Pottstown School Dist. v. Hill School

• Decision Date: 01 November 2001
• Citation: 786 A.2d 312
• Parties: POTTSTOWN SCHOOL DISTRICT and Pottstown Borough, v. HILL SCHOOL and Montgomery County Board of Assessment Appeals. Appeal of Pottstown School District.
• Court: Pennsylvania Commonwealth Court

786 A.2d 312

POTTSTOWN SCHOOL DISTRICT and Pottstown Borough, v. HILL SCHOOL and Montgomery County Board of Assessment Appeals.

Appeal of Pottstown School District.

Commonwealth Court of Pennsylvania.

Argued March 7, 2001.

Decided November 1, 2001.

Joseph E. Bresnan, Ambler, for appellant.

Thomas D. Rees, Norristown, for appellee, Hill School.

Joan M. Righter, Norristown, for appellee, Montgomery County Bd. of Assessment Appeals.

Gene E.K. Pratter, Philadelphia, for amici curiae.

Before DOYLE, President Judge, COLINS, Judge, SMITH, Judge, PELLEGRINI, Judge, FRIEDMAN, Judge, KELLEY, Judge, and LEADBETTER, Judge.

LEADBETTER, Judge.

Pottstown School District appeals from the order of the Montgomery County Court of Common Pleas, which affirmed the tax-exempt status of the Hill School, an all-male private school providing college preparatory courses. Specifically at issue is whether the Hill School's exclusion of women from its student body precludes it from claiming an exemption as a purely public charity.

The Hill School is located in the Pottstown School District in Montgomery County. Prior to September 1998,¹ the School limited its enrollment to young men only. In May 1996, the Pottstown School District (School District) and the Borough of Pottstown filed a petition before the Board of Assessment Appeals challenging the tax-exempt status of sixteen parcels of land owned by the School. Following a hearing, the Board issued a notice indicating that the tax exempt status of the parcels at issue would not be changed, and would continue for the tax year beginning January 1, 1997.

The School District appealed and the matter was submitted to the court of common pleas pursuant to a stipulation of facts. With respect to the time period at issue, namely, the period following the School District's petition in May 1996 up through the date when the Hill School began to admit women, the parties agreed that: (1) the School admitted young men of any race, color, national or ethnic origin regardless of financial ability to pay tuition; (2) the School did not discriminate among young men on the basis of educational or admission policies, nor on the basis of its scholarship, loan, athletic or other school-administered programs; and (3) the School did not admit young women regardless of qualifications. Finally, the parties agreed that the School met all the legal criteria necessary to qualify as a purely public charity except that of benefiting a substantial and indefinite class of persons. The School District argued before common pleas that the Hill School did not benefit a substantial and indefinite class of persons because its exclusion of women was discriminatory.

Common pleas initially sustained the appeal and held that the Hill School was liable for the taxes assessed on the parcels at issue. However, in response to a motion for reconsideration, common pleas vacated its earlier order and subsequently reached the opposite conclusion, holding that the Hill School was exempt from taxation as an institution of purely public charity. In reaching this conclusion, common pleas held that the fact that an institution benefits only a single gender does not preclude it from qualifying as an institution of purely public charity under the recent Institutions of Purely Public Charity Act (Charity Act)² or the decisional law prior thereto. The present appeal followed.

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.

Pa. Const., Art. VIII, § 2(a)(v). As our Supreme Court has noted, "The constitution does not, of itself, exempt any property; it merely permits the legislature to do so within certain limits." Donohugh's Appeal, 86 Pa. 306, 309 (1878). Accordingly, any challenge to such tax exemptions implicates a two-part test: first, does the stated exemption fall within the range of authority granted by the Constitution and, second, has the General Assembly enacted legislation to exempt the property.

Until enactment of the Charity Act in November of 1997, the only statutory provision relevant to our analysis was found in Article II, Section 204 of the General County Assessment Law,³ as amended, 72 P.S. § 5020-204(a)(3), which provides in pertinent part that, "[a]ll hospitals, universities, colleges, seminaries, academies, associations and institutions of learning, benevolence, or charity ... with the grounds thereto annexed and necessary for the occupancy and enjoyment of the same, founded, endowed, and maintained by public or private charity" shall be exempt from all county, city, borough, town, township, road, poor and school taxes. Since there is no question that the Hill School falls within the category of "academies, associations and institutions of learning," our only concern for the period before November, 1997 is whether the Hill School is an "[i]nstitution of purely public charity" within the meaning of our Constitution.

In Hospital Utilization Project v. Commonwealth (HUP), 507 Pa. 1, 487 A.2d 1306 (1985), the Pennsylvania Supreme Court explained the constitutional criteria which an entity must meet in order to constitute a purely public charity for tax exemption purposes. It must: (1) advance a charitable purpose; (2) donate or render gratuitously a substantial portion of its services; (3) operate entirely free from a private profit motive; (4) benefit a substantial and indefinite class of persons who are legitimate subjects of charity; and (5) relieve the government of some of its burden. Id. at 21-22, 487 A.2d at 1317. See also Unionville-Chadds Ford Sch. Dist. v. Chester County Bd. of Assessment Appeals, 552 Pa. 212, 714 A.2d 397 (1998); Mars Area Sch. Dist. v. United Presbyterian Women's Ass'n of N. Am., 554 Pa. 324, 721 A.2d 360 (1998). In the present case, the parties have stipulated that the Hill School satisfies all of the above criteria except for number four, viz., that the institution "benefit a substantial and indefinite class of persons who are legitimate subjects of charity."⁴

In reviewing this issue we do not write on a clean slate. In the seminal case of Donohugh's Appeal, the Pennsylvania Supreme Court addressed whether The Library Company of Philadelphia qualified as a public charity for purposes of tax exemption pursuant to the Act of May 14, 1874, P.L. 158.⁵ There, the Court opined that:

The essential feature of a public use is that it is not confined to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. The smallest street in the smallest village is a public highway of the Commonwealth, and none the less so because a vast majority of the citizens will certainly never derive any benefit from its use. It is enough that they may do so if they choose. So there is no charity conceivable which will not, in its practical operation, exclude a large part of mankind, and there are few which do not do so in express terms, or by the restrictive force of the description of the persons for whose benefit they are intended. Thus, Girard College excludes, by a single word, half the public, by requiring that only male children shall be received; the great Pennsylvania Hospital closes its gates to all but recent injuries, yet no one questions that they are public charities in the widest and most exacting sense.

86 Pa. at 313-14 (emphasis in original).

Subsequently, in Burd Orphan Asylum v. School District of Upper Darby, 90 Pa. 21 (1879), our Supreme Court addressed whether an orphanage populated primarily by white female orphan children baptized in the Protestant Episcopal Church constituted a "purely public charity." The charter of the orphanage established that the following classes of children be served by the institution: (1) white female orphan children of a certain age, baptized in the Protestant Episcopal Church in the City of Philadelphia; (2) the same class of children baptized in the same church in the state of Pennsylvania; and (3) all other white female orphan children without qualification, except that orphan children of clergymen of the said church shall have preference. After questioning, in dicta, whether a religious limitation would prevent a charity from being said to benefit an indefinite class of persons, the court held:

[T]here is another and a broader ground upon which this particular charity must be sustained as purely public. It is this: the third class of persons enumerated in the will of the testatrix as the objects of her bounty are, "all other white female orphan children of legitimate birth, not less than four years of age, and of not more than eight years, without respect to any other ... qualification whatever...."

Id. at 35-36. Based upon the above reasoning, the Court concluded that the orphanage constituted a purely public charity for purposes of tax exemption. See also Trustees of Academy of Protestant Episcopal Church v. Taylor, 150 Pa. 565, 25 A. 55 (1892) (denominational school's preference for children of parents connected to denomination does not preclude school from qualifying as purely public charity since no children are excluded by reason of denomination). Two years later, in City of Philadelphia v. Masonic Home of Pennsylvania, 160 Pa. 572, 28 A. 954 (1894), our Supreme Court had occasion to consider whether a home that benefited only aged, indigent Freemasons was a public charity. While there was no dispute that the home was a charity in the more general sense, the issue was whether the home's admission only of Masons precluded it from constituting a public charity. In concluding that the home did not qualify as a purely public charity for purposes of a tax...