Allentown, PA Could Not Impose Business Privilege Tax on Charity
There are not too many PA taxing bodies that impose business privilege taxes (the “BPT”). In a recent case of the PA Commonwealth Court, the Court ruled that the City of Allentown could not collect more than $780,000 in BPTs from a “purely public charity”. Good Shepherd Rehabilitation Network v. City of Allentown (March 19, 2021).
The City attempted to impose its BPT on management-type services provided by a parent entity to other nonprofit affiliates in a long-term care health system. The management services included administration, finance, human resources, technology, fundraising and maintenance.
The Courts (both the Common Pleas and Commonwealth) agreed with the nonprofit parent that since the parent and its affiliates were all purely public charities exempt from state taxes, that it was not a “business” subject to the BPT.
This recent case shows the value of obtaining an exemption from the PA Department of Revenue from PA sales and use taxes. This was a critical factor in finding that the nonprofit (Good Shepherd) and its affiliates were not subject to the City’s BPT.
If you are a purely public charity paying BPTs with the taxing body having an exemption for purely public charities, you should consider a claim for refund.
Please contact us if you have any questions about operating a nonprofit entity in PA.
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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.
We would be pleased to address any questions you may have regarding the foregoing or any other tax-exempt issues. For further information, please contact Mike Dutkovich (412-765-0535), [email protected]; Susan Ott (412-745-9900), [email protected]; or Jack Owen (412-765-1020), [email protected].
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