On May 30, 2025, the Pennsylvania Supreme Court reversed a Commonwealth Court decision that Pottstown Hospital, LLC (“Hospital”) did not qualify as an institution of purely public charity entitled to real property tax exemption.

In 2023, the Commonwealth Court had held in a group of four related decisions — Pottstown School District v. Montgomery County Board of Assessment Appeals, 289 A.3d 1142 (Pa.Cmwlth. 2023); Brandywine Hospital, LLC v. County of Chester Board of Assessment Appeals, 291 A.3d 467 (Pa.Cmwlth. 2023); Phoenixville Hospital, LLC v. County of Chester Board of Assessment Appeals, 293 A.3d 1248 (Pa.Cmwlth. 2023); and Jennersville Hospital, LLC v. County of Chester Board of Assessment Appeals, 293 A.3d 1248 (Pa.Cmwlth. 2023) — that four Tower Health hospitals were operating with a private profit motive and therefore were not considered charitable institutions.

In 2017, Tower Health’s predecessor bought several for-profit hospital facilities and related properties. Tower Health, which is a nonprofit under 26 U.S.C. § 501(c)(3), formed four non-profit limited liability companies, of which it was the sole member, to run each of the four hospitals. Tower Health generated income solely through charges it imposed on the LLCs in the form of management fees. The trial court in Montgomery County granted a tax exemption for the Pottstown hospital, but the Chester County trial court denied the exemptions for the other three hospitals.  On appeal, the Commonwealth Court denied all four exemptions, holding that the hospitals did not operate entirely fee from private profit motive, as required by the test set forth in Hospital Utilization Project v. Commonwealth (“HUP”) 487 A.2d 1306 (Pa. 1985), because:  (1) Tower Health’s management fees were exorbitant, essentially draining hospital finances; and (2) the executive compensation tied to the hospitals’ financial performance was substantial.

The Supreme Court granted permission to appeal in the Pottstown case, to determine:  (1) whether the operation of Tower Health was relevant to a determination of whether the Hospital qualified as a purely public charity; and (2) whether substantial executive compensation based upon financial performance precluded the Hospital from establishing that it was operating entirely free from private profit motive.

The Supreme Court first addressed the relevance of Tower Health’s executive compensation and the relationship between Tower Health and the Hospital.

The Supreme Court noted that the Commonwealth Court had consistently held that, when a corporate entity seeking a charitable tax exemption is a subsidiary or affiliate of another corporation, it will ordinarily be regarded as its own separate entity unless there is evidence establishing a reason to pierce its corporate veil, including: its gross undercapitalization; a failure to adhere to corporate formalities; a substantial intermingling of personal and corporate affairs; the use of the corporate form to perpetrate a fraud; or where a parent or affiliate corporation dominates the non-profit corporation to the degree that it can be regarded as a sham corporation, or a mere instrumentality or alter ego of the parent or affiliate.  The Court held that, absent such evidence, only the salaries of the executives of a corporation seeking the tax exemption, and the net impact the payment of fees by that organization to a parent or affiliate corporation has on its own ability to fulfill its charitable mission, are relevant under the HUP test.

In Pottstown, the School District had not argued that the separate existence of Tower Health and the Hospital should be disregarded.  The School District had only argued that the degree of control exerted by Tower Health and the size of the management fee justified consideration of Tower Health’s executive compensation package, and the alleged excessiveness of the management fees.  But the Court held that no facts had been established showing that the Hospital was not acting as an independent entity from Tower Health when it entered into the agreement to pay the management fees, or that Tower Health had improperly used its parent relationship.  The mere dollar size of Tower Health’s executive compensation and the amount of the management fees the Hospital paid, standing alone, were insufficient to show a private profit motive.

The Court then addressed the Hospital’s executive compensation.  Case law established a requirement that such salaries and any fringe benefits be reasonable — i.e., equal to or less than executive salaries of comparable institutions that provide comparable services.  The Court had never elaborated on the criteria for determining reasonable compensation.  But, in Pottstown, the Court finally adopted the following set of factors, set forth in federal tax law for determining if executive compensation is reasonable:

  • the levels of compensation paid by similar organizations . . . for functionally comparable positions, with emphasis on comparable entities in the same community or region;
  • the need of the organization for the services of the individual whose compensation is being evaluated;
  • the individual’s background, education, training, experience, and responsibilities;
  • whether the compensation resulted from arm’s-length bargaining, such as whether it was approved by an independent board of directors;
  • the size and complexity of the organization, in terms of . . . assets, income, and number of employees;
  • the individual’s prior compensation arrangement;
  • the individual’s performance;
  • the relationship of the individual’s compensation to that paid to other employees of the same organization;
  • whether there has been a sharp increase in the individual’s compensation . . . from one year to the next; and
  • the amount of time the individual devotes to the position.

The Court noted that particular weight should be given to the type of charitable services provided by the entity, the geographic location, and the skills, duties, and competencies required of the executive to fulfill the entity’s charitable mission.

The Court stated that, with respect to compensation dependent on financial performance, as a general rule, the greater the percentage of an executive’s total compensation which is based on financial performance, the more likely it will be that the executive compensation package as a whole is unreasonable.  The Court, however, stated that there was no fixed percentage of performance-based compensation that would render a compensation structure unreasonable, and that it must be considered with all the enumerated factors.

In Pottstown, the trial court had found the compensation of the Hospital’s executives was reasonable.  The compensation package was determined by an Executive Compensation Committee of the Hospital at arm’s length as part of an annual review process, and that it had developed the incentive pay structure and base salary levels to retain its employees, given the added responsibilities the employees would take on.  The ultimate compensation package offered to the Hospital’s employees was based on the analysis of its consulting firm comparing the salaries at other similar institutions, and on the firm’s recommendations.  Furthermore, an expert in the field of compensation of healthcare executives had testified at trial that, even if the executives had received the maximum total compensation their bonus compensation package allowed (which they did not), it would have been within fair market value.  The School District did not present an expert witness, and no other evidence rebutted the Hospital’s expert’s conclusion.  Thus, based on its review of the record, the Supreme Court concluded that substantial evidence showed that the percentage of the overall compensation of the Hospital’s executives based on its financial performance, and their total compensation, was reasonable.

Accordingly, the Supreme held that the Hospital functioned free from private profit motive, upholding the trial court’s determination, and reversing the Commonwealth Court.

This case is welcome to the extent it recognizes that, although monetary transfers may occur between related entities, those transfers do not necessarily undermine an entity’s status as a charitable institution.  It also rightly recognizes that charitable institutions are free to set compensation comparable to for-profit institutions to compete for the talent necessary to run them effectively.  But, given that the burden is usually placed on the entity seeking the exemption, it is unclear to what evidence will be sufficient to satisfy the multiple factors set forth for determining whether compensation is reasonable.  These additional factors will also apply in determining whether that entity is entitled to a Pennsylvania sales tax exemption.  As always, non-profits should consult an attorney when seeking any tax exemption in Pennsylvania.

Please contact Adam Koelsch, Esq. at 717-237-5305 or Paul Morcom, Esq. at 717-237-5364 if you have any questions regarding the “purely public charity” exemption in Pennsylvania.

In CCP Berks, LLC v. Berks Cnty. Bd. of Assessment et al., 562-64, 570, & 595 C.D. 2024 (Pa. Cmwlth Ct.  Apr. 1, 2025), in a 2-1 decision, Commonwealth Court effectively declared that a party initiating a real estate tax appeal is unable to withdraw the appeal unless all parties agree.  In 2020, property Owners appealed the value of their property to the county Board of Assessment Appeals for tax year 2021, which the Board denied.  The Owners then appealed to the Court of Common Pleas, where the local School District intervened.  Later, in July 2022, the Owners filed a Discontinuance of their appeal, which then encompassed tax years 2021 and 2022.  In response, the School District filed a Petition to Strike the Discontinuance, which the Court of Common Pleas denied.

On appeal to the Commonwealth Court, the School District argued that it was entitled, as an intervenor and party to the assessment appeals, to insist that those appeals proceed to a final determination of value by the Court of Common Pleas, regardless of the Owners’ desire to abandon the appeals they had initiated.  The Owners argued that the Court of Common Pleas had appropriately applied, in its discretion, Pennsylvania Rule of Civil Procedure 229(c), which requires any party filing a petition to strike a discontinuance to demonstrate “unreasonable inconvenience, vexation, harassment, expense, or prejudice,” which the School District had not done.

The Commonwealth Court agreed with the School District.  The Court stated that, under 53 Pa. C.S. § 8855, a taxing authority has “the right to appeal assessments within its jurisdictions and to participate in assessments initialed by others,” and that nothing requires an authority to file its own appeal to appeal a subsequent order.  Moreover, the Court stated that the School District had retained the same rights it had regarding subsequent years’ assessments as in in the initial appeal, under 53 Pa. C.S. § 8854(a)(5), which provides for automatic appeal of subsequent tax years in pending appeals.  Thus, the Court held that the School District, as an intervenor, retained an interest in the appeal that it was entitled to protect by opposing the discontinuance.

According to the Court, this holding was supported by three prior cases:  First, in In re Appeal of Gateway School District, 556 A.2d 924 (Pa. Cmwlth. 1989), the Commonwealth Court had upheld the right of a taxpayer to continue appeals in the Court of Common Pleas of two subsequent tax years after a school district withdrew its initial appeal, based on an earlier version of the automatic appeal provision relating only to taxpayer appeals.  Second, in In re Appeal of Penn Hills, 546 A.2d 50 (Pa. 1988), the Supreme Court — relying on a local board rule comparable to 53 Pa. C.S. § 8855, allowing intervention as a party in an appeal — had upheld the right of a taxpayer to continue an appeal and receive a reduction at the board after the school district initiating the appeal had withdrawn it.  Third, in In re Appeal of Maoying Yu, 121 A.3d 576 (Pa. Cmwlth. 2015), the Commonwealth Court had concluded that a school district was not required to have filed its own appeal to argue that a taxpayer’s appeal at the Court of Common Pleas should not be discontinued, after the school district had in intervened in the appeal at the board.

The Commonwealth Court disagreed with the argument, relied upon by the dissenting opinion, that the School District could not oppose the discontinuance on the basis of a statement in its pretrial memorandum that it agreed with the Board, because the School District has clearly indicated that it was challenging the value of the assessments, and because the local rules stated that the memorandum was not a pleading that precluded the School District from changing its position.

Based on the above, the Commonwealth Court remanded the matter to the Court of Common Pleas to strike the Discontinuance and to determine the assessed value of the property.

Although acknowledging that it did not need to reach the issue, the Commonwealth Court nevertheless continued to address the applicability of Rule 229(c), holding that, consistent with prior case law, the Court of Common Pleas was able to apply, in its discretion, Rule 229(c), or any other rule of civil procedure, even though they were not directly applicable to real estate tax appeals.  However, the Court found that, contrary to the lower court’s opinion, the School District had demonstrated prejudice because it had been “lulled into forgoing an appeal” by its reliance on the automatic appeal provision of 53 Pa. C.S. § 8854(a)(5), depriving it of its statutory rights to appeal. This case poses some difficult questions for property owners.   No local rule or the rule of civil procedure can now prevent an intervening tax district from continuing an appeal, regardless of the property owner’s wishes.  Given that real estate tax cases remain pending in court for multiple years, it is inevitable that any appeal will result in the addition of subsequent tax years by operation of law.  Consequently, before appealing an assessment, an owner must decide for the next 1-2 years (or more), not only whether the property’s market value is likely to increase, but whether annual changes to the county’s common level ratio are likely to increase the property’s assessed value.  If such increases occur, the owner may be caught in a trap, unable to terminate an appeal it began, and providing a taxing district the means to increase the property’s value even though it had failed to take its own appeal.

Contact Adam Koelsch, Esquire at 717-237-5305, or Paul R. Morcom, Esquire at 717-237-5364 if you have any questions regarding this case or any assessment law issues.

Pennsylvania’s sales tax is imposed only on the “service fee” portion of charges for “employment agency services,” “help supply services,” and “interior office building cleaning services” (collectively, the “Services”).  See 72 P.S. §§ 7201(g)(6), 7204(51). The taxable “service fee” is the total charge for the Services less the “costs” of the supplied employee which are itemized or stated in the aggregate on “billings” from the vendor.  Historically, taxpayers requesting a refund of tax paid on the “employee cost” component of the Services were permitted to provide letters from vendors attesting to the cost of the supplied employee(s).  In Sales and Use Tax Bulletin 2025-01, the Pennsylvania Department of Revenue (“Department”) announced that, effective March 12, 2025, the Department will no longer accept such letters because “the law requires that the employee costs [be] itemized or stated in the aggregate on the billing….”  The Department advises taxpayers seeking refunds “to have the vendor issue a revised invoice with the employee costs specifically itemized or stated in the aggregate.”

It appears that the Department will continue to accept vendor attestation letters when auditing purchasers of such Services.  However, the Bulletin specifies that, if a taxpayer receives relief based on a letter from the vendor, “the vendor may be assessed a tax deficiency, plus interest and penalties if it is determined that the employee costs are inaccurate.” 

If you have any questions about the Department’s Bulletin, or any state or local tax issue, please feel free to contact Sharon Paxton (717-237-5393) or any member of the McNees SALT Group. 

The Internal Revenue Service (IRS) has recently released a new form, 15620, which will significantly impact the way taxpayers report certain transactions in relation to Section 83(b) elections.

What is an 83(b) Election?

An 83(b) election is a valuable tax strategy for individuals who receive property, such as restricted stock or LLC ownership interests, as compensation in exchange for services. However,  the property is still subject to vesting. By making an 83(b) election, the individual can lock in the tax liability at the time of transfer, which can result in significant tax savings if the property or stock increases in value over time. In addition, 83(b) elections also put a clear stake in the ground and begin the tolling period for long-term capital gain treatment.

Example of 83(b) Election tax savings

To illustrate, suppose an individual receives restricted stock valued at $500, but the rights do not vest for three years, and during that timeframe, the stock’s value increases to $2,000. By making an 83(b) election, this person can yield substantial tax savings, because not only will they pay tax on the $500 rather than the $2,000, but they will also be eligible for long-term capital gain treatment instead of having to wait an additional year from the date of vesting.

Risks of making an 83(b) Election

However, some risks are associated with making an 83(b) election. If the property or stock decreases in value, the individual will have already paid taxes on the higher value. Additionally, if the individual’s rights to the property never vest, they will not be able to recover the taxes paid.

Benefits of using Form 15620 for 83(b) Elections

The new IRS Form 15620 can now be used by taxpayers to make an 83(b) election. The form requires taxpayers to provide detailed information about the property or stock received, including the date of transfer, the total fair market value, and the amount of tax paid. The form must be filed within 30 days from the date the transfer occurs by mailing it to the IRS, and the taxpayer must also send a copy to the employer or person who granted the property or stock.

The new IRS Form 15620 is an important development for taxpayers who make 83(b) elections. By providing detailed information about the property or stock received (and its valuation at the time it is received), taxpayers can ensure they comply with IRS reporting requirements and avoid potential penalties. Understanding 83(b) elections is critical for individuals who receive property subject to vesting as compensation, and consulting with a tax professional is highly recommended before making an election under Code Section 83(b).

In an unreported panel decision of Armstrong Township v. Lycoming County Board of Assessment Appeals and Choice FuelCorp, Inc., 140 C.D. 2022 (Pa. Cmwlth. Ct. Apr. 5, 2024), the Commonwealth Court of Pennsylvania reversed the trial court’s order that had enforced a settlement agreement between Armstrong Township (the “Township”) and Choice FuelCorp, Inc. (“Choice”). This case sheds light on the critical aspects of settlement agreements and the necessity of a clear “meeting of the minds” for enforceability. Here, we break down the court’s rationale and implications for legal professionals.

Case Background

Choice purchased a property in Lycoming County in 2006, which was utilized as a fuel tank storage farm under a non-conforming use. In 2016, to bring the tanks back to operational status, Choice entered into a consent order and agreement requiring them to submit a market value report, which they reported as $3,700,000. The Township, noting a discrepancy between its assessed value of $237,180 and Choice’s reported market value, requested a reassessment by the Lycoming County Board of Assessment Appeals (“Board”). The Board, however, upheld the original assessment. The Township subsequently appealed to the trial court, which vacated the Board’s decision and set the property’s market value at $774,177.

Settlement Negotiations and Dispute

The parties entered into settlement negotiations during the litigation process. The Township claimed an agreement was reached with Choice for reassessed values for the years 2020 and 2021. However, Choice’s owner, Jason Weisz, promptly repudiated the proposed terms, leading to the Township’s motion to enforce the settlement. The trial court granted this motion, but Choice appealed, arguing there was no enforceable agreement due to the lack of mutual assent.

Court’s Analysis

Judge Lori A. Dumas, writing for the Commonwealth Court, focused on whether there was a “meeting of the minds” essential for a binding settlement agreement. The court highlighted several key points:

  • Lack of Mutual Assent:

    The correspondence between the parties, especially Weisz’s immediate repudiation of the terms, indicated ongoing negotiations rather than a finalized agreement. The court underscored that an email from the Township’s counsel asking for written confirmation of the settlement was an implicit acknowledgment that the agreement was not yet finalized.

    • Attorney’s Authority:

    The court also examined whether Choice’s attorney had the express authority to finalize the settlement. Given Weisz’s prompt denial and testimony indicating his disagreement with the terms, the court found no evidence of such authority.

    • Case Law Application:

    The court distinguished this case from the trial court’s use of case precedents like Mastrioni-Mucker v. Allstate Insurance Company, 976 A.2d 510 (Pa. Super. Ct. 2009) and Reed v. Pittsburgh Board of Public Education, 862 A.2d 131 (Pa. Cmwlth. Ct. 2004), where settlements were upheld due to clear mutual assent and agreed terms. In contrast, the evidence here pointed to significant miscommunications and lack of agreement on essential terms.

    Implications for Legal Practice

    This decision underscores the importance of clear, unambiguous communication and documentation in settlement negotiations. Legal professionals should ensure:

    • Documented Consent: All parties must explicitly agree to the terms in writing, and attorneys should secure clear, documented authority from their clients before finalizing agreements.
    • Clarity in Negotiations: Ambiguities and conditional acceptances should be clarified promptly to avoid disputes over whether a binding agreement exists.
    • Evidentiary Support:  In case of disputes, thorough documentation and credible testimony are crucial in demonstrating the presence or absence of mutual assent.

    Conclusion

    The reversal of the trial court’s decision in Armstrong Township highlights the judiciary’s stringent standards for enforcing settlement agreements. The ruling serves as a critical reminder for legal practitioners about the necessity of precise and unequivocal agreements in settlement negotiations to avoid protracted litigation and ensure enforceability. This blog post is based on the Commonwealth Court’s decision in the case referenced above and aims to provide legal professionals with insights into the court’s reasoning and the broader implications for legal practice.   If you have any questions regarding the implications of this case, or if you have any SALT issues, please contact Ryan Gonder, Esquire (717-237-5340) or any member of the McNees SALT Group.

    Allegheny County is no longer going to be the oddball Pennsylvania county when it comes to its annual assessment appeal deadline. On June 4, 2024, Allegheny County amended its Ordinance regarding annual assessment appeal deadlines so that for the 2025 tax year all annual assessment appeals shall be filed by October 1, 2024. Additionally, for years after 2025, the annual assessment appeal deadline changes to September 1. These are significant changes that need to be adhered to in order to timely file going forward.

    Historically, Allegheny County, with an annual assessment appeal deadline of March 31, was the only county in Pennsylvania (1 of 67) where you appealed your assessed value the year it was already effective. Hence Allegheny County and all of its taxing jurisdictions could never budget accordingly. Whereas every other county in Pennsylvania had annual assessment appeal deadlines of August 1, August 15, August 31, September 1, or the first Monday in October, which were well before the assessed values were actually in effect, i.e. January 1.

    The common level ratio for Allegheny County for the 2025 tax year is 52.7%, which is down from 54.5% for the 2024 tax year.

    If you have any questions about appealing your real commercial property in Allegheny County for the 2025 tax year, please contact Paul Morcom (717-237-5364) or any member of the McNees SALT Group.

    Pennsylvania real estate taxes are usually very large line items on any corporate balance sheet. Accordingly, you should be reviewing your assessed value(s) on an annual basis if you are a Pennsylvania commercial or industrial property owner or a lessee of a commercial or industrial property that pays the property taxes as part of your lease. A reduction in your property’s assessed value will have substantial impacts on your balance sheet for many years because Pennsylvania counties don’t perform periodic county-wide reassessments. Thus, if you feel your assessed value(s) are too high, you must timely file an annual assessment appeal in the county that the property is located.

    Unfortunately, there is no set annual assessment appeal deadline for all 67 counties in Pennsylvania. Every county has its own annual assessment appeal deadline.

    The annual assessment appeal deadline of August 1, 2024 for assessed values effective for tax year January 1, 2025 is quickly approaching for the following Pennsylvania Counties:

    Adams, Blair, Bucks, Butler, Cambria, Chester, Clarion, Crawford, Dauphin, Delaware, Erie, Fayette, Franklin, Indiana, Lackawanna, Lancaster, Lawrence, Lehigh, Luzerne, Monroe, Montgomery, Northampton, Susquehanna, Westmoreland and York.

    The annual assessment appeal deadline of September 1, 2024 for assessed values effective for tax year January 1, 2025 is on the horizon for the following Pennsylvania Counties:

    Armstrong, Beaver, Bedford, Bradford, Cameron, Carbon, Centre, Clearfield, Clinton, Columbia, Cumberland, Elk, Forest, Fulton, Greene, Huntington, Jefferson, Juniata, Lebanon, Lycoming, McKean, Mercer, Mifflin, Montour, Northumberland, Perry, Pike, Potter, Schuylkill, Snyder, Somerset, Sullivan, Tioga, Union, Venango, Warren, Washington and Wayne.

    There are a few oddball counties that have to be different and thus the annual assessment appeal deadline for Berks County is August 15, 2024 and Wyoming County is usually August 31, but because this year August 31 falls on a Saturday, you will have until September 2, 2024 to file an annual assessment appeal.  Philadelphia County is not a specific date, but instead the annual appeal deadline is the first Monday in October, which is the 7th this year.

    Each county has its own separate set of local rules pertaining to annual assessment appeals that need to be navigated in order to successfully file an annual assessment appeal.  If you own or lease commercial or industrial properties in Pennsylvania, please make sure that you are aware of these appeal deadlines. Additionally, if you are not sure if you should file an appeal on your property, please contact Paul Morcom at 717-237-5364 or any member of the McNees Wallace & Nurick LLC SALT team to determine if an appeal is warranted for tax year 2025.

    A little known statutory change now allows for certain fraternal societies to obtain tax exempt status in Pennsylvania.

    In Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. 1985) (“HUP”), the Pennsylvania Supreme Court set forth the following five-pronged test to determine whether an entity qualifies as “purely public charity” under the Pennsylvania Constitution and is therefore entitled to exemption from certain taxes:

    • Does the entity advance a charitable purpose?
    • Does the entity donate or render gratuitously a substantial portion of its services?
    • Does the entity benefit a substantial and indefinite class of persons who are legitimate subjects of charity?
    • Does the entity relieve the government of some of its burden?, and
    • Does the entity operate entirely free from private profit motive?

    In 1997, the General Assembly enacted the Institutions of Purely Public Charity Act, also known as Act 55, in response to the court system’s perceived lack of consistency in applying the HUP test.  Act 55 codified five HUP prongs but defined how prongs were met and added other requirements.  The purpose of Act 55 was to bring objectivity and consistency.

    Regarding the third prong above, Act 55 states that an institution does not benefit an indefinite class of persons who are legitimate subjects of charity if: (i) the institution does not qualify as a 501(c)(3) non-profit; and (ii) the institution is, among other things, qualified under 501(c)(7) as a “club organized for pleasure or recreation” or 501(c)(8) as a “fraternal beneficiary society, order or association.”  Based on this language alone, many fraternal associations, such as, for example, Masonic lodges, would not qualify as institutions of purely public charity and would not be entitled tax exempt status in Pennsylvania.

    However, effective December 13, 2023, the General Assembly enacted an obscure provision into the Fiscal Code as part of their budget negotiations, stating that, notwithstanding the language in Act 55, an institution is considered to benefit a substantial and indefinite class of persons who are legitimate subjects of charity if:

    • the institution is a domestic fraternal society, order or association, that operates under a lodge system, the net earnings of which are devoted to religious, charitable, scientific, literary, educational and fraternal purposes and qualifies for an exemption from taxation under 26 U.S.C. § 501(c)(8) and (10) [] and:
    • the organization has been operating in this Commonwealth for at least 100 years upon the effective date of this subparagraph; and
    • the organization has not been issued a license under the act of April 12, 1951 (P.L.90, No.21), known as the Liquor Code.

    (2) the institution is a title-holding organization that qualifies for an exemption from taxation under 26 U.S.C. § 501(c)(2) that is wholly owned or controlled by one or more qualifying fraternal organization described under paragraph (1).

    72 P.S. § 102-L.

    This new language now opens the door for certain long-standing fraternal societies to qualify for sales and real estate tax exemptions in Pennsylvania.

    If you have any questions regarding this statutory change, or if you have any SALT issues, please contact Adam Koelsch, Esquire (717-237-5305) or any member of the McNees SALT Group.

    In Mixell v. Cumberland County Board of Assessment Appeals, 313 A.3d 330 (Pa. Commw. Ct. 2024), the Commonwealth Court held that the Board of Assessment Appeals (“Board”) had failed to show proof of mailing sufficient to establish that a property owner had received hearing notices in her property tax appeal.

    The property owner had filed an appeal to restore the so-called “clean and green” preferential assessment on her property after it was subdivided and the county assessed roll-back taxes on it. The Board supposedly mailed hearing notices to the owner, but she did not appear at the hearing. The Board then issued a decision denying the appeal on the basis that the owner had abandoned it under 53 Pa.C.S. § 8844(e)(1).  That statute provides that any appellant who fails to appear for the hearing is presumed to have abandoned the appeal unless the board has agreed to reschedule the hearing date.

    The property owner appealed to the trial court, claiming that she had been unable to attend the scheduled hearing. The Board filed preliminary objections, asserting abandonment as a basis to dismiss the appeal, and attaching the hearing notice and the decision. In response, the owner filed an answer and new matter, asserting that she never received the hearing notices.

    Under the “mailbox rule,” proof of mailing raises a rebuttable presumption that a notice mailed was received by the intended recipient.  Once it is shown that a notice was mailed, the rule is difficult to rebut, because caselaw has established that mere testimony from the intended recipient that the notice was not received is insufficient.

    Based only on the filings, the trial court concluded that the property owner had received the hearing notices based on the mailbox rule and dismissed the appeal.

    On appeal, however, the Commonwealth Court concluded that there was insufficient evidence to sustain the preliminary objections based on the mailbox rule. The only evidence in support of the rule was the hearing notices themselves, which showed a date but bore no other indication that the notices were in fact mailed. There was no testimony or other evidence showing that the notices were taken to a regular place of mailing.  The Commonwealth Court concluded that, in any event, even if the dates on the notices constituted proof of mailing, the trial court had not allowed the property owner an opportunity to rebut the presumption of receipt.

    As a result, the Commonwealth court vacated the trial court’s order and remanded it back to the trial court for a hearing on the mailbox rule.

    The mailbox rule is often invoked by boards and taxing authorities to deny appeals on the basis of missed deadlines.  Consequently, understanding how best to rebut the rule’s powerful presumption often means the difference between winning and losing a case.

    If you have any questions about this Decision or any state or local tax matter, please feel free t contact Adam Koelsch (717-237-5305) or any member of the McNees SALT Group.

    In HUF Restaurant, Inc. v. Commonwealth, Docket No. 394 F.R. 2018 (04/19/2024), a three-judge panel of the Commonwealth Court of Pennsylvania ruled that HUF Restaurant, Inc. (“HUF”), which had purchased restaurant assets and a liquor license from Zola New World Bistro, Ltd. (“Zola”) in a bulk sale transaction, was liable for unpaid sales and use taxes owed by Zola.  HUF had obtained a lien certificate from the Pennsylvania Department of Revenue (“Department”) prior to closing which indicated that there were no outstanding state tax liens against Zola.  In addition, the Department had issued a tax clearance in conjunction with the transfer of a liquor license from Zola to HUF.

    The Department had advised Zola that it would be subject to a sales and use tax audit after Zola and HUF had entered into an agreement of sale, but prior to the closing date.  The audit subsequently resulted in a sales and use tax assessment against Zola.  Zola filed a timely appeal with the Department’s Board of Appeals but did not file a further appeal after the Board denied relief.  HUF was not aware of the sales tax audit prior to closing on the transaction and only became aware of the tax assessment after the appeal period had lapsed and the Board of Appeals’ decision had become final.  Although Zola was contractually responsible for this tax liability under the agreement of sale, it failed to pay the assessment.  The Department therefore issued a bulk sale notice of assessment against HUF for Zola’s sales and use tax liabilities for the pre-closing period.

    HUF appealed the Department’s assessment against it, and the administrative boards denied relief on the basis that no bulk sale certificate was obtained before HUF’s purchase of Zola’s assets.  HUF argued that it should not be responsible for the disputed tax liability because the Department had cleared HUF and Zola of any taxes owed as part of the liquor license transfer process.  HUF further claimed that the Commonwealth should be estopped from pursuing the assessment because HUF had justifiably relied on this tax clearance during its purchase of Zola’s assets, and the Department failed to inform HUF of the pending audit when it certified to the PLCB that Zola did not owe any state taxes at that time.  The Court concluded that HUF’s failure to obtain a bulk sale certificate pursuant to 72 P.S. § 1403(a) was fatal to its appeal.  The Court explained that there are no exceptions to the statutory bulk sale certificate requirement and HUF could not “rely upon the clearance provided during the liquor license transfer process because that involved a separate statutory scheme and the clearance provided was of limited scope.”   

    If you have any questions about this Decision or any state or local tax issue, please feel free to contact Sharon Paxton (717-237-5393) or any member of the McNees SALT team.