Back to the Future for Real Estate Tax Exemptions and PILOTs/SILOTs? Charities Must Meet HUP Test and Act 55, Pennsylvania High Court Rules

by Ballard Spahr LLP

[authors: Philip B. Korb and Wendi L. Kotzen]

For charitable organizations in Pennsylvania, obtaining and preserving real estate tax exemptions just got a little more difficult.

The Pennsylvania Supreme Court has ruled that the statute intended to clarify the requirements for real estate tax exemption cannot replace the five-part test announced by the high court in 1985 because only the courts have the power to interpret the provisions of Pennsylvania’s constitution.

The Pennsylvania Constitution permits the General Assembly to exempt from real estate taxes “purely public charities,” but does not define that term.

In its 1985 decision in Hospital Utilization Project v. Commonwealth, the Pennsylvania Supreme Court established requirements an organization must satisfy to qualify as a purely public charity entitled to a real estate tax exemption.

The HUP test requires a charity to satisfy a five-part subjective test to prove it meets the definition of a purely public charity. It must:

  • Advance a charitable purpose
  • Donate or render gratuitously a substantial portion of its services
  • Benefit a substantial and indefinite class of persons who are legitimate subjects of charity
  • Relieve the government of some of its burden
  • Operate entirely free from private profit motive

In the years following that decision, the Pennsylvania Commonwealth Court rarely found a charity that qualified for a tax exemption.

In 1997, in an attempt to simplify the HUP test and provide relief to charities, the General Assembly passed Act 55 to provide objective standards for an organization to satisfy the HUP test.

Since Act 55 was passed, the Commonwealth Court has consistently decided that Act 55’s objective standards do not replace the HUP test because only the courts have the authority to interpret the Pennsylvania Constitution. Instead, the court read Act 55 as an additional requirement for a charity to qualify for a tax exemption. According to the Commonwealth Court, for an organization to qualify as a purely public charity, both the Act 55 objective standards and the subjective HUP test must be satisfied.

Now the Pennsylvania Supreme Court has agreed with the Commonwealth Court. In its 4‑3 decision in Mesivtah Eitz Chaim of Bobov, Inc., v. Pike County Board of Assessment, handed down on April 25, 2012, the Supreme Court held that for an organization to qualify as a purely public charity, it must satisfy both the HUP test and the specific Act 55 standards.

Because the HUP test is subjective, neither a charitable organization nor a taxing authority can determine with any certainty which organizations qualify as purely public charities.

Before Act 55, many taxing authorities entered into payment in lieu of tax and services in lieu of tax (PILOT/SILOT) agreements with charitable organizations so that both could avoid the expense and uncertainty of a protracted dispute over whether the organizations qualified as purely public charities. We would not be surprised to see taxing authorities challenge tax exemptions or once again request charities to enter into PILOT/SILOT agreements.

Please contact Philip B. Korb at 215-864-8709 or or Wendi L. Kotzen at 215-864-8305 or to discuss your organization’s public charity status. 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.