Cozen O’Connor: Stephen Cozen Represented the City and Board of City Trusts in Win Before the PA Supreme Court

Stephen Cozen Represented the City and Board of City Trusts in Win Before the PA Supreme Court

Monday, November 4, 2013

Steve Cozen achieved a major victory before the Pennsylvania Supreme Court on behalf of the Board of City Trusts and the city of Philadelphia. In an unanimous decision, the Pennsylvania Supreme Court held that Girard Estate is tax immune and as a consequence hundreds of millions of dollars of tax exempt bonds are no longer in limbo.

Girard College, which is located on the Girard Estates, was established by an unprecedented act of American philanthropy. The school was constructed and endowed from the fortune of Stephen Girard (1750-1831), a French immigrant who was believed to be the wealthiest man in America at the time of his death. The money he left to create Girard College was the largest private charitable donation up to that time in American history. Girard directed the city to use his enormous gift to build a school for poor, orphan or fatherless white boys who would live on campus. Today, Girard is a full-scholarship boarding school for academically capable boys and girls of all walks of life and races from qualified families of limited financial resources. In the face of losing its tax exempt status, Girard Estates and the college, and many other charitable institutions in the commonwealth, would not be able to afford the property taxes, and their ability to sell tax exempt bonds would be irreparable.

This case arises from an assessment dispute over property owned by Girard as investment property in Cumberland County. The property is leased to the Pennsylvania Office of the Attorney General. In 2002, Cumberland County assessed taxes against the property. The Board of City Trusts filed for an exemption, asserting immunity as a state agency. The County Board of Assessment Appeals denied the Board’s application. Subsequently, a Cumberland County judge reversed and found that the Board was a state agency and was immune from taxation. The decision was then appealed to the Commonwealth Court.

The case stems from a Cumberland County investment property owned by the Girard Trust, which it leased to the Pennsylvania Office of the Attorney General. In 2002, the county assessed taxes against the property. The Board of the City Trusts filed for a tax exemption, asserting immunity as a state agency. The Cumberland County Board of Assessment Appeals denied the board’s application. Thereafter the Cumberland County judge found the board was a state agency and immune from taxation. The decision was the appealed to the Commonwealth Court.

The Commonwealth Court’s ruling echoed a 1958 decision from the state Supreme Court that found Girard College, not the board, to be a private charity, effectively removing any tax exempt status.

Steve’s argument before the Pennsylvania Supreme Court focused on a 143-year-old statute creating the Board of City Trusts, which has been responsible for executing the will of Stephen Girard since his death in 1831, state that “Neither the Orphans’ Court in 1958 nor the Commonwealth Court has the right to nullify an actor of the legislature.” Pointing to a body of federal precedent and noting a 1957 U.S. Supreme Court decision, Steve argued that the board was an “agency of the state of Pennsylvania.”

The Pennsylvania Supreme Court was unanimous in its agreement with Steve, stating “an arm, agency, subdivision, or municipality of the commonwealth enjoys sovereign immunity from local real estate taxation. Property owned by the commonwealth is presumed to be immune, with the burden on the local taxing body to demonstrate its taxability.” The court’s opinion was written by Chief Justice Castille.

The Court’s decision to uphold Girard’s tax immunity allow the trust to continue to pursue it historic charitable mission to educate children in need, which to date has provided education to 22,000 Girard College graduates over its 165-year history