Masonic Temple Association of Lebanon, Pennsylvania, v. Lebanon County Board of Assessment Appeals No. 2015-0960

Civil Action-Law-Tax Assessment Appeal-Real Property-Exemption from Taxation-Purely Public Charity-Charitable Purpose

Plaintiff, an entity formed in 2007 by members of the Mt. Lebanon and Mt. Olive lodges to facilitate joint ownership of a property located at 499 South 14^th Avenue in South Lebanon Township, Pennsylvania, filed an appeal from the Lebanon County Board of Assessment Appeals’ determination to deny Plaintiff’s Application for Exemption of Real Estate Tax relating to that property on the basis that Plaintiff is a purely public charity.

1. The Pennsylvania Constitution authorizes the General Assembly to exempt institutions of purely public charity from taxation. Pa. Const. Art. VIII, § 2(a)(v). However, the Pennsylvania Constitution indicates that only the portion of the real property of the institution that actually and regularly is used for the purposes of the institution is subject to exemption.

2. An entity seeking exemption from taxation bears the affirmative burden of proving that it is entitled to the exemption.

3. In order to qualify for an exemption, the entity must prove that: (1) it is a purely public charity; and (2) the property for which it seeks exemption is necessary for the occupancy and enjoyment of the institutions so using it. 72 P.S. § 5020-204(a)(9). The Pennsylvania Supreme Court has indicated that an institution is a purely public charity if: (1) it advances a charitable purpose; (2) it donates or renders gratuitously a substantial portion of its services; (3) it benefits a substantial and indefinite class of persons who are legitimate subjects of charity; (4) it relieves the government of some of its burden; and (5) it operates entirely free from private profit motive.

4. Pursuant to the Institutions of Purely Public Charity Act, 10 P.S. § 371 et seq., an organization advances a charitable purpose if it is organized and operated to accomplish any of the following: (1) the relief of poverty; (2) the advancement and provision of education; (3) the advancement of religion; (4) the prevention and treatment of disease; (5) governmental or municipal purposes; or (6) the accomplishment of a purpose that is recognized as important and beneficial to the public and that advances social, moral or physical objectives. § 375(b).

5. While Plaintiff sought to establish that all freemason organizations that utilize Masonic Temple Association owned property meet the criteria of purely public charities because those organizations pay dues to organizations that operate and/or donate to charities, the salient question before the Court is not whether the various Masonic organizations that utilize the property of the Masonic Temple Association constitute purely public charities qualifying for a tax exemption. Rather, the question is whether this particular Plaintiff is entitled to the exemption as a purely public charity.

6. Based upon the evidence presented that Plaintiff’s sole purpose is to hold title to real property located at 499 South 14^th Avenue, the prohibition in Plaintiff’s bylaws that prohibit Plaintiff from distributing earnings or funds to any organization or individual except to its lodges for private social or mutual benefit organizations and Plaintiff’s operations essentially that advance collegiality and fellowship such that a significant portion of its efforts and meetings are devoted to dealing with membership, social and fellowship objects, Plaintiff is not a purely public charity so as to entitle it to exemption from taxation of its real property.

L.C.C.C.P. No. 2015-0960, Opinion by Robert J. Eby, Senior Judge, November 23, 2015.

IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY, PENNSYLVANIA CIVIL DIVISION NO. 2015-0960

MASONIC TEMPLE ASSOCIATION OF LEBANON, PENNSYLVANIA, Petitioner

vs.

LEBANON COUNTY BOARD OF ASSESSMENT APPEALS, Respondent

APPEARANCES:

IAN EHRGOOD, ESQ. For the Petitioner

DAVID WARNER, ESQ. For the Respondent

ORDER OF COURT

AND NOW, to wit, this 23^rd day of November 2015, in accordance with our Opinion this same date, after a careful review of the testimony presented at the evidentiary hearing on October 21, 2015 and the arguments of counsel presented at Oral Argument on November 12, 2015, we note and direct as follows:

1) The Masonic Temple Association of Lebanon has not met its burden of proving it is a purely public charity under the standards articulated by the Institutions of Purely Public Charity Act, 10 P.S. §375, and Hospital Utilization Project v. Commonwealth, 507 Pa. 1, 487 A.2d 1306 (1985) .

2) The Masonic Temple Association of Lebanon is therefore not entitled to exemption from taxation under 72 P.S. §5020-204(a)(9) on the real property owned by the Association at 499 South 14^th Avenue, South Lebanon Township, Lebanon County, Pennsylvania.

OPINION BY EBY, S.J. NOVEMBER 23, 2015

Before the Court is the tax assessment appeal of the Masonic Temple Association of Lebanon, which seeks a determination of whether real property owned by the Association is exempt from real estate taxes under 72 P.S. §5020-204(a)(9). The Association claims it is entitled to exempt status, because it is an institution of purely private charity and the property for which it seeks exemption is necessary for the occupancy and enjoyment of such institutions using it. Because we find that the Masonic Temple Association has failed to prove it is a purely public charity under the standards of both case and statutory law, we disagree.

Procedural History

On or about December 5, 2014, the Masonic Temple Association of Lebanon (hereinafter “MTA”) submitted an Application for the Exemption of Real Estate Tax to the Lebanon County Board of Assessment Revision for property owned by the MTA at 499 South 14^th Avenue, South Lebanon Township, Lebanon County, Pennsylvania. Following a hearing held on March 19, 2015, the Board denied MTA’s Application for Exemption on May 8, 2015. On May 28, 2015, MTA filed an appeal of that denial to the Lebanon County Court of Common Pleas pursuant to 72 P.S. §5020-518.1.

An evidentiary hearing was held before this Court for that appeal on October 21, 2015. The MTA presented the testimony of six witnesses, who testified as to the bylaws and organizational structure of the MTA, as well as the charitable and other activities of the various Masonic lodges and organizations which initially formed the MTA and currently utilize its property for meetings and events. The MTA also presented testimony regarding the charitable activities of statewide Masonic organizations, to which the member lodges of the MTA pay dues. Following the hearing, the parties submitted briefs and appeared for oral argument on November 12, 2015. Accordingly, the matter is now ripe for our review and disposition.

Discussion

The Pennsylvania Constitution allows the General Assembly to exempt institutions of purely public charity from taxation with the limiting proviso: “but in the case of any real property tax exemptions only that portion of real property of such institution which is actually and regularly used for the purposes of the institution.” Pa. Const. Art. VIII, §2 (a)(v). Both case and statutory law implement and interpret this Constitutional provision. Case law establishes that an entity seeking exemption from taxation has the affirmative burden of proving it is entitled to the exemption. Hospital Utilization Project v. Commonwealth, 487 A.2d 1306, 1312 (Pa. 1985). To qualify for exemption, an entity must prove that 1) it is a purely public charity and 2) the property for which it seeks exemption is necessary for the occupancy and enjoyment of such institutions so using it. 72 P.S. §5020-204(a)(9).

In Hospital Utilization Project v. Commonwealth, supra, (hereinafter “HUP”) the Pennsylvania Supreme Court articulated a five-point test for determining whether an organization or institution is a “purely private charity.” Under HUP, an entity is a “purely private charity” if: 1) It advances a charitable purpose; 2) It donates or renders gratuitously a substantial portion of its services; 3) It benefits a substantial and indefinite class of persons who are legitimate subjects of charity; 4) It relieves the government of some of its burden; and 5) It operates entirely free from private profit motive. Id. at 1312. These criteria are echoed and amplified in the Institutions of Purely Public Charity Act, 10 P.S. §375.

Of particular import for the instant case is the Act’s amplification of the charitable purpose requirement. The Act defines those purposes as charitable which are organized and operated to accomplish any of the following: “1) The relief of poverty. 2) The advancement and provision of education…. 3) Advancement of religion. 4) Prevention and treatment of disease or injury, … 5) Government or municipal purposes. 6) Accomplishment of a purpose which is recognized as important and beneficial to the public and which advances social, moral or physical objectives.” 10 P.S. §375(b).

At the evidentiary hearing on October 21, 2015, Petitioner MTA sought to establish that the freemason organizations utilizing the MTA-owned property meet the statutory and HUP criteria for purely public charities. In particular, it offered testimony that the Mt. Lebanon and Mt. Olivet lodges which comprise the membership of the MTA, the additional Masonic organizations which utilize the MTA property, and the statewide Masonic organizations to which those organizations pay dues all operate and/or donate to charities, including those aimed at addressing health care and group home lodging for children (e.g., Shriner’s Hospitals and the Masonic Children’s Home), education (e.g., Dyslexia Centers and various scholarship programs), and the care of the elderly and infirm (e.g., Masonic Villages). (N.T. October 21, 2015 at 13-15, 68-71, 78-80, 90)

While the charitable pursuits of these organizations are laudable and no doubt appreciated by those who benefit from them, they are not relevant to our analysis of whether the MTA is a purely public charity entitled to tax exemption. Instead, our determination is governed by the very specific and narrow language of 72 P.S. §5020-204(a)(9), which limits our inquiry to the owner of the subject property. Thus, the salient question before this Court is not whether various Masonic organizations which utilize the property of the MTA or, in the case of the Grand Lodge of Pennsylvania, benefit from organizations that utilize the property, constitute purely public charities qualifying for tax exemption under 72 P.S. §5020-204(a)(9). Rather, the question is whether the MTA, as the sole owner of the property for which tax exempt status is sought, is entitled to exemption. The testimony and exhibits offered by the Petitioner, as well as admissions contained in Petitioner’s Brief and argument, clearly establish that it is not.

The sole purpose of the MTA, as delineated in its bylaws and admitted in its Brief, is to hold title to real property located at 499 South 14^th Avenue, Lebanon. See Exhibit 1; Petitioner’s Brief at 3. The MTA itself has no stated or de facto charitable purpose and makes no charitable contributions. Indeed, MTA’s bylaws prohibit the Association from distributing earnings or funds to any organization or individual except the Mt. Lebanon or Mt. Olivet lodges, which do not meet the criteria of a substantial and indefinite class of persons. Finally, with its singular purpose of holding title to real estate for the benefit of two private social or mutual benefit organizations, the MTA does not relieve any known governmental burden.

At Oral Argument, Petitioner argued the Court should consider the “equitable owners” of the MTA property, the Mt. Olivet and Mt. Lebanon lodges, in making its determination of whether the MTA is a purely public charity entitled to tax exemption for its real property holdings. The narrow language of 72 P.S. §5020-204(a)(9) does not suggest such an interpretation, and Petitioner has cited no precedent allowing such a consideration. Unfortunately for Petitioner, even if, as suggested at Oral Argument, title to the subject property were transferred and held by the individual lodges themselves, we would find that they were not entitled to exemption. The applicable provision of the statute requires that the party seeking relief be a “purely public charity.” After hearing from representatives of the various entities utilizing the premises, it is clear that the organizations involved advance collegiality and fellowship and spend a significant portion of their efforts and meetings dealing with membership, social, and fellowship objectives. They are not “purely public charities,” but rather mutual benefit or social groups that do work that is charitable in nature.

Because we find that the MTA has failed to sustain its burden of establishing that it is a purely private charity, we hold that the Association is not entitled to exemption from taxation on its real property holdings located at 499 South 14^th Avenue. We will enter an appropriate Order.

1) According to testimony elicited at the hearing and the Petitioner’s Brief, the MTA was formed in 2007 by the membership of the Mt. Lebanon and Mt. Olivet lodges to facilitate joint ownership of the property at 499 South 14^th Avenue. (N.T. October 21, 2015 at 8-9); Petitioner’s Brief at 3.

2) We note that a previous version of the Pa. Code, quoted at length in a footnote of the HUP decision, suggests that even if these organizations were applying for exempt status for the 499 South 14^th Avenue property in their own names, they would not qualify as a purely public charity. See Hospital Utilization Project v. Commonwealth, supra, n.6, citing 61 Pa.Code §32.1(iii) (“Mutual benefit or social groups, which are created and which exist primarily for the benefit of their membership are not charitable organizations. Such groups include BPOE, B’nai B’rith, Knights of Columbus, Eagles, and similar organizations. Such groups are not charitable organizations, even though they may perform some service or work which is charitable in nature.”)

3) Because the MTA needs to satisfy both prongs of 72 P.S. §5020-204(a)(9) to qualify for exempt status, we need not proceed to an analysis of the second prong of §5020-204(a)(9), whether the property for which it seeks exemption is necessary for the occupancy and enjoyment of such institutions so using it.