Hospital Property Taxable upon the Sale of Assets
A divided panel of the Commonwealth Court held that the assets of a charitable hospital became taxable upon the date of a sale of the property to a for-profit entity and not on the first day of the coming tax year. In Re Appeal of Springfield Hospital, ex rel. Prospect Crozer, LLC, No. 191 C.D. 2017 (Pa. Commw. Feb. 13, 2018). The panel first rejected an argument that the judges of the Delaware County Court should recuse themselves because one judge served on the board of a foundation of an affiliated entity. The issue was waived because the taxpayer waited too long to raise the issue. On the merits, the court held that the tax assessment day rule remains applicable in a second class county, notwithstanding the enactment of 1978 amendments to the General County Assessment Law (GCAL).
Under the common law rule, a change in an exempt status of an entity takes effect for tax purposes on the first day of the coming tax year, not on the day of the change. The rule was changed for certain counties by the GCAL, but not for second class counties. Delaware County is a second class county. Therefore a change in tax status of a taxpayer becomes effective on the first day of the next year, not on the date of the change. The majority nonetheless held that the effective date of the sale of the nonprofit hospital’s assets on July 1 was the applicable date on which the property became subject to real estate tax, not January 1 of the coming tax year. The majority held that a judicial order enforcing a PILOT agreement modified what would otherwise be the tax assessment day rule.
A dissenting judge stated that the order could not change the tax day rule because the Consolidated County Assessment Law (CCAL) of 2010 expressly stated the terms under which changes could be made to the tax status during the tax year and a sale of assets was not among them. The majority stated that the effect of Section 8841 of the CCAL was not raised in the taxpayer’s Statement of Matters Complained of on Appeal and therefore could not be argued on appeal. The dissenting judge stated that the taxpayer had consistently raised the issue of the effective date of the change and therefore citation to Section 8841 was irrelevant.
Transit Authority Property Immune from Tax
A panel of the Commonwealth Court held that property owned by a transit authority and used as part of a public transit facility was immune from real property taxation. In re Appeal of City of Lancaster ex rel. Property of Red Rose Transit Authority, No. 665 C.D. 2017 (Pa. Commw. Jan. 3, 2018) (unreported). The transit authority was a municipal authority formed under the Municipality Authorities Act of 1945. The parcel in question was used as a passenger waiting area, parking garage, bus bays, and a roadway to permit bus entry and exit onto the main street. The parcel was physically integrated into the transit authority’s Queen Street Transit Center. The court held that the property was immune from tax as governmental property. It was used for a public purpose that was within the authorized purpose of the transit authority. Therefore, the property could not be subject to local real property taxes.
Remand Ordered to Determine Railroad Property
A panel of the Commonwealth Court remanded an appeal to the trial court to specify what portions of an approximately 85-acre tract were subject to the Public Utility Realty Tax Act Tax (PURTA Tax). Lehigh Valley Rail Management LLC v. County of Northampton Revenue Appeals Board, No. 2531 C.D. 2015 (Pa. Commw Feb. 6, 2018). PURTA subjects utility realty to the state tax in lieu of local real property taxes. However, the statute excepts certain items from taxable property. Excepted property is not taxable for PURTA purposes and therefore is not part of the formula for distribution of PURTA taxes to localities. The 85 acres were used mostly for intermodal facilities. Such facilities enabled the railroad to move rail-ready containers from one train to a truck, a truck to a train, or between trains. The court reiterated that such facilities are taxable for PURTA purposes as they are part of the real estate necessary for the operation of the railroad. However, certain portions of the 85 acres were used for an employee parking lot and an office trailer. The court directed that the lower court quantify what acreage was devoted to such purposes and to carve out those portions from the PURTA exemption.
Marina Not Immune from Property Tax
A panel of the Commonwealth Court held that property owned by the Erie-Western Pennsylvania Port Authority and leased to a partnership that operated two private marinas was not immune from taxation, Bay Harbor Marina Limited Partnership v. Erie County Board of Assessment Appeals No. 1377 C.D. 2016 (Pa. Commw. Jan. 20, 2018). The authority was formed under the Third Class City Port Authority Act. Preliminarily, the court held that the lessee of the property had standing to appeal an assessment of the property. Further, contrary to the holding below, the authority was a proper party to the proceedings. On the merits, the court affirmed that most of the property was not immune from taxation. Since the port authority was a public body, the property was immune unless it could be shown that it was not used for its authorized purposes. The burden was on the taxing authority to prove that the use was not as authorized. The court held that the authorized purpose was to operate port facilities. The operation of private marinas did not fall within that language. However, some portions of the property were open to the public. The court remanded the matter for a determination of the extent to which there was a public use of the property. Otherwise, the property was taxable.