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PA Auditor General Issues Special Report Regarding Potential Lost Revenue from Tax Exempt Properties

Jan 21, 2015

In December, Pennsylvania’s Auditor General Eugene DePasquale released a special report on property tax exemptions that might be costing local municipalities, counties and school districts billions of dollars a year.  The Pennsylvania Department of the Auditor General wrote the report in an effort to provide taxpayers with data on the potential tax revenue from the properties that are currently exempt from property taxes.

The special report found that more than $1.5 billion in property tax revenue is potentially lost in the 10-county sample examined for the report.  The report reflects potential property tax liability in the county, municipality and school district where each property is located.

The special report also provides a background regarding the ongoing tug-of-war between the Pennsylvania General Assembly and the Pennsylvania Supreme Court to define a “purely public charity.”  When an organization is defined as a purely public charity they are exempt from property taxes at all levels, including at the county, municipal, and school district levels.  Currently, as defined by the Pennsylvania Supreme Court, organization must meet all five factors of the “HUP Test” (see Note 1) in order to be considered a purely public charity.  However, the Pennsylvania General Assembly at this time is attempting to pass a constitutional amendment to give the Pennsylvania legislature the sole authority to define a purely public charity.

The Auditor General report concludes that, although the debate over how purely public charity is defined is ongoing, taxpayers, local government, school districts, and charitable institutions themselves should all have a say in the debate on how a purely public charity is defined.

Click here for the PA Auditor General’s “Review of Potential Lost Revenue Due to Property Tax Exemptions” report.

Note 1 - The five factors of the HUP Test are the following:

  1. advances a charitable purpose
  2. donates or renders gratuitously a substantial portion of its services
  3.  benefits a substantial and indefinite class of persons who are legitimate subjects of charity
  4. relieves the government of some of its burden
  5. operates entirely free from private profit motive.

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Brian C. Collins

Brian Collins is an Audit Senior Manager with over 15 years of public accounting experience. He performs outsourced accounting services, audit, review, compilation, and tax services for a wide range of clients in various industries, including not-for-profits.

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