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                                 SENATE AMENDED
        PRIOR PRINTER'S NOS. 64, 994, 1071,           PRINTER'S NO. 2575
        2563

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 55 Session of 1997


        INTRODUCED BY BOYES, TRELLO, KENNEY, TIGUE, ITKIN, BROWNE,
           NAILOR, CAWLEY, DENT, DeLUCA, DEMPSEY, COY, FLICK, READSHAW,
           GANNON, PRESTON, BOSCOLA, BROWN, CURRY, GRUPPO, BELARDI,
           ARMSTRONG, ROONEY, LAWLESS, COLAIZZO, LYNCH, ROBERTS,
           GODSHALL, OLASZ, TRAVAGLIO, MUNDY, MELIO, WOJNAROSKI,
           C. WILLIAMS, GIGLIOTTI, YOUNGBLOOD, SAYLOR, L. I. COHEN,
           STEVENSON, WILT, BELFANTI, O'BRIEN, ZUG, BUNT, ADOLPH,
           GLADECK, LESCOVITZ, E. Z. TAYLOR, EACHUS, LaGROTTA, HASAY,
           LEH, ROSS AND SERAFINI, JANUARY 28, 1997

        AS AMENDED ON SECOND CONSIDERATION, IN SENATE, NOVEMBER 18, 1997


                                     AN ACT

     1  Providing for the tax exemption of institutions of purely public  <--
     2     charity; exempting real property owned by State-related
     3     universities or Federal Government instrumentalities from
     4     taxation; and providing for unfair competition.

     5                         TABLE OF CONTENTS
     6  Section 1.  Short title.
     7  Section 2.  Legislative intent.
     8  Section 3.  State-related universities.
     9  Section 4.  Definitions.
    10  Section 5.  Criteria.
    11  Section 6.  Multiple jurisdictions.
    12  Section 7.  Existing agreements.
    13  Section 8.  Unfair competition with small businesses.
    14  Section 9.  Accountability and disclosure.

     1  Section 10.  Exemption for Federal Government
     2                 instrumentality.
     3  Section 11.  Repeals.
     4  Section 12.  Applicability.
     5  Section 13.  Effective date.
     6  PROVIDING FOR THE TAX EXEMPTION OF INSTITUTIONS OF PURELY PUBLIC  <--
     7     CHARITY; EXEMPTING REAL PROPERTY OWNED BY STATE-RELATED
     8     UNIVERSITIES OR FEDERAL GOVERNMENT INSTRUMENTALITIES FROM
     9     TAXATION; PROVIDING FOR UNFAIR COMPETITION; IMPOSING
    10     PENALTIES; AND MAKING REPEALS.

    11                         TABLE OF CONTENTS
    12  SECTION 1.  SHORT TITLE.
    13  SECTION 2.  LEGISLATIVE INTENT.
    14  SECTION 3.  DEFINITIONS.
    15  SECTION 4.  STATE-RELATED UNIVERSITIES.
    16  SECTION 5.  CRITERIA FOR INSTITUTIONS OF PURELY PUBLIC CHARITY.
    17  SECTION 6.  PRESUMPTION PROCESS.
    18  SECTION 7.  VOLUNTARY AGREEMENTS.
    19  SECTION 8.  UNFAIR COMPETITION WITH SMALL BUSINESSES.
    20  SECTION 9.  ACCOUNTABILITY AND DISCLOSURE.
    21  SECTION 10.  EXEMPTION FOR FEDERAL GOVERNMENT INSTRUMENTALITY.
    22  SECTION 11.  PROHIBITED ACT.
    23  SECTION 12.  COMPLIANCE.
    24  SECTION 13.  CIVIL PENALTY.
    25  SECTION 14.  REPEALS.
    26  SECTION 15.  APPLICABILITY.
    27  SECTION 16.  EFFECTIVE DATE.
    28     The General Assembly of the Commonwealth of Pennsylvania
    29  hereby enacts as follows:
    30  Section 1.  Short title.                                          <--
    31     This act shall be known and may be cited as the Institutions
    32  of Purely Public Charity Act.
    19970H0055B2575                  - 2 -

     1  Section 2.  Legislative intent.
     2     (a)  Findings.--The General Assembly finds and declares as
     3  follows:
     4         (1)  It is in the best interest of this Commonwealth and
     5     its citizens that the recognition of tax-exempt status be
     6     accomplished in an orderly, uniform and economical manner.
     7         (2)  For more than 100 years, it has been the policy of
     8     this Commonwealth to foster the organization and operation of
     9     charitable organizations by exempting charitable
    10     organizations from taxation.
    11         (3)  Because charitable organizations contribute to the
    12     common good or lessen the burdens of government, the historic
    13     policy of exempting charitable institutions from taxation
    14     should be continued.
    15         (4)  The General Assembly recognizes that it is
    16     unrealistic today to expect charitable organizations to rely
    17     completely upon private philanthropy and that there is an
    18     appropriate role and responsibility for government support
    19     with respect to activities historically recognized as
    20     charitable.
    21         (5)  The General Assembly recognizes that the lack of
    22     specific legislative standards defining the term
    23     "institutions of purely public charity" has led to increasing
    24     confusion and confrontation among traditionally tax-exempt
    25     organizations and local governments to the detriment of the
    26     public.
    27         (6)  There is increasing concern that the eligibility
    28     standards for charitable tax exemptions are being applied
    29     inconsistently, which may violate the uniformity provision of
    30     the Constitution of Pennsylvania.
    19970H0055B2575                  - 3 -

     1     (b)  Intent.--It is the intent of the General Assembly to
     2  eliminate inconsistent application of eligibility standards for
     3  charitable tax exemptions, reduce confusion and confrontation
     4  among traditionally tax-exempt organizations and local
     5  governments and insure that charitable and public funds are not
     6  unnecessarily diverted from the public good to litigate
     7  eligibility for tax-exempt status by providing standards to be
     8  applied uniformly in all proceedings throughout this
     9  Commonwealth for determining eligibility for exemption from
    10  State and local taxation which are consistent with traditional
    11  legislative and judicial applications of the constitutional term
    12  "institutions of purely public charity."
    13  Section 3.  State-related universities.
    14     (a)  General rule.--It is the intent of the General Assembly
    15  to recognize that the State-related universities provide a
    16  direct public benefit and serve the public purposes of this
    17  Commonwealth by declaring the real property of State-related
    18  universities to be public property for purposes of exemption
    19  from State and local taxation when the property is actually and
    20  regularly used for public purposes, provided that nothing in
    21  this section is intended or shall be construed to affect the
    22  title to real property of State-related universities or the
    23  power and authority of the governing bodies of State-related
    24  universities with respect to such real property. Further,
    25  nothing in this section is intended or shall be construed to
    26  affect, impair or terminate any contract or agreement in effect
    27  on or before the effective date of this act by and between a
    28  State-related university and any county, city, borough, township
    29  or school district wherein the State-related university pays
    30  real estate taxes, amounts in lieu of real estate taxes or other
    19970H0055B2575                  - 4 -

     1  charges, fees or contributions for municipal services.
     2     (b)  Real property.--All real property owned by State-related
     3  universities, or owned by the Commonwealth and used by a State-
     4  related university, is and shall be deemed public property for
     5  purposes of the Constitution of Pennsylvania and the laws of
     6  this Commonwealth relating to the assessment, taxation and
     7  exemption of real estate and shall be exempt from all State and
     8  local taxation when actually and regularly used for public
     9  purposes.
    10     (c)  Exemption.--This section shall not include the property
    11  of a State-related university the possession and control of
    12  which has been transferred to a for-profit entity not otherwise
    13  entitled to tax-exempt status, irrespective of whether that
    14  entity is affiliated with the university. The execution of a
    15  management services contract with a third party entity to
    16  provide operational services to the university which would
    17  otherwise be provided or conducted directly by the university
    18  shall not, however, be considered a transfer of possession and
    19  control of real property within the meaning of this section.
    20     (d)  Definitions.--As used in this section, the following
    21  words and phrases shall have the meanings given to them in this
    22  subsection:
    23     "Public purposes."  All activities relating to the
    24  educational mission of State-related universities, including
    25  teaching, research, service and activities incident or ancillary
    26  thereto which provide services to or for students, employees or
    27  the public.
    28     "State-related universities."  The Pennsylvania State
    29  University and its affiliate, the Pennsylvania College of
    30  Technology, the University of Pittsburgh, Temple University and
    19970H0055B2575                  - 5 -

     1  its subsidiaries Temple University Hospital, Inc., and Temple
     2  University Children's Hospital, Inc., and Lincoln University.
     3  Section 4.  Definitions.
     4     The following words and phrases when used in this act shall
     5  have the meanings given to them in this section unless the
     6  context clearly indicates otherwise:
     7     "Commercial business."  The sale of products or services that
     8  are principally the same as those offered by an existing small
     9  business in the same community.
    10     "Goods or services."  Goods or services which promote any of
    11  the six enumerated purposes under section 5(b) and which are
    12  valued in accordance with generally accepted accounting
    13  principles applicable to the institution. If the institution's
    14  purpose is to provide health care services, the term shall
    15  include, but not be limited to, medically necessary goods or
    16  services in life-threatening situations.
    17     "Government agency."  Any Commonwealth agency or any
    18  political subdivision or municipal or other local authority or
    19  any officer or agency of any political subdivision or local
    20  authority.
    21     "Institution of purely public charity."  A domestic or
    22  foreign nonprofit corporation, association, trust or other
    23  organization which meets the criteria under section 5.
    24     "Net operating income."  The amount of funds remaining after
    25  deducting all operating expenses related to the provision of
    26  goods or services associated with the institution's charitable
    27  purpose from payments received from providing these goods or
    28  services, as determined in accordance with the generally
    29  accepted accounting principles applicable to the institution.
    30     "Small business."  Any self-employed individual, sole
    19970H0055B2575                  - 6 -

     1  proprietorship, firm, corporation, partnership, association or
     2  other entity that:
     3         (1)  has fewer than 101 full-time employees; and
     4         (2)  is subject to income taxation under the act of March
     5     4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971.
     6     "Tax Reform Code."  The act of March 4, 1971 (P.L.6, No.2),
     7  known as the Tax Reform Code of 1971.
     8     "Total operating expenses."  The costs related to the
     9  provision of goods or services associated with the institution's
    10  charitable purpose, as determined in accordance with generally
    11  accepted accounting principles applicable to the institution.
    12  Section 5.  Criteria.
    13     (a)  General rule.--An institution of purely public charity
    14  is a nonprofit corporation, association, trust or other
    15  organization which meets the criteria set forth in this section.
    16  A nonprofit parent corporation, together with all of its
    17  subsidiary nonprofit corporations, may elect to be considered as
    18  a single institution in meeting the criteria set forth in this
    19  section as long as all of the following are met:
    20         (1)  Each subsidiary:
    21             (i)  is a nonstock corporation of which the nonprofit
    22         parent corporation is the only member; and
    23             (ii)  meets the requirements of subsections (b), (c),
    24         (d), (e) and (f).
    25         (2)  The parent:
    26             (i)  is a nonstock corporation;
    27             (ii)  is duly qualified by the Internal Revenue
    28         Service as meeting the requirements of section 501(c)(3)
    29         of the Internal Revenue Code of 1986 (Public Law 99-514,
    30         26 U.S.C. § 501(c)(3));
    19970H0055B2575                  - 7 -

     1             (iii)  meets the requirements of subsections (b) and
     2         (c); and
     3             (iv)  except for services that meet the requirements
     4         of subsections (b), (c), (d), (e) and (f), does not
     5         render services for a fee to an individual or entity that
     6         does not meet the requirements of paragraph (1).
     7  An institution of purely public charity shall meet all of the
     8  criteria contained in subsections (b), (c), (d), (e) and (f).
     9  Institutions of purely public charity which meet the criteria
    10  specified in this section shall be considered to be founded,
    11  endowed and maintained by public or private charity.
    12     (b)  Charitable purpose.--The institution shall advance a
    13  charitable purpose. This criterion is satisfied if the
    14  institution is organized and operated primarily to fulfill any
    15  one or combination of the following purposes:
    16         (1)  Relief of poverty.
    17         (2)  Advancement of education, including, but not limited
    18     to, postsecondary education.
    19         (3)  Advancement of religion.
    20         (4)  Prevention and treatment of disease or injury.
    21         (5)  Government or municipal purposes.
    22         (6)  Accomplishment of a purpose which is beneficial to
    23     the community, including advancement of the arts and
    24     sciences, advancement of the cultural, spiritual, mental,
    25     physical, social or emotional welfare or improvement of
    26     others.
    27     (c)  Private profit motive.--The institution shall operate
    28  entirely free from private profit motive. Notwithstanding
    29  whether the institution's revenues exceed its expenses, this
    30  criterion is satisfied if the institution meets all of the
    19970H0055B2575                  - 8 -

     1  following:
     2         (1)  Neither the institution's net earnings nor donations
     3     which it receives inures to the benefit of private
     4     shareholders or other individuals, as the private inurement
     5     standard is interpreted under section 501(c)(3) of the
     6     Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
     7     501(c)(3)). The purchase of tangible or intangible assets,
     8     including professional practices for fair market value, shall
     9     not, by itself, be construed to constitute evidence of
    10     operation for a private profit motive.
    11         (2)  The institution applies or reserves any revenue in
    12     excess of expenses in furtherance of its charitable purpose
    13     or to funding of other charitable organizations which meet
    14     the provisions of this subsection.
    15         (3)  Compensation, including benefits, of any director,
    16     officer or employee, is not based primarily upon the
    17     financial performance of the organization.
    18     (d)  Community service.--
    19         (1)  The institution shall donate or render gratuitously
    20     a substantial portion of its services. This criterion is
    21     satisfied if the institution benefits the community by
    22     actually providing any of the following:
    23             (i)  Goods or services to all who seek them without
    24         regard to their ability to pay for what they receive if
    25         all of the following apply:
    26                 (A)  The institution has a written policy to this
    27             effect.
    28                 (B)  The institution has published this policy in
    29             a reasonable manner.
    30                 (C)  The institution provides uncompensated goods
    19970H0055B2575                  - 9 -

     1             or services at least equal to 75% of the
     2             institution's net operating income but not less than
     3             3% of the institution's total operating expenses.
     4             (ii)  Goods or services for fees that are based upon
     5         the recipient's ability to pay for them if all of the
     6         following apply:
     7                 (A)  The institution can demonstrate that it has
     8             implemented a written policy and a written schedule
     9             of fees based on individual or family income. An
    10             institution will meet the requirement of this clause
    11             if the institution consistently applies a formula to
    12             all individuals requesting consideration of reduced
    13             fees which is in part based on individual or family
    14             income.
    15                 (B)  At least 20% of the individuals receiving
    16             goods or services from the institution pay no fee or
    17             a fee which is lower than the cost of the goods or
    18             services provided by the institution.
    19                 (C)  At least 10% of the individuals receiving
    20             goods or services from the institution receive a
    21             reduction in fees of at least 10% of the cost of the
    22             goods or services provided to them.
    23                 (D)  No individual receiving goods or services
    24             from the institution pays a fee which is equal to or
    25             greater than the cost of the goods or services
    26             provided to them, or the goods or services provided
    27             to the individuals described in clause (B) are
    28             comparable in quality and quantity to the goods or
    29             services provided to those individuals who pay a fee
    30             which is equal to or greater than the cost of the
    19970H0055B2575                 - 10 -

     1             goods or services provided to them.
     2             (iii)  Wholly gratuitous goods or services to at
     3         least 5% of those receiving similar goods or services
     4         from the institution.
     5             (iv)  Financial assistance or uncompensated goods or
     6         services to at least 20% of those receiving similar goods
     7         or services from the institution if at least 10% of the
     8         individuals receiving goods or services from the
     9         institution either paid no fees or fees which were 90% or
    10         less of the cost of the goods or services provided to
    11         them, after consideration of any financial assistance
    12         provided to them by the institution.
    13             (v)  Uncompensated goods or services which, in the
    14         aggregate, are equal to at least 5% of the institution's
    15         costs of providing goods or services.
    16             (vi)  Goods or services at no fee or reduced fees to
    17         government agencies or goods or services to individuals
    18         eligible for government programs if one of the following
    19         applies:
    20                 (A)  The institution receives 75% or more of its
    21             gross operating revenue from grants or fee-for-
    22             service payments by government agencies and if the
    23             aggregate amount of fee-for-service payments from
    24             government agencies does not exceed 95% of the
    25             institution's costs of providing goods or services to
    26             the individuals for whom the fee-for-services
    27             payments are made.
    28                 (B)  The institution provides goods or services
    29             to individuals with mental retardation, to
    30             individuals who need mental health services, to
    19970H0055B2575                 - 11 -

     1             members of an individual's family or guardian in
     2             support of such goods or services or to individuals
     3             who are dependent, neglected or delinquent children,
     4             as long as the institution performs duties that would
     5             otherwise be the responsibility of government and the
     6             institution is restricted in its ability to retain
     7             revenue over expenses or voluntary contributions by
     8             any one of the following statutes or regulations or
     9             by contractual limitations with county children and
    10             youth offices in this Commonwealth:
    11                     (I)  Sections 1315(c) and 1905(d) of the
    12                 Social Security Act (49 Stat. 620, 42 U.S.C. §§
    13                 1396d(d) and 1396n(c)).
    14                     (II)  42 CFR  440.150 (relating to
    15                 intermediate care facility (ICF/MR) services.
    16                     (III)  42 CFR Pt. 483 Subpt. I (relating to
    17                 conditions of participation for intermediate care
    18                 facilities for the mentally retarded).
    19                     (IV)  The act of October 20, 1966 (3rd
    20                 Sp.Sess., P.L.96, No.6), known as the Mental
    21                 Health and Mental Retardation Act of 1966.
    22                     (V)  Articles II, VII, IX and X of the act of
    23                 June 13, 1967 (P.L.31, No.21), known as the
    24                 Public Welfare Code.
    25                     (VI)  23 Pa.C.S. Ch. 63 (relating to child
    26                 protective services).
    27                     (VII)  42 Pa.C.S. Ch. 63 (relating to
    28                 juvenile matters).
    29                     (VIII)  55 Pa. Code Chs. 3170 (relating to
    30                 allowable costs and procedures for county
    19970H0055B2575                 - 12 -

     1                 children and youth), 3680 (relating to
     2                 administration and operation of a children and
     3                 youth social service agency) 4300 (relating to
     4                 county mental health and mental retardation
     5                 fiscal manual), 6400 (relating to community homes
     6                 for individuals with mental retardation), 6500
     7                 (relating to family living homes), 6210 (relating
     8                 to participation requirements for the
     9                 intermediate care facilities for the mentally
    10                 retarded program), 6211 (relating to allowable
    11                 cost reimbursement for non-State operated
    12                 intermediate care facilities for the mentally
    13                 retarded) and 6600 (relating to intermediate care
    14                 facilities for the mentally retarded).
    15             (vii)  Funds to corporations, associations, trusts or
    16         other organizations which meet the criteria of this
    17         section, funds to government agencies or funds to
    18         organizations which qualify under section 501(c)(3) of
    19         the Internal Revenue Code of 1986 (Public Law 99-514, 26
    20         U.S.C. § 501(c)(3)), if the institution providing the
    21         funds is primarily engaged in fundraising on behalf of or
    22         making grants to such corporations, associations, trusts,
    23         such government agencies or such organizations.
    24         (2)  The institution may elect to average the applicable
    25     data for its five most recently completed fiscal years for
    26     the purposes of calculating any formula or meeting any
    27     quantitative standard in paragraph (1).
    28         (3)  For the purposes of calculating the number of
    29     individuals for use in the percentage calculations in this
    30     subsection, educational institutions may use full time
    19970H0055B2575                 - 13 -

     1     equivalent students as defined by the Department of
     2     Education.
     3         (4)  As used in this subsection, the term "uncompensated
     4     goods or services" shall include all benefits provided to the
     5     community the institution serves, including, but not limited
     6     to, the following:
     7             (i)  The full cost of all goods or services provided
     8         by the institution for which the institution has not
     9         received monetary compensation or the difference between
    10         the full cost and any lesser fee received for the goods
    11         or services, including the cost of the goods or services
    12         provided to individuals unable to pay.
    13             (ii)  The difference between the full cost of
    14         education and research programs provided by or
    15         participated in by the institution and the payment made
    16         to the institution to support the education and research
    17         programs.
    18             (iii)  The difference between the full cost of
    19         providing the goods or services and the payment made to
    20         the institution under any government program, including
    21         individuals covered by Medicare or Medicaid.
    22             (iv)  The difference between the full cost of the
    23         community services which the institution provides or
    24         participates in and the payment made to the institution
    25         to support such community services.
    26             (v)  The reasonable value of any moneys, property,
    27         goods or services donated by the primary donor to another
    28         institution of purely public charity or to a government
    29         agency or the reasonable value of the net donation made
    30         by a secondary donor to a primary donor. As used in this
    19970H0055B2575                 - 14 -

     1         subparagraph, the following words and phrases shall have
     2         the following meanings:
     3             "Net donation."  In the case of a donation of money,
     4         property or identical goods and services made by a
     5         secondary donor, the difference between the value of the
     6         donation made by the secondary donor and the value of the
     7         donation made by the primary donor, provided such value
     8         is positive.
     9             "Primary donor."  An institution which makes a
    10         donation of any money, property, goods or services to
    11         another institution of purely public charity.
    12             "Secondary donor."  An institution which receives a
    13         donation of any money, property, goods or services from a
    14         primary donor and then makes a donation back to that
    15         primary donor within three years of having received such
    16         donation.
    17             (vi)  The reasonable value of volunteer assistance
    18         donated by individuals to the institution. The reasonable
    19         value of volunteer assistance, computed on an hourly
    20         basis, shall not exceed the "Statewide average weekly
    21         wage" as defined in section 105.1 of the act of June 2,
    22         1915 (P.L.736, No.338), known as the Workers'
    23         Compensation Act divided by 40.
    24             (vii)  The cost of goods or services provided to an
    25         individual by charitable health care facilities licensed
    26         by the Department of Health or the Department of Public
    27         Welfare, which are bad debts, as determined in accordance
    28         with the generally accepted accounting principles
    29         applicable to the institution.
    30             (viii)  The reasonable value of any moneys, property,
    19970H0055B2575                 - 15 -

     1         goods or services donated to a political subdivision. If
     2         the institution of purely public charity donates to a
     3         political subdivision an amount equal to or greater than
     4         25% of the tax liability the exempt entity would incur if
     5         its currently tax-exempt property were taxable, the
     6         institution can credit the donation at 200% of the actual
     7         value for purposes of meeting the requirements of this
     8         subsection.
     9     (e)  Charity to persons.--
    10         (1)  The institution shall benefit a substantial and
    11     indefinite class of persons who are legitimate subjects of
    12     charity.
    13         (2)  As used in this subsection, the following words and
    14     phrases shall have the meanings given to them in this
    15     paragraph:
    16         "Legitimate subjects of charity."  Those individuals who
    17     are unable to provide themselves with what the institution
    18     provides for them.
    19         "Substantial and indefinite class of persons."  Persons
    20     not predetermined in number, provided that, where the goods
    21     or services are received primarily by members of the
    22     institution, membership cannot be predetermined in number and
    23     cannot be arbitrarily denied by a vote of the existing
    24     members. This section specifically recognizes that the use of
    25     admissions criteria and enrollment limitations by educational
    26     institutions do not constitute predetermined membership or
    27     arbitrary restrictions on membership so as to violate this
    28     section and recognizes that an institution may reasonably
    29     deny membership based on the types of services it provides,
    30     as long as denial is not in violation of Federal or State
    19970H0055B2575                 - 16 -

     1     antidiscrimination laws, such as the Civil Rights Act of 1964
     2     (Public Law 88-352, 78 Stat. 241) and the act of October 27,
     3     1955 (P.L.744, No.222), known as the Pennsylvania Human
     4     Relations Act.
     5         (3)  An institution shall be considered to benefit a
     6     substantial and indefinite class of persons who are
     7     legitimate subjects of charity if the institution is
     8     primarily engaged in fundraising on behalf of or making
     9     grants to:
    10             (i)  corporations, associations, trusts or other
    11         organizations which meet the criteria set forth in this
    12         section;
    13             (ii)  government agencies; or
    14             (iii)  organizations which qualify under section
    15         501(c)(3) of the Internal Revenue Code of 1986 (Public
    16         Law 99-514, 26 U.S.C. § 501(c)(3)).
    17         (4)  An institution shall not be considered to benefit a
    18     substantial and indefinite class of persons who are
    19     legitimate subjects of charity if:
    20             (i)  the institution is not qualified under section
    21         501(c)(3) of the Internal Revenue Code of 1986; and
    22             (ii)  the institution is qualified under section
    23         501(c)(4), (5), (6), (7), (8) or (9) of the Internal
    24         Revenue Code of 1986 as any of the following:
    25                 (A)  An association of employees, the membership
    26             of which is limited to the employees of a designated
    27             person or persons.
    28                 (B)  A labor organization.
    29                 (C)  An agricultural or horticultural
    30             organization.
    19970H0055B2575                 - 17 -

     1                 (D)  A business league, chamber of commerce, real
     2             estate board, board of trade or professional sports
     3             league.
     4                 (E)  A club organized for pleasure or recreation.
     5                 (F)  A fraternal beneficiary society, order or
     6             association.
     7     (f)  Government service.--The institution shall relieve the
     8  government of some of its burden. This criterion is satisfied if
     9  the institution meets any of the following:
    10         (1)  provides a service to the public that the government
    11     would otherwise be obliged to fund or to provide directly or
    12     indirectly or assure that a similar organization exists to
    13     provide the service;
    14         (2)  provides services in furtherance of its charitable
    15     purpose which are either the responsibility of the government
    16     by law or which historically have been assumed or offered or
    17     funded by the government;
    18         (3)  receives on a regular basis payments for services
    19     rendered under a government program if the payments are less
    20     than the full costs incurred by the institution for the
    21     rendering of the services or if the institution can
    22     demonstrate that comparable services are more expensive when
    23     provided by the government; or
    24         (4)  provides a service which advances important
    25     community, public, spiritual, mental, physical, educational,
    26     emotional, civic, historical or cultural objectives.
    27     (g)  Standards.--
    28         (1)  Except as provided in paragraph (2), nothing in this
    29     act shall be deemed to prohibit a charitable organization
    30     from conducting activities intended to influence legislation.
    19970H0055B2575                 - 18 -

     1         (2)  No substantial part of the activities of an
     2     institution of purely public charity shall consist of
     3     carrying on propaganda or otherwise attempting to influence
     4     legislation, except as otherwise provided in section 501(h)
     5     of the Internal Revenue Code of 1986 or participating in or
     6     intervening in, including the publishing or distributing of
     7     statements, any political campaign on behalf of, or in
     8     opposition to, any candidate for public office as such
     9     limitations are interpreted under section 501 of the Internal
    10     Revenue Code of 1986.
    11         (3)  Nothing in this act shall affect, impair or hinder
    12     the responsibilities or prerogatives of the political
    13     subdivision responsible for maintaining real property
    14     assessment rolls to make a determination whether a parcel of
    15     property or a portion of a parcel of property is being used
    16     to advance the charitable purpose of an institution of purely
    17     public charity, or to assess the parcel or part of the parcel
    18     of property as taxable based on the use of the parcel or part
    19     of the parcel for purposes other than the charitable purpose
    20     of the institution. Such determination and assessment shall
    21     be made in accord with applicable status regarding the
    22     assessment of real property for taxation purposes and shall
    23     be made without regard to the corporate structure of the
    24     institution, the subsidiary nature of the use or the form or
    25     nature of ownership or acquisition of the property.
    26         (4)  Nothing in this act shall prohibit a political
    27     subdivision from filing challenges to or making
    28     determinations as to whether a particular parcel of property
    29     is being used to advance the charitable purpose of an
    30     institution of purely public charity.
    19970H0055B2575                 - 19 -

     1         (5)  No additional criteria shall be imposed on any
     2     organization in order to be recognized as an institution of
     3     purely public charity.
     4  Section 6.  Multiple jurisdictions.
     5     (a)  Intent.--
     6         (1)  It is the intent of the General Assembly to foster
     7     uniformity in the application of the standards contained
     8     within this act for determining status as an institution of
     9     purely public charity. The General Assembly recognizes that
    10     multiple jurisdictions at different levels of government will
    11     be required to determine whether an organization requesting
    12     tax exemption meets such standards. Because many
    13     organizations will be required to seek and receive approval
    14     from different governmental entities, the General Assembly
    15     believes that an organization which demonstrates compliance
    16     with the standards at the State level shall be entitled to a
    17     rebuttable presumption that it has met those standards when
    18     determining qualification for local property tax exemptions.
    19         (2)  The General Assembly, recognizing the interest of
    20     the taxpayers in a fair and equitable system of property tax
    21     assessment and the attendant statutory requirements for the
    22     political subdivision responsible for maintaining real
    23     property assessment roles to administer the system of
    24     property assessment, believes that such a presumption shall
    25     not in any way limit the responsibilities, prerogatives or
    26     abilities of counties or local jurisdictions with respect to
    27     the determination of, or challenges to, the taxable status of
    28     a parcel or part of a parcel of property based on the use of
    29     the parcel or part of the parcel of property.
    30     (b)  Presumption.--An organization possessing a valid
    19970H0055B2575                 - 20 -

     1  exemption from the tax imposed by Article II of the Tax Reform
     2  Code, pursuant to administrative or judicial determination that
     3  the organization qualifies for exemption under section 204(10)
     4  of the Tax Reform Code, shall be entitled to assert a
     5  presumption that it meets the criteria contained in section
     6  5(b), (c), (d), (e) and (f), and any person challenging such
     7  presumption before any agency or court shall bear the burden, by
     8  the preponderance of evidence, of proving the contrary. The
     9  Department of Revenue shall furnish to any institution applying
    10  for exemption a written determination of the department's
    11  decision including specific information concerning how the
    12  applicant does or does not meet each of the criteria in section
    13  5. Any organization asserting such a presumption shall be deemed
    14  to have waived any right to confidentiality and consented to
    15  release of any information supporting the exemption from the tax
    16  imposed by Article II of the Tax Reform Code under section
    17  204(10), and such information, along with the written
    18  determination of the department's decision in support of that
    19  exemption, shall be public record which the department shall
    20  furnish to any person upon request. Any person challenging such
    21  presumption may request from the institution all relevant
    22  financial statements, records and documents used to obtain the
    23  exemption under section 204(10) of the Tax Reform Code. Failure
    24  by the institution to supply, or at its option, to permit
    25  inspection of such information in its possession within 30 days
    26  shall remove the presumption with respect to that challenge.
    27     (c)  Applicability of presumption.--The provisions of this
    28  section shall apply only to sales and use tax exemptions granted
    29  or renewed on or after the effective date of this act.
    30  Section 7.  Existing agreements.
    19970H0055B2575                 - 21 -

     1     Nothing in this act shall be construed to affect, impair,
     2  terminate or supersede any contract, agreement or arrangement in
     3  effect on or before the effective date of this act which
     4  authorizes or requires payment of taxes, amounts in lieu of
     5  taxes, or other charges or fees for the services of a political
     6  subdivision of this Commonwealth. Further, nothing in this act
     7  shall be construed to impair, or otherwise inhibit, the right or
     8  ability of any institution or political subdivision to enter
     9  into such agreements after the effective date of this act.
    10  Section 8.  Unfair competition with small businesses.
    11     (a)  Intent.--It is the policy of this act that institutions
    12  of purely public charity shall not use their tax-exempt status
    13  to compete unfairly with small business.
    14     (b)  Rule.--An institution of purely public charity may not
    15  fund, capitalize, guarantee the indebtedness of, lease
    16  obligations of, or subsidize a commercial business that is
    17  unrelated to the institution's charitable purpose as stated in
    18  the institution's charter or governing legal documents.
    19     (c)  Exceptions.--Institutions of purely public charity are
    20  not in violation of subsection (b) if any of the following
    21  apply:
    22         (1)  The commercial business is intended only for the use
    23     of its employees, staff, alumni, faculty, members, students,
    24     clients, volunteers, patients or residents. For purposes of
    25     this paragraph, a person shall not be considered an employee,
    26     staff, member, alumnus, faculty, student, client, volunteer,
    27     patient or resident if the person's only relationship with
    28     the institution is to receive products or services resulting
    29     from the commercial business.
    30         (2)  The commercial business results in sales to the
    19970H0055B2575                 - 22 -

     1     general public that are incidental or periodic rather than
     2     permanent and ongoing.
     3     (d)  Support for other charities.--Nothing in this section
     4  shall be construed as prohibiting or limiting the ability of an
     5  institution of purely public charity to fund, capitalize,
     6  guarantee the indebtedness of or otherwise subsidize another
     7  institution of purely public charity.
     8     (e)  Investments.--An institution of purely public charity
     9  that invests in publicly traded stocks and bonds; real estate;
    10  or other investments is not in violation of subsection (b).
    11     (f)  Educational functions.--An institution of purely public
    12  charity that uses its facilities to host groups for educational
    13  purposes only is not in violation of subsection (b).
    14     (g)  Government functions.--An institution of purely public
    15  charity may engage in a new commercial business that may
    16  otherwise be in violation of subsection (b) if the institution
    17  is formally requested to do so by the Commonwealth or a
    18  political subdivision.
    19     (h)  Existing arrangements.--An institution of purely public
    20  charity that prior to the effective date of this act funded,
    21  capitalized, guaranteed the indebtedness of, leased obligations
    22  of or subsidized a commercial business may continue to own and
    23  operate such businesses without violating subsection (b) as long
    24  as the institution does not substantially expand the scope of
    25  the commercial business. In the event an injunction is issued
    26  under subsection (i), the effect of such injunction shall be
    27  limited to restraining the substantial expansion of the scope of
    28  the commercial business which was initiated after the effective
    29  date of this act.
    30     (i)  Remedies.--Whenever the Attorney General receives a
    19970H0055B2575                 - 23 -

     1  complaint from an aggrieved small business or has reason to
     2  believe that any institution of purely public charity is
     3  violating this section and the proceedings would be in the
     4  public interest, the Attorney General may bring an action in the
     5  name of the Commonwealth against that institution to restrain
     6  such violation by temporary or permanent injunction. The
     7  Attorney General must either bring an action or issue a written
     8  determination to the aggrieved small business within 120 days of
     9  the filing of a complaint.
    10         (1)  If the Attorney General fails to bring an action or
    11     to issue a written determination to a small business
    12     complainant within 120 days of the filing of a complaint, the
    13     small business may petition the Commonwealth Court for a writ
    14     of mandamus ordering the Attorney General either to bring an
    15     action under this section or to provide the reason or reasons
    16     why the Attorney General has declined to do so.
    17         (2)  Nothing in this subsection shall preclude either an
    18     aggrieved small business or an institution of purely public
    19     charity that has been affected by a decision of the Attorney
    20     General from pursuing an appeal of that decision under 2
    21     Pa.C.S. Ch. 7 Subch. A (relating to judicial review of
    22     Commonwealth agency action).
    23  Section 9.  Accountability and disclosure.
    24     (a)  Intent.--An institution which qualifies for a tax
    25  exemption by virtue of being designated an institution of purely
    26  public charity has a unique responsibility to periodically
    27  demonstrate to the public that it is fulfilling the purpose for
    28  which the exemption is granted. The citizens of this
    29  Commonwealth expect an organization which is granted tax
    30  exemption to adhere to a high standard of accountability and
    19970H0055B2575                 - 24 -

     1  public disclosure. Therefore, the institution should make an
     2  annual report in which it makes available certain information
     3  about its organization and its charitable activities. The report
     4  should be made consistent with the desire of the General
     5  Assembly to avoid burdensome reporting requirements which unduly
     6  distract the organization from its charitable purposes.
     7     (b)  Report required.--It shall be the duty of the president,
     8  chairman or principal officer of an institution which files, or
     9  is required to file, an annual return with the Internal Revenue
    10  Service under the Internal Revenue Code of 1986 (Public Law 99-
    11  514, 26 U.S.C. § 1 et seq.) to file a report with the bureau no
    12  later than the date, including any extensions granted by the
    13  Internal Revenue Service, the institution files or is required
    14  to file an annual return with the Internal Revenue Service. The
    15  following information shall be included in the report required
    16  by this section and shall be in a format approved by the
    17  Secretary of the Commonwealth:
    18         (1)  A copy of the annual return filed or required to be
    19     filed with the Internal Revenue Service.
    20         (2)  The date the institution was organized under
    21     applicable law and a reference to any determination of its
    22     tax-exempt status under the Internal Revenue Code of 1986,
    23     including, if applicable:
    24             (i)  The institution's Internal Revenue tax exemption
    25         number and the tax-exempt purposes as established by the
    26         Internal Revenue Service.
    27             (ii)  A revocation of tax-exempt status by the
    28         Internal Revenue Service.
    29         (3)  The following information on each affiliate of the
    30     institution of purely public charity:
    19970H0055B2575                 - 25 -

     1             (i)  The name and type of organization.
     2             (ii)  Whether the affiliate is organized on a for-
     3         profit or nonprofit basis.
     4             (iii)  The relationship of each affiliate to the
     5         institution making the report.
     6         (4)  The institution's relationship with any other
     7     nonprofit corporation or unincorporated association if the
     8     relationship involves formal governance or the sharing of
     9     revenue.
    10     (c)  Amendments to annual returns.--It shall be the duty of
    11  the president, chairman or principal officer of any institution
    12  which files an amended annual return with the Internal Revenue
    13  Service to file a copy of the amended annual return with the
    14  bureau within ten days of its filing with the Internal Revenue
    15  Service.
    16     (d)  Exemption from filing.--
    17         (1)  An institution which is not required to file an
    18     annual return with the Internal Revenue Service shall be
    19     exempt from the requirements of this section.
    20         (2)  An institution which files a consolidated annual
    21     return with the Internal Revenue Service shall not be
    22     required to file any report except as otherwise required by
    23     this subsection. The institution shall file with the bureau a
    24     statement giving the name and tax-exempt number of the
    25     organization filing the consolidated annual return.
    26     (e)  Paperwork reduction.--The Secretary of the Commonwealth
    27  shall implement procedures and may modify the reporting
    28  requirements of this section in order to reduce or eliminate
    29  duplicate filing by institutions subject to this section. The
    30  Secretary of the Commonwealth shall allow the president,
    19970H0055B2575                 - 26 -

     1  chairman or principal officer of an institution subject to this
     2  section to substitute the registration statement required under
     3  section 5 of the act of December 19, 1990 (P.L.1200, No.202),
     4  known as the Solicitation of Funds for Charitable Purposes Act,
     5  for those portions of the report required under subsection (b)
     6  which duplicate the information required under section 5 of the
     7  Solicitation of Funds for Charitable Purposes Act. The Secretary
     8  of the Commonwealth shall allow the institution to certify that
     9  the information required in subsection (b)(2), (3) or (4) has
    10  not changed since the prior report in lieu of providing the same
    11  information in the report required by subsection (b). The
    12  Secretary of the Commonwealth may obtain from the Internal
    13  Revenue Service copies of annual returns of institutions which
    14  file annual returns with the Internal Revenue Service on
    15  computer disk or other electronic or paper media.
    16     (f)  Retention of records.--The Secretary of the Commonwealth
    17  shall retain the reporting information required by this section
    18  for three years after the reports are required to be filed.
    19     (g)  Utilization of reports.--The Secretary of the
    20  Commonwealth shall make reports submitted under this section
    21  available for public inspection to the extent that the
    22  information is available for public inspection under section
    23  6104 of the Internal Revenue Code of 1986. The Secretary of the
    24  Commonwealth shall provide any government agency a copy of the
    25  report filed under this section upon request. Nothing in this
    26  subsection shall prevent a government agency from requiring any
    27  organization seeking exemption as an institution of purely
    28  public charity to provide the information described in
    29  subsection (b) to that agency as part of a determination of the
    30  tax exempt status of the institution.
    19970H0055B2575                 - 27 -

     1     (h)  Definitions.--As used in this section, the following
     2  words and phrases shall have the meanings given to them in this
     3  subsection:
     4     "Affiliate."  A domestic or foreign corporation, association,
     5  trust or other organization which owns a 10% or greater interest
     6  in the institution. A domestic or foreign corporation,
     7  association, trust or other organization in which the
     8  institution owns a 10% or greater interest.
     9     "Annual return." The annual information return required to be
    10  filed with the Internal Revenue Service by organizations exempt
    11  from tax by virtue of section 501(a) of the Internal Revenue
    12  Code of 1986 (Public Law 99-514, 26 U.S.C. §1, et seq.). The
    13  annual information return consists of Internal Revenue Service
    14  Form 990 or Form 990EZ and Schedule A.
    15     "Bureau."  The Bureau of Charitable Organizations of the
    16  Department of State of the Commonwealth.
    17     "Institution."  A domestic or foreign nonprofit corporation,
    18  association, trust or other organization which qualifies as an
    19  institution of purely public charity under the provisions of
    20  this act and which receives or claims exemption from the real
    21  property tax imposed by any political subdivision in this
    22  Commonwealth or which receives or claims exemption from the tax
    23  imposed by Article II of the Tax Reform Code.
    24  Section 10.  Exemption for Federal Government instrumentality.
    25     It is the intent of the General Assembly to affirm that all
    26  real property owned by any corporation established by an act of
    27  the Congress of the United States, that is required to submit
    28  annual reports of its activities to Congress containing itemized
    29  accounts of all receipts and expenditures after being fully
    30  audited by the Department of Defense, for purposes of the
    19970H0055B2575                 - 28 -

     1  Constitution of Pennsylvania and the laws of this Commonwealth
     2  relating to the assessment and taxation of real estate, is
     3  property of a Federal Government instrumentality and thus exempt
     4  from all State and local taxation.
     5  Section 11.  Repeals.
     6     All acts and parts of acts are repealed insofar as they are
     7  inconsistent with this act except for section 204(a)(3) of the
     8  act of May 22, 1933 (P.L.853, No.155), known as The General
     9  County Assessment Law, as it applies to charitable organizations
    10  providing residential housing services.
    11  Section 12.  Applicability.
    12     This act shall not apply to nor affect 40 Pa.C.S. § 6103 or
    13  6301 or the entities subject to those sections.
    14  Section 13.  Effective date.
    15     This act shall take effect January 1, next following the date
    16  of final enactment.
    17  SECTION 1.  SHORT TITLE.                                          <--
    18     THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE INSTITUTIONS
    19  OF PURELY PUBLIC CHARITY ACT.
    20  SECTION 2.  LEGISLATIVE INTENT.
    21     (A)  FINDINGS.--THE GENERAL ASSEMBLY FINDS AND DECLARES AS
    22  FOLLOWS:
    23         (1)  IT IS IN THE BEST INTEREST OF THIS COMMONWEALTH AND
    24     ITS CITIZENS THAT THE RECOGNITION OF TAX-EXEMPT STATUS BE
    25     ACCOMPLISHED IN AN ORDERLY, UNIFORM AND ECONOMICAL MANNER.
    26         (2)  FOR MORE THAN 100 YEARS, IT HAS BEEN THE POLICY OF
    27     THIS COMMONWEALTH TO FOSTER THE ORGANIZATION AND OPERATION OF
    28     INSTITUTIONS OF PURELY PUBLIC CHARITY BY EXEMPTING THEM FROM
    29     TAXATION.
    30         (3)  BECAUSE INSTITUTIONS OF PURELY PUBLIC CHARITY
    19970H0055B2575                 - 29 -

     1     CONTRIBUTE TO THE COMMON GOOD OR LESSEN THE BURDEN OF
     2     GOVERNMENT, THE HISTORIC POLICY OF EXEMPTING THESE
     3     INSTITUTIONS FROM TAXATION SHOULD BE CONTINUED.
     4         (4)  LACK OF SPECIFIC LEGISLATIVE STANDARDS DEFINING THE
     5     TERM "INSTITUTIONS OF PURELY PUBLIC CHARITY" HAS LED TO
     6     INCREASING CONFUSION AND CONFRONTATION AMONG TRADITIONALLY
     7     TAX-EXEMPT INSTITUTIONS AND POLITICAL SUBDIVISIONS TO THE
     8     DETRIMENT OF THE PUBLIC.
     9         (5)  THERE IS INCREASING CONCERN THAT THE ELIGIBILITY
    10     STANDARDS FOR CHARITABLE TAX EXEMPTIONS ARE BEING APPLIED
    11     INCONSISTENTLY, WHICH MAY VIOLATE THE UNIFORMITY PROVISION OF
    12     THE CONSTITUTION OF PENNSYLVANIA.
    13         (6)  RECOGNIZING THE INTEREST OF THE TAXPAYERS IN A FAIR
    14     AND EQUITABLE SYSTEM OF PROPERTY TAX ASSESSMENT AND THE
    15     ATTENDANT STATUTORY REQUIREMENTS FOR THE POLITICAL
    16     SUBDIVISION RESPONSIBLE FOR MAINTAINING REAL PROPERTY
    17     ASSESSMENT ROLES TO ADMINISTER THE SYSTEM OF PROPERTY
    18     ASSESSMENT, THIS ACT SHALL NOT IN ANY WAY LIMIT THE
    19     RESPONSIBILITIES, PREROGATIVES OR ABILITIES OF POLITICAL
    20     SUBDIVISIONS WITH RESPECT TO THE DETERMINATION OF, OR
    21     CHALLENGES TO, THE TAXABLE STATUS OF A PARCEL OF PROPERTY
    22     BASED ON THE USE OF THE PARCEL OR PART OF THE PARCEL OF
    23     PROPERTY.
    24         (7)  INSTITUTIONS OF PURELY PUBLIC CHARITY BENEFIT
    25     SUBSTANTIALLY FROM LOCAL GOVERNMENT SERVICES. THESE
    26     INSTITUTIONS HAVE SIGNIFICANT VALUE TO THE COMMONWEALTH AND
    27     ITS CITIZENS AND THE NEED EXISTS FOR REVENUES TO MAINTAIN
    28     LOCAL GOVERNMENT SERVICES PROVIDED FOR THE BENEFIT OF ALL
    29     CITIZENS, INCLUDING INSTITUTIONS OF PURELY PUBLIC CHARITY. IT
    30     IS THE INTENT OF THIS ACT TO ENCOURAGE FINANCIALLY SECURE
    19970H0055B2575                 - 30 -

     1     INSTITUTIONS OF PURELY PUBLIC CHARITY TO ENTER INTO VOLUNTARY
     2     AGREEMENTS OR MAINTAIN EXISTING OR CONTINUING AGREEMENTS FOR
     3     THE PURPOSE OF DEFRAYING SOME OF THE COST OF VARIOUS LOCAL
     4     GOVERNMENT SERVICES. PAYMENTS MADE UNDER SUCH AGREEMENTS
     5     SHALL BE DEEMED TO BE IN COMPLIANCE WITH ANY FIDUCIARY
     6     OBLIGATION PERTAINING TO SUCH INSTITUTIONS OF PURELY PUBLIC
     7     CHARITY, ITS OFFICERS OR DIRECTORS.
     8     (B)  INTENT.--IT IS THE INTENT OF THE GENERAL ASSEMBLY TO
     9  ELIMINATE INCONSISTENT APPLICATION OF ELIGIBILITY STANDARDS FOR
    10  CHARITABLE TAX EXEMPTIONS, REDUCE CONFUSION AND CONFRONTATION
    11  AMONG TRADITIONALLY TAX-EXEMPT INSTITUTIONS AND POLITICAL
    12  SUBDIVISIONS AND ENSURE THAT CHARITABLE AND PUBLIC FUNDS ARE NOT
    13  UNNECESSARILY DIVERTED FROM THE PUBLIC GOOD TO LITIGATE
    14  ELIGIBILITY FOR TAX-EXEMPT STATUS BY PROVIDING STANDARDS TO BE
    15  APPLIED UNIFORMLY IN ALL PROCEEDINGS THROUGHOUT THIS
    16  COMMONWEALTH FOR DETERMINING ELIGIBILITY FOR EXEMPTION FROM
    17  STATE AND LOCAL TAXATION WHICH ARE CONSISTENT WITH TRADITIONAL
    18  LEGISLATIVE AND JUDICIAL APPLICATIONS OF THE CONSTITUTIONAL TERM
    19  "INSTITUTIONS OF PURELY PUBLIC CHARITY."
    20  SECTION 3.  DEFINITIONS.
    21     THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ACT SHALL
    22  HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
    23  CONTEXT CLEARLY INDICATES OTHERWISE:
    24     "AFFILIATE."  A DOMESTIC OR FOREIGN CORPORATION, ASSOCIATION,
    25  TRUST OR OTHER ORGANIZATION WHICH OWNS A 10% OR GREATER INTEREST
    26  IN AN INSTITUTION OF PURELY PUBLIC CHARITY. A DOMESTIC OR
    27  FOREIGN CORPORATION, ASSOCIATION, TRUST OR OTHER ORGANIZATION IN
    28  WHICH AN INSTITUTION OF PURELY PUBLIC CHARITY OWNS A 10% OR
    29  GREATER INTEREST.
    30     "ANNUAL RETURN." THE ANNUAL INFORMATION RETURN REQUIRED TO BE
    19970H0055B2575                 - 31 -

     1  FILED WITH THE INTERNAL REVENUE SERVICE BY INSTITUTIONS EXEMPT
     2  FROM TAX UNDER SECTION 501(A) OF THE INTERNAL REVENUE CODE OF
     3  1986 (PUBLIC LAW 99-514, 26 U.S.C. §1, ET SEQ.). THE ANNUAL
     4  INFORMATION RETURN CONSISTS OF INTERNAL REVENUE SERVICE FORM 990
     5  OR FORM 990EZ AND SCHEDULE A OR ANY SUCCEEDING FORM USED FOR THE
     6  SAME OR SIMILAR PURPOSE. FOR AN INSTITUTION, WHICH IS NOT
     7  REQUIRED TO FILE SUCH RETURNS, THE INSTITUTION'S ANNUAL
     8  FINANCIAL STATEMENT WITH REPORTED INCOME SHALL CONSTITUTE ITS
     9  ANNUAL RETURN.
    10     "BUREAU."  THE BUREAU OF CHARITABLE ORGANIZATIONS OF THE
    11  DEPARTMENT OF STATE OF THE COMMONWEALTH.
    12     "COMMERCIAL BUSINESS."  THE SALE OF PRODUCTS OR SERVICES THAT
    13  ARE PRINCIPALLY THE SAME AS THOSE OFFERED BY AN EXISTING SMALL
    14  BUSINESS IN THE SAME COMMUNITY.
    15     "CONTRIBUTION."  THE PROMISE, GRANT, PLEDGE OR GIFT OF MONEY,
    16  PROPERTY, GOODS, SERVICES, FINANCIAL ASSISTANCE OR OTHER SIMILAR
    17  REMITTANCE.
    18     "GOODS OR SERVICES."  GOODS OR SERVICES WHICH PROMOTE ANY OF
    19  THE ENUMERATED PURPOSES UNDER SECTION 5(B) AND WHICH ARE VALUED
    20  IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
    21  APPLICABLE TO THE INSTITUTION.
    22     "GOVERNMENT AGENCY."  ANY COMMONWEALTH AGENCY OR ANY
    23  POLITICAL SUBDIVISION OR MUNICIPAL OR OTHER LOCAL AUTHORITY OR
    24  ANY OFFICER OR AGENCY OF ANY POLITICAL SUBDIVISION OR LOCAL
    25  AUTHORITY.
    26     "INSTITUTION."  A DOMESTIC OR FOREIGN NONPROFIT CORPORATION,
    27  ASSOCIATION OR TRUST OR OTHER SIMILAR ENTITY.
    28     "INSTITUTION OF PURELY PUBLIC CHARITY."  AN INSTITUTION WHICH
    29  MEETS THE CRITERIA UNDER SECTION 5.
    30     "NET OPERATING INCOME."  THE AMOUNT OF FUNDS REMAINING AFTER
    19970H0055B2575                 - 32 -

     1  ALL OPERATING EXPENSES RELATED TO THE PROVISION OF GOODS OR
     2  SERVICES ASSOCIATED WITH THE INSTITUTION'S CHARITABLE PURPOSE
     3  ARE DEDUCTED FROM PAYMENTS RECEIVED FOR PROVIDING THESE GOODS OR
     4  SERVICES, AS DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED
     5  ACCOUNTING PRINCIPLES APPLICABLE TO THE INSTITUTION.
     6     "POLITICAL SUBDIVISION."  ANY COUNTY, CITY, BOROUGH, TOWN,
     7  TOWNSHIP, SCHOOL DISTRICT, VOCATIONAL SCHOOL DISTRICT AND COUNTY
     8  INSTITUTION DISTRICT.
     9     "PROGRAM SERVICE REVENUE."  INCOME EARNED FROM THE PROVISION
    10  OF GOODS OR SERVICES, INCLUDING GOVERNMENT FEES AND CONTRACTS
    11  ASSOCIATED WITH THE INSTITUTION'S CHARITABLE PURPOSE, WHICH IS
    12  REPORTED ON THE ANNUAL RETURN.
    13     "SMALL BUSINESS."  ANY SELF-EMPLOYED INDIVIDUAL, SOLE
    14  PROPRIETORSHIP, FIRM, CORPORATION, PARTNERSHIP, ASSOCIATION OR
    15  OTHER ENTITY THAT:
    16         (1)  HAS FEWER THAN 101 FULL-TIME EMPLOYEES; AND
    17         (2)  IS SUBJECT TO INCOME TAXATION UNDER THE ACT OF MARCH
    18     4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971.
    19     "TOTAL OPERATING EXPENSES."  THE COSTS RELATED TO THE
    20  PROVISION OF GOODS OR SERVICES ASSOCIATED WITH THE INSTITUTION'S
    21  CHARITABLE PURPOSE, AS DETERMINED IN ACCORDANCE WITH GENERALLY
    22  ACCEPTED ACCOUNTING PRINCIPLES APPLICABLE TO THE INSTITUTION.
    23     "VOLUNTARY AGREEMENT."  AN AGREEMENT, CONTRACT OR OTHER
    24  ARRANGEMENT FOR THE PURPOSE OF RECEIVING CONTRIBUTIONS PURSUANT
    25  TO SECTION 7 BETWEEN A POLITICAL SUBDIVISION AND AN INSTITUTION
    26  SEEKING OR POSSESSING AN EXEMPTION AS AN INSTITUTION OF PURELY
    27  PUBLIC CHARITY. THESE CONTRIBUTIONS ARE FOR THE PURPOSE OF
    28  DEFRAYING SOME OF THE COST OF VARIOUS LOCAL GOVERNMENT SERVICES.
    29  THE TERM INCLUDES THE ESTABLISHMENT OF PUBLIC SERVICE
    30  FOUNDATIONS BY INSTITUTIONS OF PURELY PUBLIC CHARITY.
    19970H0055B2575                 - 33 -

     1  SECTION 4.  STATE-RELATED UNIVERSITIES.
     2     (A)  GENERAL RULE.--IT IS THE INTENT OF THE GENERAL ASSEMBLY
     3  TO RECOGNIZE THAT THE STATE-RELATED UNIVERSITIES PROVIDE A
     4  DIRECT PUBLIC BENEFIT AND SERVE THE PUBLIC PURPOSES OF THIS
     5  COMMONWEALTH BY DECLARING THE REAL PROPERTY OF STATE-RELATED
     6  UNIVERSITIES TO BE PUBLIC PROPERTY FOR PURPOSES OF EXEMPTION
     7  FROM STATE AND LOCAL TAXATION WHEN THE PROPERTY IS ACTUALLY AND
     8  REGULARLY USED FOR PUBLIC PURPOSES, PROVIDED THAT NOTHING IN
     9  THIS SECTION IS INTENDED OR SHALL BE CONSTRUED TO AFFECT THE
    10  TITLE TO REAL PROPERTY OF STATE-RELATED UNIVERSITIES OR THE
    11  POWER AND AUTHORITY OF THE GOVERNING BODIES OF STATE-RELATED
    12  UNIVERSITIES WITH RESPECT TO SUCH REAL PROPERTY. FURTHER,
    13  NOTHING IN THIS SECTION IS INTENDED OR SHALL BE CONSTRUED TO
    14  AFFECT, IMPAIR OR TERMINATE ANY CONTRACT OR AGREEMENT IN EFFECT
    15  ON OR BEFORE THE EFFECTIVE DATE OF THIS SECTION BY AND BETWEEN A
    16  STATE-RELATED UNIVERSITY AND ANY POLITICAL SUBDIVISION WHEREIN
    17  THE STATE-RELATED UNIVERSITY PAYS REAL ESTATE TAXES, AMOUNTS IN
    18  LIEU OF REAL ESTATE TAXES OR OTHER CHARGES, FEES OR
    19  CONTRIBUTIONS FOR GOVERNMENT SERVICES.
    20     (B)  REAL PROPERTY.--ALL REAL PROPERTY OWNED BY STATE-RELATED
    21  UNIVERSITIES, OR OWNED BY THE COMMONWEALTH AND USED BY A STATE-
    22  RELATED UNIVERSITY, IS AND SHALL BE DEEMED PUBLIC PROPERTY FOR
    23  PURPOSES OF THE CONSTITUTION OF PENNSYLVANIA AND THE LAWS OF
    24  THIS COMMONWEALTH RELATING TO THE ASSESSMENT, TAXATION AND
    25  EXEMPTION OF REAL ESTATE AND SHALL BE EXEMPT FROM ALL STATE AND
    26  LOCAL TAXATION WHEN ACTUALLY AND REGULARLY USED FOR PUBLIC
    27  PURPOSES.
    28     (C)  EXCEPTION.--THIS SECTION SHALL NOT INCLUDE THE PROPERTY
    29  OF A STATE-RELATED UNIVERSITY THE POSSESSION AND CONTROL OF
    30  WHICH HAS BEEN TRANSFERRED TO A FOR-PROFIT ENTITY NOT OTHERWISE
    19970H0055B2575                 - 34 -

     1  ENTITLED TO TAX-EXEMPT STATUS, IRRESPECTIVE OF WHETHER THAT
     2  ENTITY IS AFFILIATED WITH THE UNIVERSITY. THE EXECUTION OF A
     3  MANAGEMENT SERVICES CONTRACT WITH A THIRD PARTY ENTITY TO
     4  PROVIDE OPERATIONAL SERVICES TO THE UNIVERSITY WHICH WOULD
     5  OTHERWISE BE PROVIDED OR CONDUCTED DIRECTLY BY THE UNIVERSITY
     6  SHALL NOT, HOWEVER, BE CONSIDERED A TRANSFER OF POSSESSION AND
     7  CONTROL OF REAL PROPERTY WITHIN THE MEANING OF THIS SECTION.
     8     (D)  DEFINITIONS.--AS USED IN THIS SECTION, THE FOLLOWING
     9  WORDS AND PHRASES SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS
    10  SUBSECTION:
    11     "PUBLIC PURPOSES."  ALL ACTIVITIES RELATING TO THE
    12  EDUCATIONAL MISSION OF STATE-RELATED UNIVERSITIES, INCLUDING
    13  TEACHING, RESEARCH, SERVICE AND ACTIVITIES INCIDENT OR ANCILLARY
    14  THERETO WHICH PROVIDE SERVICES TO OR FOR STUDENTS, EMPLOYEES OR
    15  THE PUBLIC.
    16     "STATE-RELATED UNIVERSITIES."  THE PENNSYLVANIA STATE
    17  UNIVERSITY AND ITS AFFILIATE, THE PENNSYLVANIA COLLEGE OF
    18  TECHNOLOGY, THE UNIVERSITY OF PITTSBURGH, TEMPLE UNIVERSITY AND
    19  ITS SUBSIDIARIES TEMPLE UNIVERSITY HOSPITAL, INC., AND TEMPLE
    20  UNIVERSITY CHILDREN'S HOSPITAL, INC., AND LINCOLN UNIVERSITY.
    21  SECTION 5.  CRITERIA FOR INSTITUTIONS OF PURELY PUBLIC CHARITY.
    22     (A)  GENERAL RULE.--AN INSTITUTION OF PURELY PUBLIC CHARITY
    23  IS AN INSTITUTION WHICH MEETS THE CRITERIA SET FORTH IN
    24  SUBSECTIONS (B), (C), (D), (E) AND (F). AN INSTITUTION WHICH
    25  MEETS THE CRITERIA SPECIFIED IN THIS SECTION SHALL BE CONSIDERED
    26  TO BE FOUNDED, ENDOWED AND MAINTAINED BY PUBLIC OR PRIVATE
    27  CHARITY.
    28     (B)  CHARITABLE PURPOSE.--THE INSTITUTION MUST ADVANCE A
    29  CHARITABLE PURPOSE. THIS CRITERION IS SATISFIED IF THE
    30  INSTITUTION IS ORGANIZED AND OPERATED PRIMARILY TO FULFILL ANY
    19970H0055B2575                 - 35 -

     1  ONE OR COMBINATION OF THE FOLLOWING PURPOSES:
     2         (1)  RELIEF OF POVERTY.
     3         (2)  ADVANCEMENT AND PROVISION OF EDUCATION. THIS
     4     PARAGRAPH INCLUDES POSTSECONDARY EDUCATION.
     5         (3)  ADVANCEMENT OF RELIGION.
     6         (4)  PREVENTION AND TREATMENT OF DISEASE OR INJURY,
     7     INCLUDING MENTAL RETARDATION AND MENTAL DISORDERS.
     8         (5)  GOVERNMENT OR MUNICIPAL PURPOSES.
     9         (6)  ACCOMPLISHMENT OF A PURPOSE WHICH IS RECOGNIZED AS
    10     IMPORTANT AND BENEFICIAL TO THE PUBLIC AND WHICH ADVANCES
    11     SOCIAL, MORAL OR PHYSICAL OBJECTIVES.
    12     (C)  PRIVATE PROFIT MOTIVE.--THE INSTITUTION MUST OPERATE
    13  ENTIRELY FREE FROM PRIVATE PROFIT MOTIVE. NOTWITHSTANDING
    14  WHETHER THE INSTITUTION'S REVENUES EXCEED ITS EXPENSES, THIS
    15  CRITERION IS SATISFIED IF THE INSTITUTION MEETS ALL OF THE
    16  FOLLOWING:
    17         (1)  NEITHER THE INSTITUTION'S NET EARNINGS NOR DONATIONS
    18     WHICH IT RECEIVES INURES TO THE BENEFIT OF PRIVATE
    19     SHAREHOLDERS OR OTHER INDIVIDUALS, AS THE PRIVATE INUREMENT
    20     STANDARD IS INTERPRETED UNDER SECTION 501(C)(3) OF THE
    21     INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. §
    22     501(C)(3)).
    23         (2)  THE INSTITUTION APPLIES OR RESERVES ALL REVENUE,
    24     INCLUDING CONTRIBUTIONS, IN EXCESS OF EXPENSES IN FURTHERANCE
    25     OF ITS CHARITABLE PURPOSE OR TO FUNDING OF OTHER INSTITUTIONS
    26     WHICH MEET THE PROVISIONS OF THIS SUBSECTION AND SUBSECTION
    27     (B).
    28         (3)  COMPENSATION, INCLUDING BENEFITS, OF ANY DIRECTOR,
    29     OFFICER OR EMPLOYEE, IS NOT BASED PRIMARILY UPON THE
    30     FINANCIAL PERFORMANCE OF THE INSTITUTION.
    19970H0055B2575                 - 36 -

     1         (4)  THE GOVERNING BODY OF THE INSTITUTION OF PURELY
     2     PUBLIC CHARITY HAS ADOPTED, AS PART OF ITS ARTICLES OF
     3     INCORPORATION, OR IF UNINCORPORATED, OTHER GOVERNING LEGAL
     4     DOCUMENTS, A PROVISION THAT EXPRESSLY PROHIBITS THE USE OF
     5     ANY SURPLUS FUNDS FOR PRIVATE INUREMENT TO ANY PERSON IN THE
     6     EVENT OF A SALE OR DISSOLUTION OF THE INSTITUTION OF PURELY
     7     PUBLIC CHARITY.
     8     (D)  COMMUNITY SERVICE.--
     9         (1)  THE INSTITUTION MUST DONATE OR RENDER GRATUITOUSLY A
    10     SUBSTANTIAL PORTION OF ITS SERVICES. THIS CRITERION IS
    11     SATISFIED IF THE INSTITUTION BENEFITS THE COMMUNITY BY
    12     ACTUALLY PROVIDING ANY ONE OF THE FOLLOWING:
    13             (I)  GOODS OR SERVICES TO ALL WHO SEEK THEM WITHOUT
    14         REGARD TO THEIR ABILITY TO PAY FOR WHAT THEY RECEIVE IF
    15         ALL OF THE FOLLOWING APPLY:
    16                 (A)  THE INSTITUTION HAS A WRITTEN POLICY TO THIS
    17             EFFECT.
    18                 (B)  THE INSTITUTION HAS PUBLISHED THIS POLICY IN
    19             A REASONABLE MANNER.
    20                 (C)  THE INSTITUTION PROVIDES UNCOMPENSATED GOODS
    21             OR SERVICES AT LEAST EQUAL TO 75% OF THE
    22             INSTITUTION'S NET OPERATING INCOME BUT NOT LESS THAN
    23             3% OF THE INSTITUTION'S TOTAL OPERATING EXPENSES.
    24             (II)  GOODS OR SERVICES FOR FEES THAT ARE BASED UPON
    25         THE RECIPIENT'S ABILITY TO PAY FOR THEM IF ALL OF THE
    26         FOLLOWING APPLY:
    27                 (A)  THE INSTITUTION CAN DEMONSTRATE THAT IT HAS
    28             IMPLEMENTED A WRITTEN POLICY AND A WRITTEN SCHEDULE
    29             OF FEES BASED ON INDIVIDUAL OR FAMILY INCOME. AN
    30             INSTITUTION WILL MEET THE REQUIREMENT OF THIS CLAUSE
    19970H0055B2575                 - 37 -

     1             IF THE INSTITUTION CONSISTENTLY APPLIES A FORMULA TO
     2             ALL INDIVIDUALS REQUESTING CONSIDERATION OF REDUCED
     3             FEES WHICH IS IN PART BASED ON INDIVIDUAL OR FAMILY
     4             INCOME.
     5                 (B)  AT LEAST 20% OF THE INDIVIDUALS RECEIVING
     6             GOODS OR SERVICES FROM THE INSTITUTION PAY NO FEE OR
     7             A FEE WHICH IS LOWER THAN THE COST OF THE GOODS OR
     8             SERVICES PROVIDED BY THE INSTITUTION.
     9                 (C)  AT LEAST 10% OF THE INDIVIDUALS RECEIVING
    10             GOODS OR SERVICES FROM THE INSTITUTION RECEIVE A
    11             REDUCTION IN FEES OF AT LEAST 10% OF THE COST OF THE
    12             GOODS OR SERVICES PROVIDED TO THEM.
    13                 (D)  NO INDIVIDUAL RECEIVING GOODS OR SERVICES
    14             FROM THE INSTITUTION PAYS A FEE WHICH IS EQUAL TO OR
    15             GREATER THAN THE COST OF THE GOODS OR SERVICES
    16             PROVIDED TO THEM, OR THE GOODS OR SERVICES PROVIDED
    17             TO THE INDIVIDUALS DESCRIBED IN CLAUSE (B) ARE
    18             COMPARABLE IN QUALITY AND QUANTITY TO THE GOODS OR
    19             SERVICES PROVIDED TO THOSE INDIVIDUALS WHO PAY A FEE
    20             WHICH IS EQUAL TO OR GREATER THAN THE COST OF THE
    21             GOODS OR SERVICES PROVIDED TO THEM.
    22             (III)  WHOLLY GRATUITOUS GOODS OR SERVICES TO AT
    23         LEAST 5% OF THOSE RECEIVING SIMILAR GOODS OR SERVICES
    24         FROM THE INSTITUTION.
    25             (IV)  FINANCIAL ASSISTANCE OR UNCOMPENSATED GOODS OR
    26         SERVICES TO AT LEAST 20% OF THOSE RECEIVING SIMILAR GOODS
    27         OR SERVICES FROM THE INSTITUTION IF AT LEAST 10% OF THE
    28         INDIVIDUALS RECEIVING GOODS OR SERVICES FROM THE
    29         INSTITUTION EITHER PAID NO FEES OR FEES WHICH WERE 90% OR
    30         LESS OF THE COST OF THE GOODS OR SERVICES PROVIDED TO
    19970H0055B2575                 - 38 -

     1         THEM, AFTER CONSIDERATION OF ANY FINANCIAL ASSISTANCE
     2         PROVIDED TO THEM BY THE INSTITUTION.
     3             (V)  UNCOMPENSATED GOODS OR SERVICES WHICH, IN THE
     4         AGGREGATE, ARE EQUAL TO AT LEAST 5% OF THE INSTITUTION'S
     5         COSTS OF PROVIDING GOODS OR SERVICES.
     6             (VI)  GOODS OR SERVICES AT NO FEE OR REDUCED FEES TO
     7         GOVERNMENT AGENCIES OR GOODS OR SERVICES TO INDIVIDUALS
     8         ELIGIBLE FOR GOVERNMENT PROGRAMS IF ANY ONE OF THE
     9         FOLLOWING APPLIES:
    10                 (A)  THE INSTITUTION RECEIVES 75% OR MORE OF ITS
    11             GROSS OPERATING REVENUE FROM GRANTS OR FEE-FOR-
    12             SERVICE PAYMENTS BY GOVERNMENT AGENCIES AND IF THE
    13             AGGREGATE AMOUNT OF FEE-FOR-SERVICE PAYMENTS FROM
    14             GOVERNMENT AGENCIES DOES NOT EXCEED 95% OF THE
    15             INSTITUTION'S COSTS OF PROVIDING GOODS OR SERVICES TO
    16             THE INDIVIDUALS FOR WHOM THE FEE-FOR-SERVICES
    17             PAYMENTS ARE MADE.
    18                 (B)  THE INSTITUTION PROVIDES GOODS OR SERVICES
    19             TO INDIVIDUALS WITH MENTAL RETARDATION, TO
    20             INDIVIDUALS WHO NEED MENTAL HEALTH SERVICES, TO
    21             MEMBERS OF AN INDIVIDUAL'S FAMILY OR GUARDIAN IN
    22             SUPPORT OF SUCH GOODS OR SERVICES OR TO INDIVIDUALS
    23             WHO ARE DEPENDENT, NEGLECTED OR DELINQUENT CHILDREN,
    24             AS LONG AS THE INSTITUTION PERFORMS DUTIES THAT WOULD
    25             OTHERWISE BE THE RESPONSIBILITY OF GOVERNMENT AND THE
    26             INSTITUTION IS RESTRICTED IN ITS ABILITY TO RETAIN
    27             REVENUE OVER EXPENSES OR VOLUNTARY CONTRIBUTIONS BY
    28             ANY ONE OF THE FOLLOWING STATUTES OR REGULATIONS OR
    29             BY CONTRACTUAL LIMITATIONS WITH COUNTY CHILDREN AND
    30             YOUTH OFFICES IN THIS COMMONWEALTH:
    19970H0055B2575                 - 39 -

     1                     (I)  SECTIONS 1315(C) AND 1905(D) OF THE
     2                 SOCIAL SECURITY ACT (49 STAT. 620, 42 U.S.C. §§
     3                 1396D(D) AND 1396N(C)).
     4                     (II)  42 CFR  440.150 (RELATING TO
     5                 INTERMEDIATE CARE FACILITY (ICF/MR) SERVICES.
     6                     (III)  42 CFR PT. 483 SUBPT. I (RELATING TO
     7                 CONDITIONS OF PARTICIPATION FOR INTERMEDIATE CARE
     8                 FACILITIES FOR THE MENTALLY RETARDED).
     9                     (IV)  THE ACT OF OCTOBER 20, 1966 (3RD
    10                 SP.SESS., P.L.96, NO.6), KNOWN AS THE MENTAL
    11                 HEALTH AND MENTAL RETARDATION ACT OF 1966.
    12                     (V)  ARTICLES II, VII, IX AND X OF THE ACT OF
    13                 JUNE 13, 1967 (P.L.31, NO.21), KNOWN AS THE
    14                 PUBLIC WELFARE CODE.
    15                     (VI)  23 PA.C.S. CH. 63 (RELATING TO CHILD
    16                 PROTECTIVE SERVICES).
    17                     (VII)  42 PA.C.S. CH. 63 (RELATING TO
    18                 JUVENILE MATTERS).
    19                     (VIII)  55 PA. CODE CHS. 3170 (RELATING TO
    20                 ALLOWABLE COSTS AND PROCEDURES FOR COUNTY
    21                 CHILDREN AND YOUTH), 3680 (RELATING TO
    22                 ADMINISTRATION AND OPERATION OF A CHILDREN AND
    23                 YOUTH SOCIAL SERVICE AGENCY) 4300 (RELATING TO
    24                 COUNTY MENTAL HEALTH AND MENTAL RETARDATION
    25                 FISCAL MANUAL), 6400 (RELATING TO COMMUNITY HOMES
    26                 FOR INDIVIDUALS WITH MENTAL RETARDATION), 6500
    27                 (RELATING TO FAMILY LIVING HOMES), 6210 (RELATING
    28                 TO PARTICIPATION REQUIREMENTS FOR THE
    29                 INTERMEDIATE CARE FACILITIES FOR THE MENTALLY
    30                 RETARDED PROGRAM), 6211 (RELATING TO ALLOWABLE
    19970H0055B2575                 - 40 -

     1                 COST REIMBURSEMENT FOR NON-STATE OPERATED
     2                 INTERMEDIATE CARE FACILITIES FOR THE MENTALLY
     3                 RETARDED) AND 6600 (RELATING TO INTERMEDIATE CARE
     4                 FACILITIES FOR AND 6600 (RELATING TO INTERMEDIATE
     5                 CARE FACILITIES FOR THE MENTALLY RETARDED).
     6             (VII)  FUNDRAISING ON BEHALF OF, OR GRANTS TO, AN
     7         INSTITUTION OF PURELY PUBLIC CHARITY, AN ENTITY SIMILARLY
     8         RECOGNIZED BY ANOTHER STATE OR FOREIGN JURISDICTION, A
     9         QUALIFYING RELIGIOUS ORGANIZATION OR A GOVERNMENT AGENCY
    10         AND ACTUAL CONTRIBUTION OF A SUBSTANTIAL PORTION OF THE
    11         FUNDS RAISED OR CONTRIBUTIONS RECEIVED TO AN INSTITUTION
    12         OF PURELY PUBLIC CHARITY, AN ENTITY SIMILARLY RECOGNIZED
    13         BY ANOTHER STATE OR FOREIGN JURISDICTION, A QUALIFYING
    14         RELIGIOUS ORGANIZATION OR A GOVERNMENT AGENCY.
    15         (2)  THE INSTITUTION MAY ELECT TO AVERAGE THE APPLICABLE
    16     DATA FOR ITS FIVE MOST RECENTLY COMPLETED FISCAL YEARS FOR
    17     THE PURPOSES OF CALCULATING ANY FORMULA OR MEETING ANY
    18     QUANTITATIVE STANDARD IN PARAGRAPH (1).
    19         (3)  FOR THE PURPOSES OF CALCULATING THE NUMBER OF
    20     INDIVIDUALS FOR USE IN THE PERCENTAGE CALCULATIONS IN THIS
    21     SUBSECTION, EDUCATIONAL INSTITUTIONS MAY USE FULL TIME
    22     EQUIVALENT STUDENTS AS DEFINED BY THE DEPARTMENT OF
    23     EDUCATION.
    24         (4)  FOR PURPOSES OF THIS SUBSECTION, THE TERM
    25     "UNCOMPENSATED GOODS OR SERVICES" SHALL BE LIMITED TO ANY OF
    26     THE FOLLOWING:
    27             (I)  THE FULL COST OF ALL GOODS OR SERVICES PROVIDED
    28         BY THE INSTITUTION FOR WHICH THE INSTITUTION HAS NOT
    29         RECEIVED MONETARY COMPENSATION OR THE DIFFERENCE BETWEEN
    30         THE FULL COST AND ANY LESSER FEE RECEIVED FOR THE GOODS
    19970H0055B2575                 - 41 -

     1         OR SERVICES, INCLUDING THE COST OF THE GOODS OR SERVICES
     2         PROVIDED TO INDIVIDUALS UNABLE TO PAY.
     3             (II)  THE DIFFERENCE BETWEEN THE FULL COST OF
     4         EDUCATION AND RESEARCH PROGRAMS PROVIDED BY OR
     5         PARTICIPATED IN BY THE INSTITUTION AND THE PAYMENT MADE
     6         TO THE INSTITUTION TO SUPPORT THE EDUCATION AND RESEARCH
     7         PROGRAMS.
     8             (III)  THE DIFFERENCE BETWEEN THE FULL COST OF
     9         PROVIDING THE GOODS OR SERVICES AND THE PAYMENT MADE TO
    10         THE INSTITUTION UNDER ANY GOVERNMENT PROGRAM, INCLUDING
    11         INDIVIDUALS COVERED BY MEDICARE OR MEDICAID.
    12             (IV)  THE DIFFERENCE BETWEEN THE FULL COST OF THE
    13         COMMUNITY SERVICES WHICH THE INSTITUTION PROVIDES OR
    14         PARTICIPATES IN AND THE PAYMENT MADE TO THE INSTITUTION
    15         TO SUPPORT SUCH COMMUNITY SERVICES.
    16             (V)  THE REASONABLE VALUE OF ANY MONEYS, PROPERTY,
    17         GOODS OR SERVICES DONATED BY A PRIMARY DONOR TO AN
    18         INSTITUTION OF PURELY PUBLIC CHARITY OR TO A GOVERNMENT
    19         AGENCY OR THE REASONABLE VALUE OF THE NET DONATION MADE
    20         BY A SECONDARY DONOR TO A PRIMARY DONOR. AS USED IN THIS
    21         SUBPARAGRAPH, THE FOLLOWING WORDS AND PHRASES SHALL HAVE
    22         THE FOLLOWING MEANINGS:
    23             "NET DONATION."  IN THE CASE OF A DONATION OF MONEY,
    24         PROPERTY OR IDENTICAL GOODS AND SERVICES MADE BY A
    25         SECONDARY DONOR, THE DIFFERENCE BETWEEN THE VALUE OF THE
    26         DONATION MADE BY THE SECONDARY DONOR AND THE VALUE OF THE
    27         DONATION MADE BY THE PRIMARY DONOR, PROVIDED SUCH VALUE
    28         IS POSITIVE.
    29             "PRIMARY DONOR."  AN INSTITUTION WHICH MAKES A
    30         DONATION OF ANY MONEY, PROPERTY, GOODS OR SERVICES TO AN
    19970H0055B2575                 - 42 -

     1         INSTITUTION OF PURELY PUBLIC CHARITY.
     2             "SECONDARY DONOR."  AN INSTITUTION WHICH RECEIVES A
     3         DONATION OF ANY MONEY, PROPERTY, GOODS OR SERVICES FROM A
     4         PRIMARY DONOR AND THEN MAKES A DONATION BACK TO THAT
     5         PRIMARY DONOR WITHIN THREE YEARS OF HAVING RECEIVED SUCH
     6         DONATION.
     7             (VI)  THE REASONABLE VALUE OF VOLUNTEER ASSISTANCE
     8         DONATED BY INDIVIDUALS WHO ARE INVOLVED OR ASSIST IN THE
     9         PROVISION OF GOODS OR SERVICES BY THE INSTITUTION. THE
    10         REASONABLE VALUE OF VOLUNTEER ASSISTANCE, COMPUTED ON AN
    11         HOURLY BASIS, SHALL NOT EXCEED THE "STATEWIDE AVERAGE
    12         WEEKLY WAGE" AS DEFINED IN SECTION 105.1 OF THE ACT OF
    13         JUNE 2, 1915 (P.L.736, NO.338), KNOWN AS THE WORKERS'
    14         COMPENSATION ACT DIVIDED BY 40.
    15             (VII)  THE COST OF GOODS OR SERVICES PROVIDED BY AN
    16         INSTITUTION LICENSED BY THE DEPARTMENT OF HEALTH OR THE
    17         DEPARTMENT OF PUBLIC WELFARE TO INDIVIDUALS WHO ARE
    18         UNABLE TO PAY PROVIDED THAT REASONABLE AND CUSTOMARY
    19         COLLECTION EFFORTS HAVE BEEN MADE BY THE INSTITUTION.
    20             (VIII)  THE VALUE OF ANY VOLUNTARY AGREEMENT AS SET
    21         FORTH IN SECTION 7(C).
    22     (E)  CHARITY TO PERSONS.--
    23         (1)  THE INSTITUTION MUST BENEFIT A SUBSTANTIAL AND
    24     INDEFINITE CLASS OF PERSONS WHO ARE LEGITIMATE SUBJECTS OF
    25     CHARITY.
    26         (2)  AS USED IN THIS SUBSECTION, THE FOLLOWING WORDS AND
    27     PHRASES SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS
    28     PARAGRAPH:
    29         "LEGITIMATE SUBJECTS OF CHARITY."  THOSE INDIVIDUALS WHO
    30     ARE UNABLE TO PROVIDE THEMSELVES WITH WHAT THE INSTITUTION
    19970H0055B2575                 - 43 -

     1     PROVIDES FOR THEM.
     2         "SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS."  PERSONS
     3     NOT PREDETERMINED IN NUMBER, PROVIDED THAT, WHERE THE GOODS
     4     OR SERVICES ARE RECEIVED PRIMARILY BY MEMBERS OF THE
     5     INSTITUTION, MEMBERSHIP CANNOT BE PREDETERMINED IN NUMBER AND
     6     CANNOT BE ARBITRARILY DENIED BY A VOTE OF THE EXISTING
     7     MEMBERS. THIS SUBSECTION SPECIFICALLY RECOGNIZES THAT THE USE
     8     OF ADMISSIONS CRITERIA AND ENROLLMENT LIMITATIONS BY
     9     EDUCATIONAL INSTITUTIONS DO NOT CONSTITUTE PREDETERMINED
    10     MEMBERSHIP OR ARBITRARY RESTRICTIONS ON MEMBERSHIP SO AS TO
    11     VIOLATE THIS SECTION AND RECOGNIZES THAT AN INSTITUTION MAY
    12     REASONABLY DENY MEMBERSHIP BASED ON THE TYPES OF SERVICES IT
    13     PROVIDES, AS LONG AS DENIAL IS NOT IN VIOLATION OF FEDERAL OR
    14     STATE ANTIDISCRIMINATION LAWS, SUCH AS THE CIVIL RIGHTS ACT
    15     OF 1964 (PUBLIC LAW 88-352, 78 STAT. 241) AND THE ACT OF
    16     OCTOBER 27, 1955 (P.L.744, NO.222), KNOWN AS THE PENNSYLVANIA
    17     HUMAN RELATIONS ACT.
    18         (3)  AN INSTITUTION SHALL BE CONSIDERED TO BENEFIT A
    19     SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS WHO ARE
    20     LEGITIMATE SUBJECTS OF CHARITY IF THE INSTITUTION IS
    21     PRIMARILY ENGAGED IN FUNDRAISING ON BEHALF OF OR MAKING
    22     GRANTS TO AN INSTITUTION OF PURELY PUBLIC CHARITY, AN ENTITY
    23     SIMILARLY RECOGNIZED BY ANOTHER STATE OR FOREIGN
    24     JURISDICTION, A QUALIFYING RELIGIOUS ORGANIZATION OR A
    25     GOVERNMENT AGENCY AND THERE IS ACTUAL CONTRIBUTION OF A
    26     SUBSTANTIAL PORTION OF THE FUNDS RAISED OR CONTRIBUTIONS
    27     RECEIVED TO AN INSTITUTION OF PURELY PUBLIC CHARITY, AN
    28     ENTITY SIMILARLY RECOGNIZED BY ANOTHER STATE OR FOREIGN
    29     JURISDICTION, A QUALIFYING RELIGIOUS ORGANIZATION OR A
    30     GOVERNMENT AGENCY.
    19970H0055B2575                 - 44 -

     1         (4)  AN INSTITUTION WHICH OPERATES EXCLUSIVELY ON A
     2     VOLUNTARY BASIS TO PROVIDE EMERGENCY HEALTH AND SAFETY
     3     SERVICES TO THE COMMUNITY OR AN INSTITUTION WHICH PROVIDES
     4     FUNDS AND SUPPORT EXCLUSIVELY TO VOLUNTEER INSTITUTIONS WHICH
     5     PROVIDE EMERGENCY HEALTH AND SAFETY SERVICES TO THE COMMUNITY
     6     SHALL BE CONSIDERED TO BENEFIT A SUBSTANTIAL AND INDEFINITE
     7     CLASS OF PERSONS WHO ARE LEGITIMATE SUBJECTS OF CHARITY.
     8         (5)  AN INSTITUTION SHALL NOT BE CONSIDERED TO BENEFIT A
     9     SUBSTANTIAL AND INDEFINITE CLASS OF PERSONS WHO ARE
    10     LEGITIMATE SUBJECTS OF CHARITY IF:
    11             (I)  THE INSTITUTION IS NOT QUALIFIED UNDER SECTION
    12         501(C)(3) OF THE INTERNAL REVENUE CODE OF 1986 (26 U.S.C.
    13         § 501(C)(3)); AND
    14             (II)  THE INSTITUTION IS QUALIFIED UNDER SECTION
    15         501(C)(4), (5), (6), (7), (8) OR (9) OF THE INTERNAL
    16         REVENUE CODE OF 1986 (26 U.S.C. § 501(C)(4), (5), (6),
    17         (7), (8) OR (9)) AS ANY OF THE FOLLOWING:
    18                 (A)  AN ASSOCIATION OF EMPLOYEES, THE MEMBERSHIP
    19             OF WHICH IS LIMITED TO THE EMPLOYEES OF A DESIGNATED
    20             PERSON OR PERSONS.
    21                 (B)  A LABOR ORGANIZATION.
    22                 (C)  AN AGRICULTURAL OR HORTICULTURAL
    23             ORGANIZATION.
    24                 (D)  A BUSINESS LEAGUE, CHAMBER OF COMMERCE, REAL
    25             ESTATE BOARD, BOARD OF TRADE OR PROFESSIONAL SPORTS
    26             LEAGUE.
    27                 (E)  A CLUB ORGANIZED FOR PLEASURE OR RECREATION.
    28                 (F)  A FRATERNAL BENEFICIARY SOCIETY, ORDER OR
    29             ASSOCIATION.
    30     (F)  GOVERNMENT SERVICE.--THE INSTITUTION MUST RELIEVE THE
    19970H0055B2575                 - 45 -

     1  GOVERNMENT OF SOME OF ITS BURDEN. THIS CRITERION IS SATISFIED IF
     2  THE INSTITUTION MEETS ANY ONE OF THE FOLLOWING:
     3         (1)  PROVIDES A SERVICE TO THE PUBLIC THAT THE GOVERNMENT
     4     WOULD OTHERWISE BE OBLIGED TO FUND OR TO PROVIDE DIRECTLY OR
     5     INDIRECTLY OR TO ASSURE THAT A SIMILAR INSTITUTION EXISTS TO
     6     PROVIDE THE SERVICE.
     7         (2)  PROVIDES SERVICES IN FURTHERANCE OF ITS CHARITABLE
     8     PURPOSE WHICH ARE EITHER THE RESPONSIBILITY OF THE GOVERNMENT
     9     BY LAW OR WHICH HISTORICALLY HAVE BEEN ASSUMED OR OFFERED OR
    10     FUNDED BY THE GOVERNMENT.
    11         (3)  RECEIVES ON A REGULAR BASIS PAYMENTS FOR SERVICES
    12     RENDERED UNDER A GOVERNMENT PROGRAM IF THE PAYMENTS ARE LESS
    13     THAN THE FULL COSTS INCURRED BY THE INSTITUTION, AS
    14     DETERMINED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
    15         (4)  PROVIDES A SERVICE TO THE PUBLIC WHICH DIRECTLY OR
    16     INDIRECTLY REDUCES DEPENDENCE ON GOVERNMENT PROGRAMS OR
    17     RELIEVES OR LESSENS THE BURDEN BORNE BY GOVERNMENT FOR THE
    18     ADVANCEMENT OF SOCIAL, MORAL, EDUCATIONAL OR PHYSICAL
    19     OBJECTIVES.
    20         (5)  ADVANCES OR PROMOTES RELIGION AND IS OWNED AND
    21     OPERATED BY A CORPORATION OR OTHER ENTITY AS A RELIGIOUS
    22     MINISTRY AND OTHERWISE SATISFIES THE CRITERIA SET FORTH IN
    23     SECTION 5.
    24         (6)  HAS A VOLUNTARY AGREEMENT UNDER SECTION 7.
    25     (G)  OTHER NONPROFIT ENTITIES.--A NONPROFIT PARENT
    26  CORPORATION, TOGETHER WITH ALL OF ITS SUBSIDIARY NONPROFIT
    27  CORPORATIONS, MAY ELECT TO BE CONSIDERED AS A SINGLE INSTITUTION
    28  IN MEETING THE CRITERIA SET FORTH IN THIS SECTION AS LONG AS ALL
    29  OF THE FOLLOWING ARE MET:
    30         (1)  EACH SUBSIDIARY:
    19970H0055B2575                 - 46 -

     1             (I)  IS A NONSTOCK CORPORATION OF WHICH THE NONPROFIT
     2         PARENT CORPORATION IS THE ONLY MEMBER; AND
     3             (II)  MEETS THE REQUIREMENTS OF THIS SECTION.
     4         (2)  THE PARENT:
     5             (I)  IS A NONSTOCK CORPORATION;
     6             (II)  IS QUALIFIED BY THE INTERNAL REVENUE SERVICE AS
     7         MEETING THE REQUIREMENTS OF SECTION 501(C)(3) OF THE
     8         INTERNAL REVENUE CODE OF 1986 (26 U.S.C. § 501(C)(3));
     9             (III)  MEETS THE REQUIREMENTS OF SUBSECTION (B) AND
    10         (C); AND
    11             (IV)  EXCEPT FOR SERVICES THAT MEET THE REQUIREMENTS
    12         OF THIS SECTION, DOES NOT RENDER SERVICES FOR A FEE TO AN
    13         INDIVIDUAL OR ENTITY THAT DOES NOT MEET THE REQUIREMENTS
    14         OF PARAGRAPH (1).
    15     (H)  PARCEL REVIEW.--
    16         (1)  NOTHING IN THIS ACT SHALL AFFECT, IMPAIR OR HINDER
    17     THE RESPONSIBILITIES OR PREROGATIVES OF THE POLITICAL
    18     SUBDIVISION RESPONSIBLE FOR MAINTAINING REAL PROPERTY
    19     ASSESSMENT ROLLS TO MAKE A DETERMINATION WHETHER A PARCEL OF
    20     PROPERTY OR A PORTION OF A PARCEL OF PROPERTY IS BEING USED
    21     TO ADVANCE THE CHARITABLE PURPOSE OF AN INSTITUTION OF PURELY
    22     PUBLIC CHARITY, OR TO ASSESS THE PARCEL OR PART OF THE PARCEL
    23     OF PROPERTY AS TAXABLE BASED ON THE USE OF THE PARCEL OR PART
    24     OF THE PARCEL FOR PURPOSES OTHER THAN THE CHARITABLE PURPOSE
    25     OF THAT INSTITUTION.
    26         (2)  NOTHING IN THIS ACT SHALL PROHIBIT AN AGGRIEVED       <--
    27     PERSON OR A POLITICAL SUBDIVISION FROM FILING CHALLENGES TO,   <--
    28     OR PROHIBIT A POLITICAL SUBDIVISION FROM MAKING                <--
    29     DETERMINATIONS AS TO, WHETHER A PARTICULAR PARCEL OF PROPERTY  <--
    30     IS BEING USED TO ADVANCE THE CHARITABLE PURPOSE OF AN
    19970H0055B2575                 - 47 -

     1     INSTITUTION OF PURELY PUBLIC CHARITY.
     2     (I)  STANDARDS.--AN INSTITUTION OF PURELY PUBLIC CHARITY MAY
     3  CONDUCT ACTIVITIES INTENDED TO INFLUENCE LEGISLATION PROVIDED
     4  THAT NO SUBSTANTIAL PART OF THE ACTIVITIES OF AN INSTITUTION OF
     5  PURELY PUBLIC CHARITY SHALL CONSIST OF CARRYING ON PROPAGANDA,
     6  EXCEPT AS OTHERWISE PROVIDED IN SECTION 501(H) OF THE INTERNAL
     7  REVENUE CODE OF 1986 (26 U.S.C. § 501(H)) OR PARTICIPATING IN OR
     8  INTERVENING IN, INCLUDING THE PUBLISHING OR DISTRIBUTING OF
     9  STATEMENTS, ANY POLITICAL CAMPAIGN ON BEHALF OF, OR IN
    10  OPPOSITION TO, ANY CANDIDATE FOR PUBLIC OFFICE AS SUCH
    11  LIMITATIONS ARE INTERPRETED UNDER SECTION 501 OF THE INTERNAL
    12  REVENUE CODE OF 1986 (26 U.S.C. § 501).
    13  SECTION 6.  PRESUMPTION PROCESS.
    14     (A)  PRESUMPTION DETERMINATION.--AN INSTITUTION OF PURELY
    15  PUBLIC CHARITY POSSESSING A VALID EXEMPTION FROM THE TAX IMPOSED
    16  BY ARTICLE II OF THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN
    17  AS THE TAX REFORM CODE OF 1971, SHALL BE ENTITLED TO ASSERT A
    18  REBUTTABLE PRESUMPTION REGARDING THAT INSTITUTION'S COMPLIANCE
    19  WITH THE CRITERIA SET FORTH IN SECTION 5 AS FOLLOWS:
    20         (1)  AN INSTITUTION OF PURELY PUBLIC CHARITY THAT HAS
    21     ANNUAL PROGRAM SERVICE REVENUE LESS THAN $10,000,000 SHALL BE
    22     ENTITLED TO ASSERT THE PRESUMPTION IF THE INSTITUTION
    23     POSSESSES A VALID EXEMPTION UNDER SECTION 204(10) OF THE TAX
    24     REFORM CODE OF 1971.
    25         (2)  AN INSTITUTION OF PURELY PUBLIC CHARITY THAT HAS
    26     ANNUAL PROGRAM SERVICE REVENUE EQUAL TO OR EXCEEDING
    27     $10,000,000 SHALL BE ENTITLED TO ASSERT THE PRESUMPTION IF
    28     ALL OF THE FOLLOWING APPLY:
    29             (I)  THE INSTITUTION POSSESSES A VALID EXEMPTION
    30         UNDER SECTION 204(10) OF THE TAX REFORM CODE OF 1971; AND
    19970H0055B2575                 - 48 -

     1             (II)  THE INSTITUTION HAS A VOLUNTARY AGREEMENT AS
     2         PROVIDED UNDER SECTION 7 WITH A POLITICAL SUBDIVISION IN
     3         WHICH THAT INSTITUTION CONDUCTS SUBSTANTIAL BUSINESS
     4         OPERATIONS.
     5         (3)  THE PRESUMPTION PURSUANT TO PARAGRAPH (2) MAY BE
     6     ASSERTED BY AN INSTITUTION OF PURELY PUBLIC CHARITY ONLY WITH
     7     REGARD TO A CHALLENGE MADE CONCERNING OR BY A POLITICAL        <--
     8     SUBDIVISION WITH WHICH THAT INSTITUTION HAS A VOLUNTARY
     9     AGREEMENT IN EFFECT PURSUANT TO SECTION 7.
    10         (4)  FOR THE PURPOSE OF CALCULATING ANNUAL PROGRAM
    11     SERVICE REVENUE UNDER THIS SECTION, AN INSTITUTION OF PURELY
    12     PUBLIC CHARITY MAY ELECT TO AVERAGE ANNUAL PROGRAM SERVICE
    13     REVENUE FOR ITS TWO MOST RECENTLY COMPLETED FISCAL YEARS.
    14         (5)  COMMENCING JULY 1, 1999, AND EVERY YEAR THEREAFTER,
    15     THE DEPARTMENT OF REVENUE SHALL INCREASE THE AMOUNT SET FORTH
    16     IN PARAGRAPHS (1) AND (2) BY 1%. THE DEPARTMENT SHALL
    17     TRANSMIT NOTICE OF THE ADJUSTMENT TO THE LEGISLATIVE
    18     REFERENCE BUREAU FOR PUBLICATION IN THE PENNSYLVANIA
    19     BULLETIN.
    20     (B)  BURDEN OF PROOF.--IF AN INSTITUTION OF PURELY PUBLIC
    21  CHARITY ASSERTS A PRESUMPTION UNDER SUBSECTION (A), AN AGGRIEVED  <--
    22  PERSON OR A POLITICAL SUBDIVISION CHALLENGING THAT INSTITUTION
    23  BEFORE A GOVERNMENT AGENCY OR COURT SHALL BEAR THE BURDEN, BY A
    24  PREPONDERANCE OF THE EVIDENCE, OF PROVING THAT THE INSTITUTION
    25  OF PURELY PUBLIC CHARITY DOES NOT COMPLY WITH THE REQUIREMENTS
    26  OF SECTION 5.
    27     (C)  ISSUANCE OF WRITTEN ORDER.--THE DEPARTMENT SHALL FURNISH
    28  A WRITTEN ORDER TO ANY INSTITUTION APPLYING FOR EXEMPTION UNDER
    29  SECTION 204(10) OF THE TAX REFORM CODE OF 1971 APPROVING OR
    30  DENYING THE EXEMPTION. AN ORDER DENYING AN EXEMPTION SHALL
    19970H0055B2575                 - 49 -

     1  INCLUDE SPECIFIC INFORMATION CONCERNING THAT INSTITUTION'S
     2  FAILURE TO COMPLY WITH AT LEAST ONE OF THE CRITERIA UNDER
     3  SECTION 5.
     4     (D)  WAIVER OF CONFIDENTIALITY.--AN INSTITUTION OF PURELY
     5  PUBLIC CHARITY ASSERTING A PRESUMPTION UNDER SUBSECTION (A)
     6  SHALL BE DEEMED TO HAVE WAIVED ANY RIGHT TO CONFIDENTIALITY WITH
     7  REGARD TO ALL RECORDS IN THE POSSESSION OF THE DEPARTMENT
     8  RELATING TO THE APPLICATION FOR EXEMPTION. THESE RECORDS SHALL
     9  BE DEEMED PUBLIC RECORDS THAT THE DEPARTMENT MUST FURNISH TO ANY
    10  PERSON UPON REQUEST. A POLITICAL SUBDIVISION CHALLENGING SUCH
    11  PRESUMPTION MAY REQUEST FROM THE INSTITUTION OF PURELY PUBLIC
    12  CHARITY ALL RELEVANT FINANCIAL STATEMENTS, RECORDS AND DOCUMENTS
    13  USED TO OBTAIN THE EXEMPTION UNDER SECTION 204(10) OF THE TAX
    14  REFORM CODE OF 1971. FAILURE BY THAT INSTITUTION TO SUPPLY OR,
    15  AT ITS OPTION, TO PERMIT INSPECTION OF SUCH INFORMATION IN ITS
    16  POSSESSION WITHIN 30 DAYS SHALL ELIMINATE THE PRESUMPTION WITH
    17  RESPECT TO THAT CHALLENGE.
    18     (E)  DEPARTMENT INVOLVEMENT.--A DETERMINATION MADE UNDER THIS
    19  SECTION SHALL NOT, IN ANY WAY, SUBJECT THE DEPARTMENT TO
    20  PARTICIPATION IN ANY CONTROVERSY, DISCOVERY OR LITIGATION
    21  BETWEEN AN AGGRIEVED PERSON OR A POLITICAL SUBDIVISION AND AN     <--
    22  INSTITUTION CLAIMING THE EXEMPTION AS AN INSTITUTION OF PURELY
    23  PUBLIC CHARITY, OTHER THAN PROVIDING A COPY OF ITS WRITTEN ORDER
    24  AND ANY SUPPORTING DOCUMENTATION SUPPLIED TO THE DEPARTMENT BY
    25  THAT INSTITUTION.
    26  SECTION 7.  VOLUNTARY AGREEMENTS.
    27     (A)  GENERAL RULE.--A POLITICAL SUBDIVISION MAY EXECUTE A
    28  VOLUNTARY AGREEMENT WITH AN INSTITUTION THAT OWNS REAL PROPERTY
    29  WITHIN THE POLITICAL SUBDIVISION. ALL CONTRIBUTIONS RECEIVED
    30  FROM SUCH VOLUNTARY AGREEMENTS SHALL BE USED TO HELP ENSURE THAT
    19970H0055B2575                 - 50 -

     1  ESSENTIAL GOVERNMENTAL, PUBLIC OR COMMUNITY SERVICES WILL
     2  CONTINUE TO BE PROVIDED IN A MANNER THAT WILL PERMIT AN
     3  INSTITUTION TO CONTINUE TO FULFILL ITS CHARITABLE MISSION.
     4  NOTHING IN THIS SECTION SHALL BE CONSTRUED TO PROHIBIT A
     5  POLITICAL SUBDIVISION FROM SHARING WITH ANOTHER POLITICAL
     6  SUBDIVISION A PORTION OF THE PROCEEDS DERIVED FROM A VOLUNTARY
     7  AGREEMENT UPON THE MUTUAL AGREEMENT OF ALL AFFECTED PARTIES.
     8     (B)  PUBLIC SERVICE FOUNDATIONS.--INSTITUTIONS OF PURELY
     9  PUBLIC CHARITY MAY ESTABLISH A PUBLIC SERVICE FOUNDATION, UPON
    10  MUTUAL AGREEMENT WITH A POLITICAL SUBDIVISION, FOR THE PURPOSE
    11  OF RECEIVING CONTRIBUTIONS FROM INSTITUTIONS OF PURELY PUBLIC
    12  CHARITY. UPON AGREEMENT, THE FOUNDATION SHALL MAKE DISTRIBUTIONS
    13  OR GRANTS TO A PARTICIPATING POLITICAL SUBDIVISION TO HELP
    14  ENSURE THAT ESSENTIAL GOVERNMENTAL, PUBLIC OR COMMUNITY SERVICES
    15  WILL CONTINUE TO BE PROVIDED IN A MANNER THAT WILL PERMIT AN
    16  INSTITUTION TO CONTINUE TO FULFILL ITS CHARITABLE MISSION. A
    17  POLITICAL SUBDIVISION WHICH RECEIVES A DISTRIBUTION OR GRANT
    18  FROM A PUBLIC SERVICE FOUNDATION SHALL NOT ASSESS OR SEEK A
    19  SEPARATE CONTRIBUTION FOR SERVICES FROM INSTITUTIONS OF PURELY
    20  PUBLIC CHARITY PARTICIPATING IN A FOUNDATION.
    21     (C)  ADDITIONAL CREDIT FOR VOLUNTARY AGREEMENTS.--AN
    22  INSTITUTION WHICH HAS ENTERED INTO A VOLUNTARY AGREEMENT MAY
    23  CREDIT THE FOLLOWING PERCENTAGE OF THE REASONABLE VALUE OF ITS
    24  CONTRIBUTION FOR PURPOSES OF COMPUTING THE COMMUNITY SERVICE
    25  CRITERIA SET FORTH IN SECTION 5(D)(4)(VIII):
    26         (1)  IF THE REASONABLE VALUE OF THE INSTITUTION'S
    27     CONTRIBUTION IS EQUAL TO OR LESS THAN 0.15% OF ITS PROGRAM
    28     SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE ENTIRE
    29     CONTRIBUTION AT 150% OF ITS VALUE.
    30         (2)  IF THE REASONABLE VALUE OF THE INSTITUTION'S
    19970H0055B2575                 - 51 -

     1     CONTRIBUTION IS GREATER THAN 0.15% BUT LESS THAN 0.25% OF ITS
     2     PROGRAM SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE
     3     ENTIRE CONTRIBUTION AT 250% OF ITS VALUE.
     4         (3)  IF THE REASONABLE VALUE OF THE INSTITUTION'S
     5     CONTRIBUTION IS EQUAL TO OR GREATER THAN 0.25% OF ITS PROGRAM
     6     SERVICE REVENUE, THE INSTITUTION MAY CREDIT THE ENTIRE
     7     CONTRIBUTION AT 350% OF ITS VALUE.
     8     (D)  EXISTING AGREEMENTS.--NOTHING IN THIS ACT SHALL BE
     9  CONSTRUED TO AFFECT, IMPAIR, TERMINATE OR SUPERSEDE ANY
    10  CONTRACT, AGREEMENT OR OTHER ARRANGEMENT IN EFFECT ON OR BEFORE
    11  THE EFFECTIVE DATE OF THIS SECTION BETWEEN AN INSTITUTION AND A
    12  POLITICAL SUBDIVISION, WHICH AUTHORIZES OR REQUIRES PAYMENT OF
    13  TAXES, AMOUNTS IN LIEU OF TAXES OR OTHER CHARGES OR FEES FOR THE
    14  SERVICES OF A POLITICAL SUBDIVISION.
    15     (E)  NEW AGREEMENTS.--NOTHING IN THIS ACT SHALL BE CONSTRUED
    16  TO IMPAIR OR OTHERWISE INHIBIT THE RIGHT OR ABILITY OF ANY
    17  INSTITUTION SEEKING OR POSSESSING AN EXEMPTION AS AN INSTITUTION
    18  OF PURELY PUBLIC CHARITY, A PUBLIC SERVICE FOUNDATION OR A
    19  POLITICAL SUBDIVISION FROM EXECUTING VOLUNTARY AGREEMENTS AFTER
    20  THE EFFECTIVE DATE OF THIS SECTION.
    21  SECTION 8.  UNFAIR COMPETITION WITH SMALL BUSINESSES.
    22     (A)  INTENT.--IT IS THE POLICY OF THIS ACT THAT INSTITUTIONS
    23  OF PURELY PUBLIC CHARITY SHALL NOT USE THEIR TAX-EXEMPT STATUS
    24  TO COMPETE UNFAIRLY WITH SMALL BUSINESS.
    25     (B)  GENERAL RULE.--AN INSTITUTION OF PURELY PUBLIC CHARITY
    26  MAY NOT FUND, CAPITALIZE, GUARANTEE THE INDEBTEDNESS OF, LEASE
    27  OBLIGATIONS OF, OR SUBSIDIZE A COMMERCIAL BUSINESS THAT IS
    28  UNRELATED TO THE INSTITUTION'S CHARITABLE PURPOSE AS STATED IN
    29  THE INSTITUTION'S CHARTER OR GOVERNING LEGAL DOCUMENTS.
    30     (C)  EXCEPTIONS.--INSTITUTIONS OF PURELY PUBLIC CHARITY ARE
    19970H0055B2575                 - 52 -

     1  NOT IN VIOLATION OF SUBSECTION (B) IF ANY OF THE FOLLOWING
     2  APPLY:
     3         (1)  THE COMMERCIAL BUSINESS IS INTENDED ONLY FOR THE USE
     4     OF ITS EMPLOYEES, STAFF, ALUMNI, FACULTY, MEMBERS, STUDENTS,
     5     CLIENTS, VOLUNTEERS, PATIENTS OR RESIDENTS. FOR PURPOSES OF
     6     THIS PARAGRAPH, A PERSON SHALL NOT BE CONSIDERED AN EMPLOYEE,
     7     STAFF, MEMBER, ALUMNUS, FACULTY, STUDENT, CLIENT, VOLUNTEER,
     8     PATIENT OR RESIDENT IF THE PERSON'S ONLY RELATIONSHIP WITH
     9     THE INSTITUTION OF PURELY PUBLIC CHARITY IS TO RECEIVE
    10     PRODUCTS OR SERVICES RESULTING FROM THE COMMERCIAL BUSINESS.
    11         (2)  THE COMMERCIAL BUSINESS RESULTS IN SALES TO THE
    12     GENERAL PUBLIC THAT ARE INCIDENTAL OR PERIODIC RATHER THAN
    13     PERMANENT AND ONGOING.
    14     (D)  SUPPORT FOR OTHER CHARITIES.--NOTHING IN THIS SECTION
    15  SHALL BE CONSTRUED AS PROHIBITING OR LIMITING THE ABILITY OF AN
    16  INSTITUTION OF PURELY PUBLIC CHARITY TO FUND, CAPITALIZE,
    17  GUARANTEE THE INDEBTEDNESS OF OR OTHERWISE SUBSIDIZE ANOTHER
    18  INSTITUTION OF PURELY PUBLIC CHARITY.
    19     (E)  INVESTMENTS.--THE INVESTMENT IN PUBLICLY TRADED STOCKS
    20  AND BONDS; REAL ESTATE, WHETHER DIRECTLY OR INDIRECTLY; OR OTHER
    21  INVESTMENTS BY AN INSTITUTION OF PURELY PUBLIC CHARITY DOES NOT
    22  VIOLATE SUBSECTION (B).
    23     (F)  EDUCATIONAL FUNCTIONS.--USE OF FACILITIES TO HOST GROUPS
    24  FOR EDUCATIONAL PURPOSES BY AN INSTITUTION OF PURELY PUBLIC
    25  CHARITY DOES NOT VIOLATE SUBSECTION (B).
    26     (G)  GOVERNMENT FUNCTIONS.--AN INSTITUTION OF PURELY PUBLIC
    27  CHARITY MAY ENGAGE IN A NEW COMMERCIAL BUSINESS THAT MAY
    28  OTHERWISE BE IN VIOLATION OF SUBSECTION (B) IF THE INSTITUTION
    29  IS FORMALLY REQUESTED TO DO SO BY THE COMMONWEALTH OR A
    30  POLITICAL SUBDIVISION.
    19970H0055B2575                 - 53 -

     1     (H)  EXISTING BUSINESS ARRANGEMENTS.--AN INSTITUTION OF
     2  PURELY PUBLIC CHARITY THAT PRIOR TO THE EFFECTIVE DATE OF THIS
     3  SECTION FUNDED, CAPITALIZED, GUARANTEED THE INDEBTEDNESS OF,
     4  LEASED OBLIGATIONS OF OR SUBSIDIZED A COMMERCIAL BUSINESS MAY
     5  CONTINUE TO OWN AND OPERATE SUCH BUSINESSES WITHOUT VIOLATING
     6  SUBSECTION (B) AS LONG AS THE INSTITUTION DOES NOT SUBSTANTIALLY
     7  EXPAND THE SCOPE OF THE COMMERCIAL BUSINESS. IN THE EVENT AN
     8  INJUNCTION IS ISSUED UNDER SUBSECTION (I), THE EFFECT OF SUCH
     9  INJUNCTION SHALL BE LIMITED TO RESTRAINING THE SUBSTANTIAL
    10  EXPANSION OF THE SCOPE OF THE COMMERCIAL BUSINESS WHICH WAS
    11  INITIATED AFTER THE EFFECTIVE DATE OF THIS SECTION.
    12     (I)  REMEDIES.--THE DEPARTMENT OF STATE SHALL ESTABLISH A
    13  SYSTEM OF MANDATORY ARBITRATION FOR THE PURPOSE OF RECEIVING ALL
    14  COMPLAINTS FROM AGGRIEVED SMALL BUSINESSES RELATING TO AN
    15  INSTITUTION OF PURELY PUBLIC CHARITY'S ALLEGED VIOLATION OF
    16  THIS SECTION. UPON RECEIPT OF SUCH COMPLAINT, THE DEPARTMENT
    17  SHALL DIRECT THAT THE COMPLAINT BE RESOLVED AS PROVIDED IN THIS
    18  SUBSECTION.
    19         (1)  ALL COMPLAINTS SHALL BE IN THE FORM OF A SWORN
    20     STATEMENT SETTING FORTH ALL ALLEGATIONS AND REQUESTS FOR
    21     RELIEF, AND SHALL BE FILED WITH THE DEPARTMENT, TOGETHER WITH
    22     A FEE AS PRESCRIBED BY THE DEPARTMENT.
    23         (2)  WITHIN TEN DAYS OF FILING THE COMPLAINT WITH THE
    24     DEPARTMENT, THE AGGRIEVED SMALL BUSINESS SHALL SERVE A COPY
    25     OF THE COMPLAINT ON THE INSTITUTION OF PURELY PUBLIC CHARITY
    26     AGAINST WHICH THE COMPLAINT IS FILED. THE INSTITUTION OF
    27     PURELY PUBLIC CHARITY MUST RESPOND TO THE COMPLAINT WITHIN 30
    28     DAYS OF ITS RECEIPT BY THE INSTITUTION OF THE PURELY PUBLIC
    29     CHARITY.
    30         (3)  WITHIN 30 DAYS FOLLOWING THE PERIOD OF TIME ALLOTTED
    19970H0055B2575                 - 54 -

     1     TO THE INSTITUTION OF PURELY PUBLIC CHARITY TO RESPOND TO THE
     2     COMPLAINT, THE DEPARTMENT SHALL PROVIDE AN UNBIASED AND
     3     QUALIFIED ARBITRATOR WHO POSSESSES SUFFICIENT KNOWLEDGE
     4     REGARDING SUCH INSTITUTIONS TO ADJUDICATE THE MATTER. IF THE
     5     INSTITUTION OF PURELY PUBLIC CHARITY DOES NOT PARTICIPATE IN
     6     THE ARBITRATION, THE ARBITRATOR MAY ISSUE AN ORDER TO COMPEL
     7     SUCH PARTICIPATION. SUCH AN ORDER SHALL BE ENFORCEABLE BY THE
     8     COURT OF COMMON PLEAS IN THE JUDICIAL DISTRICT WHERE THE
     9     ARBITRATION TAKES PLACE.
    10         (4)  THE ARBITRATION SHALL TAKE PLACE IN THE JUDICIAL
    11     DISTRICT IN WHICH THE INSTITUTION OF PURELY PUBLIC CHARITY     <--
    12     AGGRIEVED SMALL BUSINESS IS LOCATED. THE DEPARTMENT SHALL      <--
    13     PROVIDE THE ARBITRATOR ALL RELEVANT MATERIAL REGARDING THE
    14     COMPLAINT, INCLUDING THE ORIGINAL COMPLAINT, THE INSTITUTION
    15     OF PURELY PUBLIC CHARITY'S RESPONSE TO THE COMPLAINT AND
    16     COPIES OF ANY OTHER RELEVANT INFORMATION WHICH THE DEPARTMENT
    17     MAY POSSESS. THE ARBITRATION SHALL BE COMPLETED WITHIN ONE
    18     YEAR FROM THE DATE ON WHICH THE ARBITRATOR WAS ASSIGNED.
    19         (5)  WITHIN 30 DAYS OF THE ARBITRATOR'S ASSIGNMENT, THE
    20     ARBITRATOR SHALL DETERMINE IF THE COMPLAINT SETS FORTH PRIMA
    21     FACIE EVIDENCE THAT A VIOLATION OF THIS SECTION HAS OCCURRED.
    22     IF THE ARBITRATOR DETERMINES THAT THE COMPLAINT DOES NOT
    23     CONTAIN PRIMA FACIE EVIDENCE, THE ARBITRATOR SHALL ISSUE A
    24     WRITTEN REPORT DETAILING THE FINDINGS AND SHALL TERMINATE THE
    25     ARBITRATION. A SMALL BUSINESS MAY APPEAL SUCH A DETERMINATION
    26     AS PROVIDED IN PARAGRAPH (9).
    27         (6)  THE ARBITRATOR SHALL DETERMINE IF THE ACTIVITY OF
    28     THE INSTITUTION OF PURELY PUBLIC CHARITY IS IN VIOLATION OF
    29     THIS SECTION. IN MAKING THIS DETERMINATION, THE ARBITRATOR
    30     SHALL REVIEW ALL RELEVANT LAW, INCLUDING PREVIOUS
    19970H0055B2575                 - 55 -

     1     ARBITRATORS' DECISIONS; REGULATIONS; AND THE CHARTER OR
     2     GOVERNING LEGAL DOCUMENTS OF THE INSTITUTION OF PURELY PUBLIC
     3     CHARITY.
     4         (7)  THE DECISION OF THE ARBITRATOR SHALL BE SET FORTH IN
     5     A WRITTEN DECISION ISSUED TO EACH PARTY, SPECIFYING FINDINGS
     6     OF FACT AND CONCLUSIONS OF LAW. IF THE ARBITRATOR FINDS A
     7     VIOLATION OF THIS SECTION, THE ARBITRATOR MAY INCLUDE AN
     8     ORDER OR INJUNCTION AS PART OF THE DECISION, PROVIDED THAT NO
     9     DAMAGES MAY BE ASSESSED AGAINST AN INSTITUTION OF PURELY
    10     PUBLIC CHARITY.
    11         (8)  UPON AGREEMENT OF THE PARTIES, THE DECISION OF THE
    12     ARBITRATOR SHALL BE FINAL AND BINDING AS TO ALL MATTERS OF
    13     FACT AND LAW AND SHALL BE ENTERED BY THE ARBITRATOR AS A
    14     FINAL JUDGMENT IN THE COURT OF COMMON PLEAS OF THE JUDICIAL
    15     DISTRICT IN WHICH THE ARBITRATION TOOK PLACE. A COPY OF THE
    16     ARBITRATOR'S FINAL DECISION SHALL ALSO BE FILED WITH THE
    17     DEPARTMENT.
    18         (9)  EITHER PARTY MAY INITIATE A DE NOVO APPEAL FROM THE
    19     ARBITRATOR'S DECISION IN THE COURT OF COMMON PLEAS OF THE
    20     JUDICIAL DISTRICT IN WHICH THE ARBITRATION TOOK PLACE WITHIN
    21     30 DAYS OF THE ARBITRATOR'S DECISION.
    22         (10)  THE DEPARTMENT MAY PROVIDE FOR THE SYSTEM OF
    23     ARBITRATION BY MAINTAINING A LIST OF QUALIFIED ARBITRATORS OR
    24     BY CONTRACTING FOR QUALIFIED ARBITRATION SERVICES.
    25         (11)  THE DEPARTMENT MAY ADOPT REGULATIONS NECESSARY TO
    26     IMPLEMENT THIS SECTION.
    27         (12)  THE COST OF AN ARBITRATION PROCEEDING, INCLUDING
    28     THE ARBITRATOR'S FEE, SHALL BE BORNE BY THE COMPLAINANT,
    29     UNLESS THE ARBITRATOR DIRECTS OTHERWISE. EACH PARTY SHALL BE
    30     RESPONSIBLE FOR ITS ATTORNEY FEES AND OTHER COSTS INCURRED.
    19970H0055B2575                 - 56 -

     1         (13)  EXCEPT AS SET FORTH IN THIS SECTION OR IN
     2     REGULATIONS PROMULGATED BY THE DEPARTMENT UNDER THIS SECTION,
     3     THE ARBITRATION SHALL BE GOVERNED BY 42 PA.C.S. CH. 73 SUBCH.
     4     A (RELATING TO STATUTORY ARBITRATION).
     5         (14)  THE REMEDIES SET FORTH IN THIS SUBSECTION SHALL BE
     6     THE EXCLUSIVE REMEDIES AVAILABLE TO AN AGGRIEVED SMALL
     7     BUSINESS.
     8  SECTION 9.  ACCOUNTABILITY AND DISCLOSURE.
     9     (A)  REPORTING.--AN INSTITUTION OF PURELY PUBLIC CHARITY THAT
    10  DOES NOT REGISTER WITH THE DEPARTMENT OF STATE UNDER THE ACT OF
    11  DECEMBER 19, 1990 (P.L.1200, NO.202), KNOWN AS THE SOLICITATION
    12  OF FUNDS FOR CHARITABLE PURPOSES ACT, INCLUDING INSTITUTIONS
    13  EXEMPTED FROM REGISTRATION UNDER SECTION 6(A) OF THE
    14  SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES ACT, SHALL FILE AN
    15  ANNUAL REPORT WITH THE BUREAU. THE REPORT SHALL BE FILED WITHIN
    16  135 DAYS AFTER THE CLOSE OF THE INSTITUTION'S FISCAL YEAR UNLESS
    17  AN EXTENSION IS GRANTED BY THE DEPARTMENT. THE REPORT SHALL BE
    18  IN A FORMAT APPROVED BY THE DEPARTMENT AND SHALL INCLUDE:
    19         (1)  A COPY OF THE ANNUAL RETURN FILED OR REQUIRED TO BE
    20     FILED WITH THE INTERNAL REVENUE SERVICE.
    21         (2)  THE DATE THE INSTITUTION OF PURELY PUBLIC CHARITY     <--
    22     WAS ORGANIZED UNDER APPLICABLE LAW.
    23         (3)  ANY REVOCATION OF TAX-EXEMPT STATUS BY THE INTERNAL
    24     REVENUE SERVICE.
    25         (4)  THE FOLLOWING INFORMATION ON EACH AFFILIATE OF THE
    26     INSTITUTION OF PURELY PUBLIC CHARITY:
    27             (I)  THE NAME AND TYPE OF ORGANIZATION.
    28             (II)  WHETHER THE AFFILIATE IS ORGANIZED ON A FOR-
    29         PROFIT OR NONPROFIT BASIS.
    30             (III)  THE RELATIONSHIP OF EACH AFFILIATE TO THE
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     1         INSTITUTION OF PURELY PUBLIC CHARITY MAKING THE REPORT.
     2         (5)  THE RELATIONSHIP OF THE INSTITUTION OF PURELY PUBLIC
     3     CHARITY WITH ANY OTHER NONPROFIT CORPORATION OR
     4     UNINCORPORATED ASSOCIATION IF THE RELATIONSHIP INVOLVES
     5     FORMAL GOVERNANCE OR THE SHARING OF REVENUE.
     6     (B)  REGULATIONS.--THE DEPARTMENT SHALL PROMULGATE
     7  REGULATIONS TO REQUIRE INSTITUTIONS OF PURELY PUBLIC CHARITY
     8  WHICH REGISTER UNDER SECTION 5 OF THE SOLICITATION OF FUNDS FOR
     9  CHARITABLE PURPOSES ACT TO INCLUDE THE INFORMATION SET FORTH IN
    10  SUBSECTION (A).
    11     (C)  AMENDMENTS TO ANNUAL RETURNS.--AN INSTITUTION OF PURELY   <--
    12  PUBLIC CHARITY WHICH FILES AN AMENDED ANNUAL RETURN WITH THE
    13  INTERNAL REVENUE SERVICE SHALL FILE A COPY OF THE AMENDED ANNUAL
    14  RETURN WITH THE BUREAU WITHIN TEN DAYS OF ITS FILING WITH THE
    15  INTERNAL REVENUE SERVICE.
    16     (D)  EXEMPTION FROM FILING.--EACH OF THE FOLLOWING
    17  INSTITUTIONS OF PURELY PUBLIC CHARITY SHALL BE EXEMPT FROM THE    <--
    18  REPORTING REQUIREMENTS OF THIS SECTION:
    19         (1)  A BONA FIDE DULY CONSTITUTED RELIGIOUS INSTITUTION
    20     AND SUCH SEPARATE GROUPS OR CORPORATIONS WHICH FORM AN
    21     INTEGRAL PART OF A RELIGIOUS INSTITUTION AND ARE EXEMPT FROM
    22     FILING AN ANNUAL RETURN PURSUANT TO THE INTERNAL REVENUE CODE
    23     OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 1 ET SEQ.).
    24         (2)  AN INSTITUTION OF PURELY PUBLIC CHARITY WHICH
    25     RECEIVES CONTRIBUTIONS OF LESS THAN $25,000 PER YEAR PROVIDED
    26     THAT THE INSTITUTION'S PROGRAM SERVICE REVENUE DOES NOT EQUAL
    27     OR EXCEED $5,000,000.
    28     (E)  FILING FEE.--AN INSTITUTION OF PURELY PUBLIC CHARITY
    29  WHICH IS REQUIRED TO FILE A REPORT UNDER SUBSECTION (A) SHALL
    30  PAY AN ANNUAL FILING FEE OF $15. ALL FEES COLLECTED UNDER THIS
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     1  ACT AND UNDER THE SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES
     2  ACT SHALL BE DEPOSITED IN THE STATE TREASURY. THE AMOUNT OF THE
     3  FILING FEE UNDER THIS SUBSECTION MAY BE ADJUSTED BY THE
     4  DEPARTMENT BY REGULATION. ALL FINES, PENALTIES, ATTORNEY FEES
     5  AND COSTS OF INVESTIGATION COLLECTED UNDER THIS ACT AND UNDER
     6  THE SOLICITATION OF FUNDS FOR CHARITABLE PURPOSES ACT SHALL BE
     7  PAID AS FOLLOWS:
     8         (1)  AMOUNTS COLLECTED BY THE BUREAU SHALL BE PAID TO THE
     9     STATE TREASURY.
    10         (2)  AMOUNTS COLLECTED BY THE ACTION OR LITIGATION OF
    11     ANOTHER GOVERNMENT AGENCY SHALL BE PAID DIRECTLY TO THAT
    12     AGENCY.
    13     (F)  PAPERWORK REDUCTION.--THE DEPARTMENT SHALL ALLOW AN
    14  INSTITUTION OF PURELY PUBLIC CHARITY TO CERTIFY THAT THE
    15  INFORMATION REQUIRED IN SUBSECTION (A)(2) THROUGH (5) HAS NOT
    16  CHANGED SINCE THE PRIOR REPORT IN LIEU OF PROVIDING THE SAME
    17  INFORMATION IN THE REPORT REQUIRED BY SUBSECTION (A). THE
    18  DEPARTMENT MAY OBTAIN FROM THE INTERNAL REVENUE SERVICE COPIES
    19  OF ANNUAL RETURNS OF INSTITUTIONS OF PURELY PUBLIC CHARITY WHICH  <--
    20  FILE ANNUAL RETURNS WITH THE INTERNAL REVENUE SERVICE ON
    21  COMPUTER DISK OR OTHER ELECTRONIC OR PAPER MEDIA.
    22     (G)  RETENTION OF RECORDS.--THE DEPARTMENT SHALL RETAIN THE
    23  REPORTING INFORMATION REQUIRED BY THIS SECTION FOR THREE YEARS
    24  FROM THE DATE THE REPORTS ARE REQUIRED TO BE FILED.
    25     (H)  UTILIZATION OF REPORTS.--THE DEPARTMENT SHALL MAKE
    26  REPORTS SUBMITTED UNDER THIS SECTION AVAILABLE FOR PUBLIC
    27  INSPECTION TO THE EXTENT THAT THE INFORMATION IS AVAILABLE FOR
    28  PUBLIC INSPECTION UNDER SECTION 6104 OF THE INTERNAL REVENUE
    29  CODE OF 1986 (26 U.S.C. § 6104). THE DEPARTMENT SHALL PROVIDE
    30  ANY GOVERNMENT AGENCY A COPY OF THE REPORT FILED UNDER THIS
    19970H0055B2575                 - 59 -

     1  SECTION UPON REQUEST. NOTHING IN THIS SUBSECTION SHALL PREVENT A
     2  GOVERNMENT AGENCY FROM REQUIRING ANY INSTITUTION SEEKING
     3  EXEMPTION AS AN INSTITUTION OF PURELY PUBLIC CHARITY TO PROVIDE
     4  THE INFORMATION DESCRIBED IN SUBSECTION (A) TO THAT AGENCY AS
     5  PART OF A DETERMINATION OF THE TAX EXEMPT STATUS OF THE
     6  INSTITUTION.
     7     (I)  ADMINISTRATIVE PENALTY.--THE DEPARTMENT MAY IMPOSE AN
     8  ADMINISTRATIVE PENALTY NOT TO EXCEED $500 FOR ANY OF THE
     9  FOLLOWING:
    10         (1)  KNOWINGLY FAILING TO FILE THE REPORT REQUIRED BY
    11     THIS SECTION.
    12         (2)  KNOWINGLY MAKING A FALSE STATEMENT WHICH IS MATERIAL
    13     IN A REPORT REQUIRED BY THIS SECTION.
    14  SECTION 10.  EXEMPTION FOR FEDERAL GOVERNMENT INSTRUMENTALITY.
    15     ALL REAL PROPERTY OWNED BY ANY CORPORATION ESTABLISHED BY AN
    16  ACT OF THE CONGRESS OF THE UNITED STATES, THAT IS REQUIRED TO
    17  SUBMIT ANNUAL REPORTS OF ITS ACTIVITIES TO CONGRESS CONTAINING
    18  ITEMIZED ACCOUNTS OF ALL RECEIPTS AND EXPENDITURES AFTER BEING
    19  FULLY AUDITED BY THE DEPARTMENT OF DEFENSE, FOR PURPOSES OF THE
    20  CONSTITUTION OF PENNSYLVANIA AND THE LAWS OF THIS COMMONWEALTH
    21  RELATING TO THE ASSESSMENT AND TAXATION OF REAL ESTATE, IS
    22  DEEMED TO BE PROPERTY OF A FEDERAL GOVERNMENT INSTRUMENTALITY
    23  AND THUS EXEMPT FROM ALL STATE AND LOCAL TAXATION.
    24  SECTION 11.  PROHIBITED ACT.
    25     NO INSTITUTION MAY CLAIM AN EXEMPTION FROM SALES AND USE TAX
    26  AS AN INSTITUTION OF PURELY PUBLIC CHARITY UNLESS THE
    27  INSTITUTION HAS RECEIVED AN ORDER FROM THE DEPARTMENT OF REVENUE
    28  APPROVING AND AUTHORIZING THE EXEMPTION.
    29  SECTION 12.  COMPLIANCE.
    30     INSTITUTIONS OF PURELY PUBLIC CHARITY SHALL COMPLY WITH THE
    19970H0055B2575                 - 60 -

     1  PROVISIONS OF THIS ACT AND WITH THE PROVISIONS OF ARTICLE II OF
     2  THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM
     3  CODE OF 1971.
     4  SECTION 13.  CIVIL PENALTY.
     5     IN ADDITION TO ANY PENALTIES AUTHORIZED BY THE ACT OF MARCH
     6  4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, FOR
     7  VIOLATIONS OF THAT ACT, THE DEPARTMENT OF REVENUE MAY IMPOSE AN
     8  ADMINISTRATIVE PENALTY NOT TO EXCEED $500 FOR ANY WILLFUL AND
     9  KNOWING VIOLATION OF THIS ACT. THIS SECTION SHALL NOT APPLY TO
    10  ANY VIOLATION OF SECTION 8.
    11  SECTION 14.  REPEALS.
    12     (A)  ABSOLUTE.--SECTION 24 OF THE ACT OF DECEMBER 19, 1990
    13  (P.L.1200, NO. 202), KNOWN AS THE SOLICITATION OF FUNDS FOR
    14  CHARITABLE PURPOSES ACT, IS REPEALED.
    15     (B)  GENERAL.--ALL OTHER ACTS AND PARTS OF ACTS ARE REPEALED
    16  INSOFAR AS THEY ARE INCONSISTENT WITH THIS ACT EXCEPT FOR
    17  SECTION 204(A)(3) OF THE ACT OF MAY 22, 1933 (P.L.853, NO.155),
    18  KNOWN AS THE GENERAL COUNTY ASSESSMENT LAW, AS IT APPLIES TO
    19  CHARITABLE ORGANIZATIONS PROVIDING RESIDENTIAL HOUSING SERVICES.
    20  SECTION 15.  APPLICABILITY.
    21     (A)  GENERAL.--THIS ACT SHALL NOT APPLY TO NOR AFFECT 40
    22  PA.C.S. § 6103 (RELATING TO EXEMPTIONS APPLICABLE TO CERTIFIED
    23  HOSPITAL PLAN CORPORATIONS) OR 6307 (RELATING TO EXEMPTIONS
    24  APPLICABLE TO CERTIFICATED PROFESSIONAL HEALTH SERVICE
    25  CORPORATIONS) OR THE ENTITIES SUBJECT TO THOSE SECTIONS.
    26     (B)  EXISTING SALES AND USE TAX EXEMPTIONS.--AN EXEMPTION
    27  FROM TAX UNDER SECTION 204(10) OF THE ACT OF MARCH 4, 1971
    28  (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, EXISTING ON
    29  THE EFFECTIVE DATE OF THIS SECTION SHALL REMAIN IN EFFECT UNTIL
    30  THE EXPIRATION OF THAT EXEMPTION.
    19970H0055B2575                 - 61 -

     1     (C)  PRESUMPTION.--NO INSTITUTION OF PURELY PUBLIC CHARITY
     2  MAY ASSERT A PRESUMPTION PURSUANT TO SECTION 6 UNTIL THAT
     3  INSTITUTION'S EXEMPTION UNDER SECTION 204(10) OF THE TAX REFORM
     4  CODE OF 1971 IS GRANTED OR RENEWED ON OR AFTER THE EFFECTIVE
     5  DATE OF THIS SECTION.
     6  SECTION 16.  EFFECTIVE DATE.
     7     THIS ACT SHALL TAKE EFFECT AS FOLLOWS:
     8         (1)  SECTIONS 8 AND 9 SHALL TAKE EFFECT IN 120 DAYS.
     9         (2)  THE REMAINDER OF THIS ACT SHALL TAKE EFFECT
    10     IMMEDIATELY.














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