Achieving Tax-Exempt Status Now Depends on HUP Test

On April 25, the Pennsylvania Supreme Court issued a potentially explosive decision to any nonprofit organization possessing tax-exempt status or seeking to qualify for tax-exempt status as a “purely public charity” in the commonwealth of Pennsylvania. In Mesitvah Eitz Chaim of Bobov v. Pike County Board of Assessment Appeals , No. 16 MAP 2011, the Pennsylvania Supreme Court held that any nonprofit organization seeking to qualify for tax-exempt status as a purely public charity must, under Article VIII, §2 of the Pennsylvania Constitution, first meet all of the elements of the test announced in Hospital Utilization Project v. Commonwealth , 487 A.2d 1306, 1317 (Pa. 1985).

In so holding, the court rejected the notion that the Pennsylvania General Assembly, through the Institutions of Purely Public Charity Act, 10 P.S. §§371-385 (Act 55), could legislatively relax the minimum constitutional standard for a purely public charity previously set by the Supreme Court in Hospital Utilization Project .