
This is an appeal from an Order and Opinion of the Court of Common Pleas of Allegheny County dismissing the appeals of Robert Morris College, appellant (Robert Morris) from two adverse decisions of the Board of Property Assessment, Appeals and Review of Allegheny County, appellee (Board). The Board denied the grant of appellant’s requests for real estate tax exemption on property located in the second ward of the City of Pittsburgh (No. 819 C.D. 1971) and in Moon Township (No. 820 C.D. 1971). The desired exemptions affect tax liability commencing with the tax
Robert Morris contends that owing to its non-profit corporate nature and its ongoing operation as an institution of higher learning (a college) entirely free from any private profit motive, in that no individual has any direct pecuniary interest in the revenues of the institution, it is entitled thereby to the constitutionally created, and legislatively implemented, real estate tax exemption granted to institutions of “purely public charity.”
The record discloses that prior to 1962 the institution was a family-owned proprietary school. On March 20, 1962, it qualified as a Pennsylvania non-profit corporation operating under the name of “The Robert Morris School.” On September 25, 1962, its Charter was amended for the purpose of changing its name to “Robert Moms Junior College” ánd empowering the college to grant associate degrees. On May 22, 1969, by virtue of additional amendments to the Charter and Articles, it became “Robert Morris College” empowered to grant degrees on the baccalaureate level. Pursuant to its 1969 Charter, it was authorized to operate as a college under the laws of the Commonwealth.
The statutes provide that a college must be a nonprofit corporation and that it must further establish and maintain a protective endowment in the amount of |500,000 beyond all indebtedness and amounts invested in real and personal property. (Regulation 900, Department of Public Instruction, Bureau of Academic Standards and Services, and Non-Profit Corporation Law, Act of May 5, 1933, P. L. 289, 15 P.S. 7312) Robert Morris presently operates as an institution of higher learning duly certified by the Department of Public
To facilitate a determination of the issues presented, it is necessary to have at hand a clear and concise picture of the fiscal history of the appellant college. The opinion of the court below sets forth an accurate narrative of those facts and we therefore adopt them and set them forth as follows:
“Prior to the incorporation of the appellant as a non-profit corporation, the Robert Morris School, a Pennsylvania corporation, along with three closely held associated corporations, conducted a proprietary school with J. R. McCartan, Sr., as its President and with other members of the McCartan family holding interests either in the Robert Morris School or in the closely held associated corporations known as the Beverly Cafeteria Company, The School Furniture, Inc., and R.M.S. Book Store. In 1962 the McCartans sold all of their stock in the aforementioned four corporations to the College, selling the school as a going business and it was this business which the College, upon its incorporation, continued to operate as ‘The Robert Morris School.’ The McCartans received $400,000.00 for their stock in the aforementioned four corporations, which corporations had no real estate holdings. In addition, the appellant assumed all of the liabilities of the Mc-Cartan corporations which approximated $385,000.00. A lease arrangement was also entered into between the appellant and Beverly Realty Company, a corporation whose stock was also owned by members of the McCartan family. Under this lease arrangement, the appellant rented the downtown center (Pittsburgh property) for approximately two years, during which time it paid a rental to the owner, Beverly Realty Company, of approximately $460,000.00, including utilities and taxes.
“The appellant’s Pittsburgh facilities consist of an eight-story building with a three-story addition, housing classrooms, cafeteria, library, student services area, counsel rooms and administration offices. Its Moon Township facilities are located on a 230-acre tract of
“In the fiscal year 1969-1970 the College awarded scholarships amounting to $559,314.00, but approximately % million dollars of this came from Federal and State grants earmarked specifically and solely for scholarship use. Only $50,000.00 to $60,000.00 in scholarship aid was appropriated by the College in its budget.
“During the fiscal year 1967-1968, the College had a gross income of almost $4,000,000.00 and after deduction of interest payments and operating expenses, it showed a net income of $931,778.00. Out of this it paid $338,000.00 on its long-term debt, placed $128,000.00 into a sinking fund and reserves and paid $200,000.00 on a demand note leaving income of $266,000.00 for other uses. The foregoing figures, although approximate, substantially reflect the sound financial condition of the College.
“Of its gross income of approximately $5,000,000.00 in 1969-1970, slightly less than $60,000.00 was budgeted by the College for scholarship use which sum was included in gross revenues with an expenditure in the same amount. The remaining scholarships granted by the College were in large part from grants eanharked specifically for scholarships by Federal and State grants with very little from private contributions.
Article VIII, Section 2 of the Pennsylvania Constitution states:
“(a) The General Assembly may by law exempt from taxation:
“(v) Institutions of purely public charity, but in the case of any real property tax exemptions only that portion of real property of such institution which is actually and regularly used for the purposes of the institution.” (Emphasis added.) Obviously then, this section is not self-executing and does not grant per se any tax exemptions. Legislation is required to create an exemption from real estate taxes.
The General Assembly by the enactment of The General County Assessment Law, Act of May 22, 1933, P. L. 853, Article II, Section 204, as amended, 72 P.S. 5020-204 established the kinds of property which may be exempted and, inter alia, provided:
“The following property shall be exempt from all county, city, borough, town, township, road, poor and school tax, to wit:
“(c) All hospitals, universities, colleges, seminaries, academies, associations and institutions of learning,
“(i) All real property owned by one or more institutions of purely public charity, used and occupied partly by such owner or owners and partly by other institutions of purely public charity, and necessary for the occupancy and enjoyment of such institutions so using it; . . .” (Emphasis added.)
We must begin with an understanding of the underlying philosophy of the constitutional-legislative grant of tax exemption. “Taxes are not penalties but are contributions which all inhabitants are expected to make (and may be compelled to make) for the support of the manifold activities of government. Every inhabitant and every parcel of property receives governmental protection. Such protection costs money. When an inhabitant fails to contribute his share óf the costs of this protection, some other inhabitant must contribute more than his fair share of that cost. . . . Any institution which by its charitable activities relieves the government of part of this burden is conferring a pecuniary benefit upon the body politic, and in receiving exemption from taxation it is merely being given a ‘quid pro quo’ for its services in providing something which otherwise the government would have to provide. . . . The measure of an institution’s gratuitous aid to those requiring it is the measure by which the government is relieved of its responsibilities.” YMCA of Germantown v. Phladelphia, 323 Pa. 401, 413-14, 187 A. 204, 210
In the case of Woods Schools Tax Exemption Case, 406 Pa. 579, 584, 178 A. 2d 600, 602 (1962), the Court stated: “For the appellant to obtain the claimed exemption from taxation, it must affirmatively show that the entire institution, (1) is one of ‘purely public charity’; (2) was founded by public or private charity; (3) is maintained by public or private charity.” See Four
In the case of Ogontz School Tax Exemption Case, 361 Pa. 284, 65 A. 2d 150 (1949), the court held that an educational institution whose income from tuition payments is sufficient to cover all of its operating expenses and its debt service (with or without a resultant surplus) cannot constitute an institution of “purely public charity.”
In Ogontz, supra, the court considered as critical, the percentage of students receiving scholarship aid and the ratio of tuition received and scholarship aid granted. The facts therein indicated that the value of the free scholarships approximated an amount equal to about ten percent of the total tuition and fees paid by the students. The court concluded that the devotion of ten percent to scholarship aid was of insufficient amount to permit the institution’s inclusion within the category of a “purely public charity.” In this case Robert Morris enjoyed a net profit in excess of a quarter of a million dollars. The record is silent on what Robert Morris did or planned to do with that profit. Robert Morris allocated a little more than one percent
It is true that in the case of Hill School Tax Exemption Case, supra, at page 26, the court stated: “The word ‘purely’ as used in the Constitution in the phrase ‘purely public charity’ means that the institution must be entirely free from private profit motive. ...” And at page 27: “A purely public charity does not cease to be such where it receives some payment for its services.” The facts of that case indicate the receipt of substantial gifts at the very founding of the institution and the receipt of considerable gifts thereafter. Furthermore, forty-nine percent of the student body was receiving aid from the Hill School, causing the institution to be
We see little merit in the argument of the taxing-authorities in this case that Robert Morris could not be tax exempt because it was not “founded” as a purely public charity. It is not difficult to conceive of many factual situations wherein a profit maldng institution
We are likewise unimpressed with the argument that inasmuch as the one-half million dollar endowment created by the college contains only $21,000.00 attributable to charitable contribution, the college has not been endowed by public or private charity. The fact that most of its original endowment came from its own earnings is not determinative of that question. The record clearly shows that a statute of this Commonwealth requires the half-million dollar figure. In the absence of the statutory requirement of one-half million dollars, Robert Morris could have created an endowment employing only the $21,000.00 resulting from charitable contributions, thereby satisfying the requirement of being endowed by public or private charity. Most educational institutions of higher learning by necessity devote many years to the development of their institutional endowments. The existence of a statute requiring substantial “instant” endowment should not preclude an institution from qualifying for exemption. We are, however, concerned with the qualification of the college under the third element of the statutory requirement, i.e., that it be “maintained” by public or private charity.
The record in this case clearly shows that no person receives any pecuniary benefit from the revenues of Robert Morris College. Its Board of Trustees serves without remuneration. Its employes, professional and nonprofessional, are paid salaries, wages and expenses comparable with those of other institutions. There is likewise no question whatsoever that Robert Morris
The stance assumed by the college, in effect, urges upon us the interpretation that if it performs a purely public function, or, if it is operated for a “charitable educational purpose,” or, if it performs “charitable services,” or if it has “charitable motives” yielding up no private gain to any individual, it should then qualify for exemption eligibility as a “purely public charity.” As sympathetic as we may be with that position, our
We would be remiss if we did not cite the case of Vanguard School Tax Exemption Case, 430 Pd. 378, 243 A. 2d 323 (1968), wherein our Supreme Court allowed the exemption to a non-profit school for handicapped children. The school’s operating costs were met by student tuition ($3,000 per year), by a state subsidy ($1,500 per student per year), and by the generosity of individual contributors. The school allocated only 2.2 percent of its operating revenues to scholarship aid; and it realized a surplus of $80,000 during the test period. From our reading of the several cases cited in this Opinion we must concede that Vanguard, supra, sticks out like the proverbial “sore thumb.” The Court in Vanguard, supra, appears to have ignored its own line of precedent, and in succeeding cases, the Court has chosen each time to distinguish Vanguard, supra, on its facts.
We hasten to point out, however, that we distinguish Vanguard, supra, from this case for two reasons. First, the Vanguard opinion states: “Generous benefactors contributed toward founding and maintaAmng the Vanguard School, but their gifts cannot equal the sums required to operate such an institution to the end that parents may eventually see their child, the healthy, social, companionable person they had envisioned before his or her birth.” (Emphasis added.) 430 Pa. 378, 243 A. 2d at 323. The Pennsylvania Supreme Court, based upon the record of that case, held that the Vanguard School was, in fact, maintained as a purely public char
Vanguard, supra, can be distinguished further by the fact that the record clearly indicated that any financial surplusage was being applied directly to the costs of educating the handicapped students. The Supreme Court in the case of Pittsburgh Institute of Aeronautics Tax Exemption Case, supra, recognized this point as a salient feature of the Vanguard Case, supra, when it stated: “In a recent case which involved the application of this same statute to the Vanguard School, we noted, as an important factor in allowing the exemption, that any profits realized were used directly for the cost of the school rather than going to any individuals. See: Vanguard School Taxation Case. . . 435 Pa. at 626, 258 A. 2d at 854. In this case there is nothing in the record which discloses what Robert Morris did or intends to do with the surplus money realized from its operations. We have no way of knowing, for example, whether that surplusage was to be paid to individuals as bonuses, or increased salaries, or whether it was to be used for the direct benefit of needy students.
In spite of the fact that we would have no trouble classifying Robert Morris as a public charity, we are troubled by the additional constitutional requirement found in the word “purely.” “Purely” to us mean's it must be entirely Or wholly a public charity, in every sense of the word, which would include all of the elements found in the word “eleemosynary.” Based upon the above analysis of the law and applying the facts of this case to that law, we must affirm the court below.
A $2,150.00 cost, exclusive of books and supplies, is less than other non-state related colleges in the area.
We recognize, of course, that the “quid pro quo” theory is not the sole determinative test to be employed in a real estate tax-exemption case. (See West Indies. Mission Appeal, 387 Pa. 534, 128 A. 2d 773 (1957).