Constitution question will affect local tax-exempts

It’s a long road from proposal to passage of legislation to alter Pennsylvania’s constitution.

A bill must first pass both houses of the state General Assembly as a joint resolution. If passed, the proposed amendment must then be published three months prior to the next election. After the election, the newly seated session of the assembly must again pass the bill. If it makes it through second passage, the proposal is then published again three months prior to the next election and included on the ballot as a referendum for public vote. Only if passed by the electorate does the change become law.

Further, an amendment can only be submitted once every five years, making it a long wait for supporters of any proposal that doesn’t make it through the process to try again.

Of course, changing the document which serves as very bedrock of state law isn’t meant to be easy.

This year however, the governor has accounted for publication of three separate proposed constitutional amendments in his proposed budget. The proposed budget allots more than $5 million toward advertising the proposals in two newpapers in each of Pennsylvania’s 67 counties.

One, an effort to eliminate the Traffic Court of Philadelphia to bring judicial structure into line with the rest of the commonwealth, probably won’t elicit much excitement in Warren County. Another to change the mandatory retirement age for judges in the state could elicit some strong emotions; while the last, a proposal to hand power to decide what constitutes a purely public charity eligible for property tax exemption, could have very real impacts for county residents.

State Rep. Kathy Rapp weighed in on all three proposals with responses generally proportional to the potential impact of each could have locally.

The issue she was most vocal about was one that hits close to home, property taxes.

On March 20 of last year, the Pennsylvania Senate passed Senate Bill 4, which aims to settle once and for all which branch of state government, the legislative or judicial, defines what constitutes an institution of purely public charity. The state House of Representatives followed suit in June.

In 2012, the Pennsylvania Supreme Court denied public charity status, and therefore property tax exemptions, to Camp Mesivtah in Pike County.

In the case, the Pike County Board of Assessment had denied tax exempt status for a property used as a summer camp by Mesivtah Eitz Chaim of Bobov, Inc., which is related to an orthodox Jewish community in Brooklyn. The group used the camp primarily for lectures and classes on orthodox Judaism.

Mesivtah appealed the decision, first to trial court, which also denied the exemption, and then to the Commonwealth Court, which upheld the trial court decision. In its ruling, the Commonwealth Court cited the test outlined in the Hospital Utilization Project vs/ Commonwealth decision of 1985, commonly known as the HUP test.

Mesivtah again appealed, claiming that, while it did not meet the HUP test requirements defining a purely public charity, it did meet the requirements set down by the General Assembly in the Purely Public Charity Act of 1997. Mesivtah argued that the newer law trumped the older court decision.

Eventually, the issue made its way to the Pennsylvania Supreme Court, which upheld the original denial on the basis that the new law did not overrule the earlier court decision as it was made in deferral to the language of the state constitution.

The court justified the ruling by saying that, while the legislature could set limits on qualification as a purely public charity, this power was limited to qualifications which did not include exemptions prohibited by judicial decision. If the legislature enacts a statutory definition of what constitutes a purely public charity, it only has the weight of statutory and not constitutional law as the judiciary has sole power of constitutional interpretation.

Such a law, the court ruled, could require organizations to meet the qualifications set out in it, but the organization would still need to meet the qualifications set out by the court in the HUP test. In cases where the qualifications conflict, the court ruled, the HUP decision takes precedence as it has a constitutional rather than statutory basis.

The ruling left the legislature with only one option if it wanted to overrule the HUP test, amending the state constitution, either to define a purely public charity as it saw fit or to give the legislature constitutional authority to define a purely public charity. Senate Bill 4 seeks to do the latter.

“By elevating its own judgment above the will of the General Assembly, the court has created uncertainty as to the qualifications for public charities in Pennsylvania,” a co-sponsorship memorandum to Senate Bill 4 reads. “Charitable organizations statewide could have their public charity status called into question based on this decision.”

It’s an issue familiar in Warren County, where the county board of assessment has revoked a number of organization’s standing as institution of purely public charity. In fact, the co-sponsorship memorandum to Senate Bill 4 specifically cites Warren General Hospital, the Warren County YMCA and other organizations that faced revocation by the board of assessments.

The bill would amend the Pennsylvania Constitution to include a clause reading, “The General Assembly may, by law: Establish uniform standards and qualifications which shall be criteria to determine qualification as institutions of purely public charity…”

In effect, the change would give the legislative branch explicit constitutional power to decide what constitutes a purely public charity.

“This has an impact on some of our local entities that our county is trying to tax,” Rapp said. “This would establish uniform standards and qualifications to determine which ones are purely public charities. As a member of the finance committee we have had hearings on this.”

She supported the measure largely on the basis of what the entities facing revocation of their tax exempt status in the county provide.

“When you have entities like a YMCA and a rural hospital, and in most counties they are deemed tax-exempt, and then you have one county in our region that wants to tax those entities it becomes, it’s not even fair and it’s a burden,” Rapp said. “These entities have to prove that they are providing services to the community above and beyond. I think our local Y and our hospital do a great job of their community involvement and providing services to the community. For example, our Y has a scholarship program for every seventh grader there involved in other community activities.

“A lot of school districts in the state of Pennsylvania have their own swimming pools. We all know that the kids from Warren County, if they want to be on a swim team they go to the Y. There’s a fee for that service, but still it’s a service. We wouldn’t have swim teams. So they are providing service to the community and I am supporting the bill. I did support the bill.”

She also implied the revocation of the entities’ tax status may have been misguided to begin with.

“Typically what happens when these types of entities are deemed taxable, they’re looking at the salary of the administrators,” Rapp said. “People perceive that because someone is the head CO (company officer) that they’re just sitting at their desk and not really working when there’s really a lot of responsibility in that position.”

While she supported the proposed charity amendment, Rapp does not support a proposed change to the mandatory retirement age of Pennsylvania judges.

“I voted no on that because a specific judge wanted to extend his time,” she said. “That does provide for an increase in the mandatory retirement age from 70 to 75 years-old. That’s (for) all judges, the (state) Supreme Court right down to the justice of the peace.”

The measure, House Bill 79, passed the House in June of 2013 and the Senate in October.

“Mandatory retirement is generally unlawful in the United States for most industries and occupations,” the bill’s co-sponsorship memorandum reads. “Many states and the federal judiciary have no mandatory retirement age for judges. This results in a system that is arguably less discriminatory and allows voters the right to elect and retain judges of their choice regardless of age. Further, raising the retirement age would save the state’s retirement system money. Judges who have been a judge for at least ten years have a 3 percent multiplier of the retirement as opposed to a 4 percent multiplier for judges in their subsequent terms and thus save the government money. By giving judges more time on the bench, the Commonwealth and its citizens will benefit from the knowledge, experience, and temperament of seasoned jurists. The extended retirement age will also serve to attract qualified legal practitioners to run for the bench. The possibility of serving an additional five years on the bench may entice them to leave lucrative private legal practices at the height of their careers and enter public service…. the life expectancy of the average person in 1968, when the Pennsylvania Constitution was most recently revised, was approximately 70 years. By contrast, the current life expectancy is approximately 78 years because of medical advancement and healthier lifestyles. Accordingly, it seems appropriate to update our Constitution to reflect this new reality by changing the mandatory retirement age for our judges to 75 years old.”

Finally, Senate Bill 333 would eliminate the Traffic Court of Philadelphia, the only such court in the state. It would bring the city’s judicial hierarchy into line with the rest of the state, where traffic issues are handled at the magisterial district level.

“The other one is to eliminate the traffic court of Philadelphia,” Rapp said of the final amendment proposal. “This was Sen. Pileggi’s bill that was passed. Again, it’s doing away with the traffic court because in every other county those infractions are heard before a district magistrate.”