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Defining charities

March 17, 1997

Defining 'charities'

When historians write the story of Pennsylvania state government in the 1990s, there'll be a footnote devoted to the bravery on Rep. Karl Boyes, who's sponsoring a bill to limit the number of organizations that would be exempt from municipal taxes. Good luck to Rep. Boyes on his journey through this political minefield.

The confusion on this issue stems from the Pennsylvania Constitution, which permits the legislature to exempt charitable organizations from paying taxes, but doesn't define what a charitable organization is. For the past 120 years, disputes over what is (or isn't) a charity have been settled by the courts .

The dispute in more than academic because the municipalities claim that every agency is that is exempted from taxes is one more group that won't help defray the cost of services like police protection and the like.

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Boyes' bill would set five conditions for tax-exempt status, including:

- that the group advance a charitable purpose,

- that the group donate a substantial portion of its services,

- that the group help genuinely needy people,

- that the group relieve the government of a burden, and

- that the group operate free of a profit motive.

A quick look at these conditions reveals that they are vague at best, and without further interpretation, (presumably by the courts), would probably be useless.

Even defining who is "genuinely needy" would be difficult. Who is to say that those in need of spiritual guidance are less needy (for the purposes of this law) than someone who needs food and clothing?

What Boyes is trying to root out are those groups which achieve non-profit status, but do little public good. We suggest this approach: Limit non-profit status to those groups with a payroll which doesn't exceed (for example) 10 percent of their annual budget. That figure may not be the precise one needed, but it should discourage those groups whose main accomplishment is perpetuating themselves from one year to the next.

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