Philadelphia OPA Relaxes and Clarifies Requirements for Tax-Exempt Real Property Owners/City Council Continues Its Efforts

April 2015Articles In the Zone

Owners of exempt real estate in Philadelphia were surprised in January of this year to receive notices from the Office of Property Assessment (OPA) requiring both the completion of paperwork confirming the tax-exempt use of real estate, along with submission requirements, including organizational charters and by-laws, income expense statements, statements of assets and liabilities, descriptions of fundraising activities and other materials. The form was requested for each exempt parcel, and the communication from OPA was murky regarding whether or not there was a requirement for multiple copies of requested information for those entities that owned more than one parcel.

This effort by OPA to audit tax-exempt properties had been authorized by Ordinance Number 130123, which had been passed by the city council and then signed into law on June 13, 2013. The ordinance was passed in response to concerns that some parcels were enjoying tax-exempt status even though a change of circumstance should have resulted in the parcel becoming taxable.

However, once OPA took action, the members of the city council heard from a range of non-exempt property owners, particularly members of the clergy. These constituents complained that the OPA submission requirements were burdensome and unnecessary. In response, Councilman David Oh introduced Bill Number 150149, which significantly pared back the information requirements OPA could impose in connection with its audit of exempt parcels. Facing a high likelihood that the proposed legislation would pass, OPA made a strategic retreat and revised its submission requirements. As complaints from church groups continued, on March 26, 2015, the city council passed Bill Number 150144, which eliminated all recertification submission requirements. As this update is written, it is unclear whether the mayor will sign the new law or whether he and the council will reach a compromise approach.

In response to the legislative efforts, OPA has extended from March 31, 2015, to June 1, 2015, its deadline for responding to the audit information request. Pending Bill Number 150144 becoming law, either by way of the mayor’s signature or a veto override, owners are required only to submit a copy of the OPA form with answers to the questions on its first page, along with a copy of the IRS determination letter confirming Section 501(c)(3) tax-exempt status under the Internal Revenue Code. The lengthy list of additional documents, which had been required, can now be ignored. Taxpayers are still required to explain how they utilize each of their tax-exempt parcels while disclosing any income received from each of the parcels.

If an organization with which you are familiar believes it enjoys tax-exempt status for its Philadelphia property and has not received the forms described above, a representative of the organization should contact the OPA. If you need assistance with completing the paperwork, confirming how the law has evolved after March 31, 2015, or any other aspect of the process, please contact William Martin at 215.299.2865 or Reuben Asia at 215.299.2190.

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