In Circle of Seasons Charter School v. Northwestern Lehigh School District, 273 A.3d 23 (Pa. Cmwlth. 2022), the Pennsylvania Commonwealth Court reversed the trial court decision, and the matter was remanded to the common pleas court to transfer the matter to the County of Lehigh Board of Assessment Appeals via a nunc pro tunc appeal in order to consider the merits of Circle of Seasons Charter School’s (“Circle of Seasons”) challenge to Lehigh County’s (“County”) assessment notices and the Northwestern Lehigh School District’s (“School District”) tax invoices.
In May of 2017, Circle of Seasons acquired two parcels of land from Penn State’s Lehigh Valley campus to be exclusively used for charter school activities. At the time of the purchase, the properties were tax exempt because they were part of the Lehigh Valley campus of Pennsylvania State University. On or around June 5, 2017, County issued property assessment notices that revised the tax status of these properties from “non-taxable assessed” to “taxable assessed,” effective January 1, 2018. The assessment notices were undated, but stated that any appeal of the assessment revision had to be filed by July 17, 2017 or an “annual appeal” could be filed by August 1, 2017.
In July of 2017, the School District issued two invoices to Circle of Seasons for the 2017 and 2018 tax years, totaling nearly $112,000. Circle of Seasons asserted the invoices were unlawful because the properties’ tax status did not change until January 1, 2018 and it never received a proper notice from the County revising the tax status of the properties because the notices were not dated, making it difficult to decipher the deadline to file an appeal of the assessments.
On June 15, 2018, Circle of Seasons refinanced the properties and at closing paid $125,000 for “delinquent taxes” to the School District. A month later Circle of Seasons filed an appeal to the County of Lehigh Board of Assessment Appeals (the “Board”). A hearing was held before the Board on September 20, 2018 which agreed the properties were non-taxable effective June 1, 2019, but made no decision on the taxes due to be paid at the end of 2018.
On June 6, 2019, Circle of Seasons filed a formal demand for a refund with the School District. After the School District failed to respond, Circle of Seasons filed a complaint with the trial court on December 17, 2019 asserting the Tax Refund Law and unjust enrichment. The School District filed preliminary objections arguing that Circle of Friends failed to exhaust its statutory remedies under the Consolidated County Assessment Law and thus the trial court lacked subject matter jurisdiction over Circle of Seasons’ complaint. The trial court agreed and dismissed the complaint with prejudice.
On appeal, the Commonwealth Court began its analysis with the statutory definition and purpose of charter schools and noted that real property used by a charter school for any purpose is exempt from all types of real estate tax and that once a charter school demonstrates it is using its property for purposes consistent with the charter school law, the burden of proof shifts to the school district to showcase otherwise.
The Commonwealth Court then proceeded to explain Pennsylvania’s Assessment Law and the Tax Refund Law. Under these laws, a defective notice received does not automatically void the assessment. Rather, the aggrieved party has a right to a hearing. In instances where the aggrieved party pays the taxes in dispute and subsequently seeks a refund, and if the school district refuses to refund the money paid, the right to a hearing converts to a right to file suit in the court of common pleas in the county the school district resides.
As applied to Circle of Seasons, the notices were defective because they were not dated, and the School District refused to refund the money paid for the 2017 and 2018 tax years, even though Circle of Seasons’ properties were deemed non-taxable in 2019. The School District argued Circle of Seasons waived its right to challenge the defective notice because it paid the real estate taxes. The Commonwealth Court held that the trial court erred in dismissing the action with prejudice and should have considered whether Circle of Seasons should have been able to file an appeal nunc pro tunc due to the County’s administrative error.
Due to the fact the notices were not dated, this gave rise to a level of administrative negligence on the County’s part that warranted a nunc pro tunc hearing. As such, the proper resolution for the trial court was to transfer the matter to the appeals board, rather than dismiss it with prejudice. Accordingly, the Commonwealth Court reversed the trial court’s dismissal with prejudice and remanded to the trial court with specific directions to transfer the matter to the appeals board for the tax years in dispute.
The take away: Circle of Seasons serves as an important reminder to both taxpayers and taxing authorities alike. Administrative procedures are put in place to preserve taxpayers’ rights. Whether sending an assessment or receiving one, it behooves one to be cognizant of administrative layouts to either avoid years of litigation or assert your rights, respectively, from the onset of a potential tax dispute.