Penn State retains tax-exempt status

The University won the court case that questioned whether it could remain exempt from property taxes.

As of yesterday, the University can breathe a sigh of relief -- it has one less monetary concern weighing on its mind. In the case dealing with the tax-exempt status of the University, the Dauphin County Court of Common Pleas ruled yesterday in favor of the University.

The case questioned whether the University could continue to be exempt from property taxes for the University's Hershey Medical Center, which includes the College of Medicine as well as research centers and the University hospitals.

"This is obviously good news for the medical center," said Stephen MacCarthy, executive director for University Relations. The reason for this suit is that a local government is trying to find a new revenue source, he said.

If the status were not confirmed, the students would not be protected from additional costs from the University, Nathan Nair, student trustee, said.

"It's definitely a positive step for both the University and the students," he said.

The court issued that the University is "an instrumentality of the Commonwealth (of Pennsylvania)," MacCarthy said. As such, the University cannot be taxed.

"I think on this particular issue, (the ruling) supports what we have contended all along," he said.

This decision is important to students because if the University were responsible for coming up with the money, that money would be taken from the University, MacCarthy noted.

"If suddenly we had a tax bill of $100 million, we've got to come up with that money somewhere," he said.

If the University had lost the suit, it would have created problems around the Commonwealth for the University, MacCarthy said, because the increase in taxes would produce millions of dollars of costs.

"Obviously that would be very costly to the University if they were allowed to do that," he said.

If the case was defeated, the University would have had an added concern -- if it were forced to pay property taxes in Dauphin County, MacCarthy said, other areas of the state would also question its tax-exempt status.

The University has been questioned about its tax-exempt status in other areas of the state. Centre County has had concerns with the tax-exempt status, according to a press release from the Office of Public Information.

This issue was addressed in a bill that died with the end of the 1996 term for the state House of Representatives. Senate Bill 355 would have declared real estate property owned by state-related institutions -- including the University -- as tax exempt. The bill would have clarified the tax-exempt status, MacCarthy said.

But no place in the country allows local governments to tax state properties, because the locals exist essentially because of the state, MacCarthy said.

The suit itself is not in anyway related to the University's recent merger with Geisinger Health System, he said, because the suit preceded the merger. The health system is not-for-profit, so any income above expenses it would make goes back to the College of Medicine.