At the meeting of the Pittsburgh Planned Giving Council on Tuesday March 12, 2019, I reported on several updates in the first quarter of 2019. The four items I reported on are as follows:
There is a strong push to repeal this UBIT inclusion, with legislation introduced by Senators Lankford (Oklahoma) and Coons (Delaware), in Senate Bill 632, the “LIFT for Charities Act”. Nonprofit organizations should consider supporting this legislation or other efforts to repeal this UBIT inclusion.
In what I think is an unusual decision, the trial court found, and the Commonwealth Court affirmed that, the Church is entitled to a 50% exemption since only approximately half of the property is used as an actual place of stated religious worship, with the other non-worship activities being merely incidental to worship. The Court rejected the Church’s argument that the Holy Family Center would not exist without the parish and a primary purpose of the parish is religious worship. The Church argued that all of the property that the Church owns is necessary for religious worship and eligible for exemption.
From my review of the case, there was no indication that this new Holy Family Center was used for anything other than worship and for supporting the worship activities of the Church. It seems quite unusual that a court would rule that church “office” space is not a place of religious worship, when it is more than simply convenient to the operation of the Church as a whole, and includes necessary administration for the operation of a Church with 4,000 some parishioners per weekend. If this case is correct, then real estate owned by nonprofit organizations and used for administration, and/or “office space”, and not for the conduct of a charity’s operations, may be taxable in Pennsylvania. Here’s hoping the Pennsylvania Supreme Court reverses this unfortunate result, although it does not appear that the case was appealed.
Due to UPMC’s refusal to extend the Consent Decrees and the conditions requested by General Shapiro, General Shapiro brought this lawsuit against UPMC. General Shapiro did not bring suit against Highmark because Highmark apparently agreed to the requested conditions.
In response to the petition brought by General Shapiro, UPMC filed a Complaint-Class Action in the United States District Court, Middle District of Pennsylvania, asking that General Shapiro’s petition be enjoined. There are numerous reasons cited by UPMC for enjoining the petition, such as federal preemption under various federal laws.
If General Shapiro is successful in this litigation, it appears to me that the Pennsylvania Office of Attorney General would be rewarded with numerous powers which it has not before exercised, including:
The UPMC/Highmark situation is highly controversial and elicits strong opinions from many. Regardless of opinions on UPMC, Highmark, and the Pennsylvania Office of Attorney General, court decisions rendered could have long-lasting impact on all types of nonprofit organizations.
As with all changes in the tax and state laws affecting nonprofit organizations, it is incumbent upon nonprofits, their boards and their advisors to keep abreast of new court decisions and IRS guidance being issued in 2019.
Please do not hesitate to contact our office if you have any questions on these topics.
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Note: This provides general information regarding matters of interest to tax-exempt organizations. Such information is neither legal advice nor legal opinion concerning particular situations. If legal advice or opinion is required, legal counsel should be consulted.
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