District files challenge to LVHN’s tax-exempt status
Salisbury Township School District is challenging the Lehigh Valley Health Network’s tax-exempt status in a lawsuit filed Jan. 9.
In an action filed in the Court of Common Pleas of Lehigh County, the district is arguing Lehigh Valley Hospital should be ordered to pay its “fair share” of taxes.
According to a news release from the district, Lehigh Valley Hospital, part of the Lehigh Valley Health Network, is a multi-billion dollar integrated health network with hospitals, outpatient facilities and numerous related health facilities throughout the Lehigh Valley.
According to the new tax exemption appeal the district filed, the hospital does not meet the constitutional requirements set forth by the Pennsylvania Supreme Court necessary to show that it is a “purely public charity.”
In challenging the health system’s claim of tax-exempt status, the district’s recently filed lawsuit argues the health system should pay more than $5 million a year in property taxes, based on the current real estate valuation and the school district’s property tax rate. The hospital’s properties may be subject to future reassessments that would result in even greater revenue to the district, the news release states.
“These uncollected revenues could help support core programs and even limit future tax increases,” Salisbury Township School District Superintendent Dr. Randy Ziegenfuss said.
The district claims Lehigh Valley Hospital’s property tax avoidance penalizes all other taxpayers, including for-profit health care entities with which the health network fiercely competes. Contrary to state law, Lehigh Valley Health Network conducts its far-reaching business enterprises as profit-making businesses – including paying its top executives extremely high salaries and bonuses – while avoiding payment of their fair share of property taxes, the news release states.
The lawsuit was filed by special outside counsel Martin Cohen and Mark Altemose of Cohen, Feeley, Altemose & Rambo, and by Aaron J. Freiwald, managing partner of Freiwald Law in Philadelphia.
The lawyers will only be compensated if the tax appeal is successful.
The news release lists the following key points:
•Under a 1985 Supreme Court decision, nonprofit hospitals are not automatically exempt from paying local property taxes, which substantially fund Pennsylvania’s public schools. They must meet the law’s rigid five-point standard to qualify as a purely public charity.
•Lehigh Valley Hospital does not satisfy these requirements to be property-tax exempt and also fails to meet other state and county rules and regulations.
•Based on a comprehensive review, it was determined that the hospital provides less than two percent of its total operating revenue for charitable care. Pennsylvania law allows tax exemption only to those entities that donate a substantial portion of their revenue to charity.
“According to the Pennsylvania Constitution, the privilege of property-tax exemption is reserved for those nonprofits that are primarily in the business of charity,” Freiwald said. “Lehigh Valley Hospital is primarily in the business of profits and they do quite well enough to pay their fair share to support the students, faculty and staff and Salisbury Township.”
“We intend to vigorously defend the matter,” according to a statement from Brian Downs, Lehigh Valley Heath Network’s public information officer. “It is important to point out that this is an appeal of a decision of the tax assessment appeals board which found in LVHN’s favor.
“We believe the health network fulfills its charitable mission including improving health care, advancing medical science and providing education,” Downs said. “We feel Judge Brian Johnson’s decision in June 2016 related to the handling of our charitable assets bolsters this point.”