Court Opinion

ID: 9713100
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:07:53.089708+00
Date Added: 2024-06-11T18:23:16.158523
License: Public Domain

OPINION BY
President Judge COLINS.
American Law Institute (ALI) petitions for review of the Board of Finance and Revenue’s (Board) order denying the renewal of its sales and use tax exemption1 as an institute of purely public charity.
*1090The facts as stipulated by the parties2 are as follows. ALI is a nonprofit corporation organized under the law of the District of Columbia with its principal place of business in Philadelphia. ALI’s charitable purposes are education and legal reform; more specifically, as stated in its certificate of incorporation, its goals are the clarification and simplification of the law and its adaptation to social needs, improving the administration of justice, and the encouragement and promotion of scholarly and scientific legal work. ALI is exempt from federal income tax under IRC Section 501(c)(3). Its elected membership consists of legal scholars, attorneys, and members of the judiciary. Ex officio members include the U.S. Supreme Court Justices, the chief judges of the Circuit Courts of Appeals, the U.S. Attorney General and Solicitor General, the chief judge of the highest state court of each state, law school deans, bar association presidents, and the leaders of other prominent legal organizations. Members are required to actively participate in ALI’s work. For 2002, volunteers spent an estimated 22,000 hours annually on ALI law reform projects and an estimated 66,000 hours on ALI-ABA education programs and materials.
Among ALI’s current projects are the drafting of a proposed federal statute for the uniform treatment of foreign judgments; researching and evaluation of criminal sentencing nationwide and under the Model Penal Code; acting as an editorial board for the National Conference of Commissioners on Uniform State Laws, including the development of international annotations to the Uniform Commercial Code; collaborating on the development of a uniform procedural system for adjudicating international disputes; developing principles of the law of nonprofit organizations; an ongoing analysis of World Trade Organization decisions; clarifying and updating the Restatements of the Law Third, which it developed between 1923 and 1944; and the development of principles governing intellectual property and aggregate litigation. In collaboration with the American Bar Association (ABA), ALI-ABA offers legal education courses and materials through a variety of media.
In 1994 ALI developed its Principles of Corporate Governance, which continue to be adopted throughout the country. Its Statement of Essential Human Rights was used as the basis for the United Nations’ Universal Declaration of Human Rights adopted in 1948. In recent years ALI has worked on international projects including the development of transnational rules and procedures, international jurisdiction and judgments, and a Restatement of Foreign Relations Law of the United States.
In February 2002, ALI applied for renewal of its sales and use tax exemption, which was denied. The Board of Appeals and Board of Finance and Revenue upheld the denial of exemption.
Article VIII, Section 2(a)(v) of the Pennsylvania Constitution states, in pertinent part, “The General Assembly may by law exempt from taxation: .... (v) Institution of purely public charity....” Pa. Const, art. VIII, § 2(a)(v). Because the Constitution itself does not exempt a taxpayer from taxation, but rather permits the legislature to do so within limits, an entity seeking or defending a tax exemption must first establish that it is a purely public charity within the meaning of Article VIII, Section 2 by meeting the minimum constitutional qualifications set forth *1091in Hospital Utilization Project v. Commonwealth, 507 Pa. 1, 487 A.2d 1306 (1985) (HUP), and second that it meets statutory-qualifications for exemption under Section 5 of the Institutions of Purely Public Charity Act (Charity Act).3 Community Options, Inc. v. Board of Property Assessment, Appeals and Review, 571 Pa. 672, 813 A.2d 680 (2002). In determining whether an institution is one of purely public charity prior cases have limited value as precedent because of the continually changing nature of the concept of charity and the variable circumstances of time, place, and purpose. City of Washington v. Board of Assessment Appeals, 666 A.2d 352 (Pa.Cmwlth.1995), affirmed, 550 Pa. 175, 704 A.2d 120 (1997) (quoting G.D.L. Plaza v. Council Rock School District, 515 Pa. 54, 59-60, 526 A.2d 1173, 1175 (1987)).
An entity meets the constitutional qualifications as a purely public charity if it possesses the following characteristics: 1) advances a charitable purpose, 2) donates or renders gratuitously a substantial portion of its services, 3) benefits a substantial and indefinite class of persons who are legitimate subjects of charity, 4) relieves the government of some of its burden, and 5) operates entirely free from private profit motive. HUP, 507 Pa. at 12-13, 487 A.2d at 1311-12. At issue in the present case is only the question of whether ALI benefits a substantial and indefinite class of persons who are legitimate subjects of charity.4
The Board argues that ALI is not entitled to the exemption because its purpose is to provide educational services, that it does not benefit an indefinite number of persons but rather a large, definite class of beneficiaries, and that its primary beneficiaries are attorneys, who are not the legitimate subjects of charity. In support of its arguments, the Board relies primarily on PICPA Foundation for Education and Research v. Commonwealth, 535 Pa. 67, 634 A.2d 187 (1993), and Community Accountants v. Commonwealth, 655 A.2d 652 (Pa.Cmwlth.1995), affirmed, 544 Pa. 259, 676 A.2d 194 (1996). In PICPA the Supreme Court upheld the denial of a sales and use tax exemption after concluding that the facts demonstrated that the benefit bestowed on the general public was at most indirect. PICPA’s purpose was the encouragement of education and research in accounting, and its services consisted of disseminating accounting information and offering related conferences whose attendees were primarily accountants. In Community Accountants, the exemption was denied on the same grounds; its purpose was to provide free accounting and financial management services to small nonprofit organizations and small businesses. We find both of these cases to be factually distinguishable.
The word “charitable,” in a legal sense, includes every gift for a general public use, to be applied, consistent with existing laws, for the benefit of an indefinite number of persons, and designed to benefit them from an educational, religious, moral, physical or social standpoint. In its broadest meaning it is understood “to refer to something done or given for the benefit of our fellows or the public.”
*1092In re Hill School, 370 Pa. 21, 25, 87 A.2d 259 (1952) (quoting Taylor v. Hoag, 273 Pa. 194, 196, 116 A. 826 (1922)). “[W]hat-ever is gratuitously done ... for the advancement of the public good is a public charity. In every such case as the public is the beneficiary, the charity is a public charity.” Trustees of Academy of Protestant Episcopal Church v. Taylor, 150 Pa. 565, 573, 25 A. 55, 56 (1892).
In American Society for Testing Materials v. Board of Revision of Taxes, 423 Pa. 530, 225 A.2d 557 (1967) (ASTM), the Supreme Court upheld the Society’s exemption as a purely public charity over the City of Philadelphia’s objection that its principal beneficiaries were its membership, which was not open to the public, and that the Society had no contact with the public save through its library, which was not a general interest library and rarely used by the public. The Court concluded that the Society primarily benefited the general public. The Court has since reinforced the concept that a purely public charity can provide members of the general public with resources that would not otherwise be within their reach, and that “it is fully consistent with the fundamental character of a purely public charity to benefit the general public.” Unionville-Chadds Ford School District v. Chester County Board of Assessment Appeals, 552 Pa. 212, 714 A.2d 397 (1998). See also Appeal of Sewickley Valley YMCA, 774 A.2d 1 (Pa.Cmwlth.2001).
As ALI argues, the Board’s analysis considers only a portion of ALI’s purpose and activities. It is undisputed that ALI’s primary purposes, as stated in its articles of incorporation and as exemplified by the bulk of its activities, are legal reform, clarification and simplification of the law and its adaptation to social needs, and improving the administration of justice. In furthering those precise goals, ALI has undertaken the restatement of the common law for the benefit of all those affected by that law, developed the Uniform Commercial Code, an achievement that requires no further explanation, developed the Model Penal Code, making criminal codes nationwide more rational and coherent. ALI’s Statement of Essential Human Rights formed the basis for international human rights law, and its work in developing transnational civil procedure, restatements of foreign law, and international jurisdiction and judgments are fundamental to established and developing nations worldwide. Judges and justices of the highest of the nation’s courts contribute to the accomplishment of ALI’s goals through their membership and participation. To paraphrase the Supreme Court in ASTM, it must be apparent from even this meager summarization of ALI’s spheres of activity that it is does more than benefit attorneys. As New York trial lawyer, Henry G. Miller, once said, “The legal system is often a mystery, and we, its priests, preside over rituals baffling to everyday citizens.” Legal reform and clarification and simplification of the law and its adaptation to social needs clearly benefit society as a whole.
,To the extent that the Board focused solely on ALI’s legal education activities, again paraphrasing ASTM, whatever gain can be said to accrue to attorneys eventually accrues to the benefit of the public as well. Continuing legal education is generally an annual requirement for an attorney to maintain his or her license to practice law; however, the purpose of continuing legal education is professional responsibility, which helps ensure that attorneys are able to discharge their duties to the public. See Memorandum of Understanding Between ALI and the ABA, Stipulations of Fact, Exhibit B.
Having determined that ALI benefits a substantial and indefinite class of persons *1093who are legitimate subjects of charity, we similarly conclude that it meets the statutory qualifications for exemption under Section 5(e) of the Charity Act, 10 P.S. § 375(e), which provides that an institution of purely public charity is one that meets the criteria set forth in subsections (b) through (e). Subsection (e), Charity to persons, in terms identical to those used in the HUP test, requires that the institution benefit a substantial and indefinite class of persons who are legitimate subjects of charity. 10 P.S. § 375(e)(1). Under the statutory qualification, a purely public charity exempt from taxation may be one that provides services to the general public. Appeal of Sewickley Valley YMCA.
Accordingly, the order of the Board of Finance and Revenue is reversed.

ORDER

AND NOW, this 15th day of September 2005, the order of the Board of Finance and Revenue in the above-captioned matter is reversed.
The Chief Clerk is directed to enter judgment in favor of American Law Institute and against the Commonwealth of Pennsylvania unless exceptions are filed within 30 days pursuant to Pa. R.A.P. 1671(9.

. Section 204(10) of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, as amended, 72 P.S. § 7204(10), exempts from sales and use tax "[t]he sale at retail, or use by (i) any charitable organization, volunteer firemen’s organization or nonprofit educational institution...."

. The facts stipulated by the parties on appeal are binding and conclusive and should be regarded as this Court’s findings of fact. Philadelphia Gas Works v. Commonwealth, 741 A.2d 841 (Pa.Cmwlth.1999), affirmed, 562 Pa. 621, 757 A.2d 360 (2000).

. Act of November 26, 1997, P.L. 55, 10 P.S. § 375.

. The Board’s order states that ALI failed to establish that it qualifies as a purely public charity but does not specifically state which of the requirements it failed to meet. The briefs of both ALI and the Board frame the issue before this Court as solely the fourth of the HUP and Charity Act requirements, whether ALI benefits a substantial and indefinite class of persons who are legitimate subjects of charity.