Community Benefit Requirement
Pennsylvania requires “institutions of purely public charity” to provide community benefits as a condition of tax exemption.

In 2012, the Supreme Court of Pennsylvania ruled that to qualify for a property tax exemption an organization must first meet the definition of an institution of purely public charity under Pa. Const. art. VIII, § 2(a)(v). An organization will qualify as a purely public charity under the Pennsylvania Constitution if it: (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, and (5) operates entirely free from private profit motive. Hospital Utilization Project v. Commonwealth, 507 Pa. 1, 487 A.2d 1306, 1317 (Pa. 1985).

If an organization satisfies the constitutional standards, only then does a court look to the Institutions of Purely Public Charity Act to determine eligibility for property tax exemption under the statutory requirements. Mesivtah Eitz Chaim of Bobov, Inc. v. Pike County Board of Assessment Appeals, 615 Pa. 463, 44 A.3d 3 (Pa. 2012).

Pennsylvania’s Institutions of Purely Public Charity Act establishes specific criteria that a nonprofit corporation must satisfy in order to qualify as an “institution of purely public charity” that is exempt from Pennsylvania property and sales tax. These criteria include a requirement that the organization “donate or render gratuitously a substantial portion of its services” to benefit the community. 10 Pa. Stat. §375(d). In addition, the Hospital & Healthsystem Association of Pennsylvania has developed voluntary guidelines for hospital charity care and financial assistance policies: Charity Care and Financial Aid Guidelines for Pennsylvania Hospitals (2004).