Court Opinion

ID: 9635340
Source: CourtListenerOpinion
Date Created: 2023-08-22 13:47:36.474334+00
Date Added: 2024-06-11T18:09:24.596144
License: Public Domain

Justice CASTILLE,
dissenting.
In my view, the trial court was correct in ruling that the restaurant and real estate office operated on property owned by appellee Saw Creek Community Association, Inc. (“Saw Creek” or “Association”), but leased to private, for-profit entities, do not qualify as common facilities such as to exempt them from taxation. Therefore, I respectfully dissent.
The Common Pleas Court looked to general law in the area of tax assessment and properly found that the actual use of the property in this instance is more pertinent to issues of taxation than ownership. Citing this Court’s decision in In re Township of Moon, 387 Pa. 144, 127 A.2d 361 (1956), the trial court noted that even property that is generally exempt from taxation because it is owned by a public entity may lose that tax exempt status if it is used for commercial purposes or leased to a purely business enterprise and not for a public use. In Moon, the issue before this Court was whether portions of the Greater Pittsburgh Airport, which was a tax exempt municipal property, were subject to taxation because they were rented to private individuals and corporations for the purpose of operating for-profit concessions including a jewelry store, news stand, hotel, night club, women’s clothing store, barber shop, parking areas, and a number of restaurants, bars and cafes. The lease agreements with the concessionaires provided the Airport with a net minimum rent per month plus a percentage of gross sales. This Court held that the use of the disputed property was of paramount importance in determining its tax status:
[T]here is equally no doubt but that property, even though owned by a body ordinarily tax exempt, is taxable if used by it for commercial purposes, or if rented to a lessee for a purely business enterprise and not a public use; this is true even though the rentals or other proceeds from the proper*448ty are devoted to the tax exempt activities of the lessor.... It was said in the West Vieto Borough Municipal Authority Appeal, [381 Pa. 416, 113 A.2d 307, 309 (1955)]: “The controlling test is, not merely whether the property or part of it has been rented out, but whether the usé of the part so leased is for a public or a private purpose. It is the use of the property, and not the use of the proceeds from the property, which determines whether tax exemption may constitutionally be granted.”
Id. at 364 (citations omitted). Applying this principle to the facts in Moon, this Court held that the portions of the Airport devoted to commercial uses not constituting “a reasonably necessary and incidental part of the Airport itself’ were subject to taxation. Id. at 365.
I agree with the trial court that the sound and realistic approach set forth in Moon applies here. Indeed, the facts in this appeal are so closely analogous to the facts in Moon as to compel the same tax status conclusion. The property at issue is owned by the Association and, pursuant to 68 Pa.C.S. 5105(b)(1), would ordinarily enjoy the tax exemption available to common Association property in a planned community However, the property is leased to two private entities, one of which operates a restaurant, while the other operates a real estate office. The rental agreements, like the agreements in Moon, provide income to the Association in the form of a minimum monthly rental and, in the case of the real estate office, a percentage of commissions earned from real estate transactions. The restaurant is open to the public, not just to residents of the Association, and residents do not eat for free in the restaurant, albeit they do enjoy a small discount.
These same businesses, if operated in the very same fashion but located on property owned by an entity other than a planned community’s association, would undoubtedly be subject to taxation. These businesses do not exist solely for the benefit of Saw Creek’s residents, nor are they “a reasonably necessary and incidental part” of Saw Creek Estates. Rather, the Association has elected to make its property available to for-profit businesses, in exchange for income. Such being the *449use and economic reality of the property, it should be taxed in the same manner as other for-profit businesses not so fortunate as to lease their space from a tax exempt entity. These going business ventures should not be afforded a competitive tax advantage merely because of the fortuity of who owns the property.
I am also persuaded by appellants’ argument that, because Saw Creek’s residents do not possess an “appurtenant interest,” meaning that they do not have free and unfettered access to the leased property, the restaurant and sales office should not be exempt from taxation because they are leased to private entities who control the use of the premises. As the trial court aptly noted, these for-profit corporations enjoy exclusive control over the leased property, which is therefore not subject to the unfettered use, control or dominion of Saw Creek’s residents. Instead, the properties are exclusively used, occupied and controlled by these private entities for the purpose of generating a profit. The property should not be deemed tax exempt.
Accordingly, I would reverse the decision of the Commonwealth Court holding that the property is exempt from taxation and reinstate the trial court’s determination.
Justice NEWMAN joins this dissenting opinion.