The opinion
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Lazarus Housing, LLC : CASES CONSOLIDATED
:
v. :
:
Allentown School District, :
Allentown City, Lehigh County :
Board of Assessment Appeals, :
Lehigh County Department of Law :
: Nos. 992, 993, 994, 995 &
Appeal of: City of Allentown and : 1010 C.D. 2023
Lehigh County : Argued: December 8, 2025
BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE STACY WALLACE, Judge
HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE WALLACE FILED: February 4, 2026
The City of Allentown (City) and Lehigh County (County) appeal the August
11, 2023 orders of the Court of Common Pleas of Lehigh County (trial court)
reversing the decision of the Lehigh County Board of Assessment Appeals (Board).
The trial court’s orders granted an exemption from property taxation for Lazarus
Housing, LLC (Lazarus) as a purely public charity. The City and County
(collectively, Appellants) contend the trial court abused its discretion and erred as a
matter of law in two main regards; firstly, by finding that Lazarus can include the
charitable services of a separate and independent corporation in its exemption
petition; and secondly, by finding that Lazarus produced sufficient evidence under
both the Hospital Utilization Project test and the Institutions of Purely Public
Charity Act. We affirm.
BACKGROUND
On November 25, 2020, Lazarus appealed the Board’s October 30, 2020
decision which denied a real estate tax exemption for five separate parcels
(Property).1 Reproduced Record (R.R.) at 417-18.2 Lazarus filed a separate appeal
for each parcel, and on February 14, 2023, the trial court held a non-jury trial for all
five parcels. Id. at 418. In five separate, identical August 11, 2023 orders and
decisions, the trial court reversed the Board. Id. at 416-31. These matters are now
consolidated on appeal.
On November 21, 2017, the Lehigh County Conference of Churches
(Conference of Churches) created and organized Lazarus as a Domestic Limited
Liability Company exclusively for charitable purposes under Section 501(c)(3) of
the Internal Revenue Code of 1986.3 Id. at 121, 419. Lazarus was created “to acquire
and hold real property, and provide affordable housing through real property, and to
facilitate the development of supportive relationships for adults re-entering the
community, such as after incarceration, and reduce the risk of recidivism among
participants.” Id. at 108-09. The Conference of Churches uses the Property for its
Lazarus Housing Program. Id. at 419. Both Lazarus and the Conference of Churches
have their principal offices at 457 W. Allen Street, Allentown, Pennsylvania 18102.
1
The five properties, all located in Allentown, Lehigh County, are as follows: 449 W. Allen
Street; 451 W. Allen Street; 462 W. Tilghman Street; 609 S. 6th Street; and 614 N. Penn Street.
2
References to Reproduced Record reflect electronic pagination relative to 992 C.D. 2023.
3
26 U.S.C. § 501(c)(3).
2
Id. at 107-08. Lazarus’s Certificate of Organization and Operating Agreement both
provide:
Lazarus does not contemplate pecuniary gain or profit, incidental or
otherwise. No part of the net earnings of Lazarus shall inure to the
benefit of, or be distributable to Lazarus Directors or officers, or other
private persons, except that Lazarus shall be authorized and empowered
to pay reasonable compensation for services rendered and to make
payments and distributions in furtherance of the purposes set forth
herein. Notwithstanding the generality of the foregoing, whenever the
lawful activities of Lazarus involve, among other things, the charging
of fees or prices for services or production, Lazarus shall have the right
to receive such income and, in so doing, may have net earnings. All
such net earnings shall be applied to the operation and maintenance of
the lawful activities of Lazarus.
Id. at 109, 354.
The Operating Agreement also delineates the powers of the Lazarus Board as
“The persons designated pursuant to this [Operating] Agreement as the Lazarus
Directors shall have all powers and duties for the conduct of the activities, business
and affairs of Lazarus.” Id. at 110. Moreover, the Operating Agreement provides:
Lazarus Board manages all the business and affairs of Lazarus subject
to the authority and direction of [the Conference of Churches]. Except
for situations in which the approval of [the Conference of Churches] is
expressly required by this Agreement or by no-waivable provisions of
applicable law, and subject to the authority and direction of [the
Conference of Churches] or [the Conference of Churches’] articles of
incorporation, as amended, or bylaws, as amended, or any other
restrictions on [the Conference of Churches], Lazarus Board has full
and complete authority, power, and discretion to manage and control
the business, affairs, assets and properties of Lazarus, to make all
decisions regarding those matters, and to perform any and all other acts
or activities customary incident to the management of Lazarus’
business.
3
Id. The number of Lazarus Directors shall be no less than three, but no more than
nine, and a minimum of two seats on the Lazarus Board must be held or reserved for
the Conference of Churches Directors. Id.
The Conference of Churches is the sole member of Lazarus. Id. at 419. The
Lazarus Board of Directors makes decisions subject to the authority and direction of
the Conference of Churches. Id. at 110. Lazarus does not pay any fees or dividends
to any incorporators, voting members, chief officers, executives or employees. Id.
at 101. In the event of dissolution, after payment of all liabilities, the assets of
Lazarus shall be transferred to the Conference of Churches or, if the Conference of
Churches is dissolved, to one or more qualifying 501(c)(3) organizations or to a
governmental entity described in Section 170 (c)(1) of the Code, but under no
circumstance to any director, officer or employee of Lazarus or to the Conference of
Churches. Id. at 119.
Pursuant to an Access, Use, License and Managed Services Agreement
(Services Agreement), the Conference of Churches agrees to provide Lazarus with
certain administrative, operational, management, financial, accounting, and human
resource services. Id. at 101, 124-28. Under the Services Agreement, Lazarus
contracts with the Conference of Churches for support, as Lazarus does not have its
own employees. Id. at 101. Lazarus’s financial reporting, including audits, is
combined with the Conference of Churches; however, Lazarus does maintain
separate financial records from the Conference of Churches. Id. at 56.
By orders of August 11, 2023, the trial court reversed the Board, concluding
Lazarus is a purely public charity within the meaning of article VIII, section 2(a)(v)
of the Pennsylvania Constitution. PA. CONST. art. 8, section 2(a)(v). The trial court
first addressed the City’s assertion that because Lazarus’s parent, the Conference of
4
Churches, operates all charitable programming at the Property, Lazarus presented
no evidence of providing any services to qualify for a purely public charity
exemption. Id. at 419. The trial court likened the case to Pottstown School District
v. Montgomery County Board of Assessment Appeals, 289 A.3d 1142 (Pa. Cmwlth.
2023) (Pottstown I),4 wherein Tower Health, LLC (Tower Health), created a limited
liability company (LLC) to run several newly purchased hospitals as nonprofit
entities. Id. at 420. Tower Health was the sole member of each newly created LLC.
Id. One of these entities, Pottstown Hospital, LLC, sought property tax exemption,
which the trial court granted. Id. On appeal, the Commonwealth Court rejected the
contention the trial court should have found Tower Health’s degree of control over
the Hospital’s operations made Tower Health the true party in interest for tax
exemption purposes. Id.
The trial court further relied upon Pottstown I, as it involved the LLC and its
sole member, and distinguished cases involving a parent-subsidiary relationship,
such as Appeal of Community General Hospital, 708 A.2d 124 (Pa. Cmwlth. 1998)
and the case relied upon by the City, Appeal of the Northwestern Corporation from
the Dauphin County Board of Assessment Appeals, 665 A.2d 856 (Pa. Cmwlth.
1995). Id. at 420-21. Relying upon the Nonprofit Corporation Law of 1988, and the
limited liability company’s operating agreement, the Pottstown I Court concluded
the limited liability company was member-managed, rather than manager-managed.
Id. at 421-22. The trial court adopted the same rationale of the Pottstown I Court,
and reviewing Lazarus’s Operating Agreement and its Access, Use, License and
4
On May 30, 2025, the Supreme Court of Pennsylvania reversed the Commonwealth Court,
Pottstown School District v. Montgomery County Board of Assessment Appeals (Pottstown II), 335
A.3d 1125 (Pa. 2025). Here, we directed the parties to file briefs relative to the implications, if
any, of this change in the law. See Per Curiam Order of November 13, 2025.
5
Managed Services Agreement with the Conference of Churches, the trial court found
no evidence of manager-management. Id. at 422. The trial court specifically
determined Lazarus has one member, the Conference of Churches, and “the
management of all business and affairs of Lazarus is subject to the authority and
direction of the Conference of Churches.” Id. Applying Pottstown I, the trial court
held Lazarus is member-managed and assessed the totality of operations conducted
at the Property in determining Lazarus’s entitlement to exemption status. Id.
The trial court next held that Lazarus satisfied the five-part test established by
our Supreme Court in Hospital Utilization Project v. Commonwealth of
Pennsylvania, 487 A.2d 1306 (Pa. 1985) (HUP), as well as the statutory
requirements of the Institutions of Purely Public Charity Act (Public Charity Act),
10 P.S. §§ 371-385.5 R.R. at 423. To qualify as a purely public charity under HUP,
an entity must possess the following characteristics:
(a) Advances a charitable purpose;
(b) Donates or renders gratuitously a substantial portion of its services;
(c) Benefits a substantial and indefinite class of persons who are legitimate
subjects of charity;
(d) Relieves the government of some of its burden; and
(e) Operates entirely free from private profit motive.
HUP at 1317. An institution advances a charitable purpose “if it benefits the public
from an educational, religious, moral, physical or social standpoint.” City of
Washington v. Bd. of Assessment Appeals, 704 A.2d 120, 122-23 (Pa. 1997).
The trial court based this conclusion on a number of factual findings, premised
primarily upon review of Lazarus’s internal documents and the testimony proffered
5
Act of November 26, 1997, P.L. 508, No. 55, 10 P.S. §§ 371-385.
6
by the sole trial witness, Shawn Milisits (Milisits), Director of Finance for Lazarus
and the Conference of Churches. The trial court determined the Lazarus program
benefits the public in a variety of ways by providing housing “for those who are
poor, have mental health issues, suffer from addiction, or are re-entering the
population from prison,” and at a time when providing housing may be critical. R.R.
at 423. The court found that Lazarus “actively provide[s] low-cost housing to
members of society who are in very vulnerable positions and help them to become
productive members of society,” and “promotes restoration and new life for those
who need it most.” Id. The trial court deemed providing persons with a second
chance a charitable purpose. Id. at 424.
The trial court determined that although rent for each apartment is $500 per
month, “rent actually depends upon what the prospective client can afford.” Id. Rent
includes electricity, gas, water, sewer and trash, full furnishings, renter’s insurance,
and a waiver of move-in fee. Id. With no testimony or evidence to the contrary, the
trial court found the rental value of $500 well under market value. Id. The trial
court also deemed credible testimony that 94% of the accounts receivable are for
rents past due, and that Lazarus does not enforce an eviction policy. Id.
The trial court reiterated Lazarus “serves the poor, and those who have mental
health issues, suffer from addiction, or are re-entering the population from prison.”
R.R. 424. By serving people who “are in need of help to get back on their feet,”
such as indigent tenants and those who seek to reenter society after going through
the criminal justice system, and facilitating the “development of supportive
relationships,” the trial court concluded the program benefited a substantial and
indefinite class of persons who are the legitimate subjects of charity. Id.
7
Based on Milisits’ testimony, the trial court found “without this program, the
people receiving support from this program who are in need of charity would have
to seek housing assistance from the government,” and that “Lazarus has worked with
a few people to get them some rental assistance.” Id. at 425. The trial court noted
Commonwealth funding is “for capital expenditures to repair the properties.” Id.
The trial court found “[t]he reduced burden to the government is legitimately equated
to the rent charged below market price,” since Lazarus provides affordable housing
without government assistance. Id.
As to the last prong of HUP, operation free from private profit motive, the
trial court characterized this prong as “coming under great scrutiny in the
Commonwealth in recent times.” Id. The court outlined the case of Pottstown I
where the Commonwealth Court reversed the trial court and held that the “eye
popping” executive salaries, in conjunction with tying 40 percent of the bonus
incentives to the hospital’s financial performance, indicated a private profit motive.
Id. at 425-26. The trial court considered the financial statements for the Conference
of Churches for 2017, 2018, 2019 and 2020, and testimony that prior to 2023,
Lazarus “was bringing in more money than it was spending.” Id. at 426. The trial
court also viewed the amended financial reports, solely accounting for Lazarus and
not the Conference of Churches, which the witness testified as showing Lazarus
operated “$20,000 in the red.” Id.
The trial court relied upon Pottstown I, to formulate its analysis, first noting
that “surplus revenue is not synonymous with private profit.” Id. As in Pottstown
I, the trial court focused on the following three factors relative to the use of revenue,
specifically:
1) Whether the utilization of the revenue is made with the
expectation of a reasonable return or some non-monetary benefit;
8
2) Whether the utilization of the revenue ultimately supports or
furthers the eleemosynary nature of the charitable entity; and
3) Whether the utilization of the revenue inures, directly or
indirectly, to any private individual related to the charitable
entity or related organization.
Id. (citation omitted). The trial court examined the Operating Agreement and the
Certificate of Organization for Lazarus and rejected the notion that either document
supported a private profit motive. Id. at 427. Based on the testimony and financial
statements, the court found the salaries “modest and reasonable as opposed to eye
popping,” given that at the end of the year, profit is kept within Lazarus to repair the
properties, and hopefully expand the program, without a profit motive. Id.
Having satisfied the HUP test, the trial court next examined whether Lazarus
also established the statutory requirements of the Public Charity Act, which
provides:
§ 375. Criteria for institutions of purely public charity
(a) General rule.—An institution of purely public charity is an institution
which meets the criteria set forth in subsections (b), (c), (d), (e) and (f).
An institution which meets the criteria specified in this section shall be
considered to be founded, endowed and maintained by public or private
charity.
(b) Charitable purpose.—The institution must advance a charitable purpose.
***
(c) Private profit motive.—The institution must operate entirely free from
private profit motive.
***
(d) Community service.—
(1) The institution must donate or render gratuitously a substantial portion
of its services.
***
(e) Charity to persons.—
9
(1) The institution must benefit a substantial and indefinite class of persons
who are legitimate subjects of charity.
***
(f) Government service.—The institution must relieve the government of
some of its burden.
***
Id. at 427-28 (quoting 10 P.S. § 375(a)-(f)). The trial court focused upon the private
profit motive prong, noting the following specifications:
(1) Neither the institution’s net earnings nor donations which it receives inures
to the benefit of private shareholders or other individuals, as the private
inurement standard is interpreted under section 501(c)(3) of the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 501(c)(3)).
(2) The institution applies or reserves all revenue, including contributions, in
excess of expenses in furtherance of its charitable purpose or to funding of
other institutions which meet the provisions of this subsection and
subsection (b).
(3) Compensation, including benefits, of any director, officer or employee is
not based primarily upon the financial performance of the institution.
(4) The governing body of the institution of purely public charity has adopted
as part of its articles of incorporation or, if unincorporated, other governing
legal documents a provision that expressly prohibits the use of any surplus
funds for private inurement to any person in the event of a sale or
dissolution of the institution of purely public charity.
Id. at 429-430 (quoting 10 P.S. § 375(c)). Relying upon its HUP analysis, the trial
court also examined Lazarus’s Operating Agreement for protocol in the event of sale
and dissolution. Id. at 430. Based upon the preclusion in article XII, that “[u]under
no circumstances shall any assets be distributed to Lazarus Directors or [the
Conference of Churches],” the trial court held Lazarus satisfied the private profit
motive prong. Id.
10
The trial court found Lazarus satisfied the community service prong “by the
fact that everyone receives the benefit of wholly gratuitous goods and services
provided, such as: electricity, gas, water, sewer, trash, fully furnished apartments,
renter’s insurance, and a waiver of the move-in fee.” Id. The trial court held Lazarus
met the charity to persons prong based upon the testimony of record that Lazarus
provides “for people who otherwise would not be able to fully provide for
themselves.” Id. The trial court ruled Lazarus met the government service prong
based upon the wide “panoply of services that Lazarus offers,” that “the government
has historically assumed or offered for individuals who seek government housing
assistance programs or funding for housing.” Id. at 431. The trial court concluded
Lazarus satisfied the requirements of the Public Charity Act. Id. Overall, the trial
court recognized Lazarus as a purely public charity. Id.
The City and County appealed to this Court.
DISCUSSION
This Court’s review determines whether the trial court abused its discretion,
committed an error of law, or rendered a decision unsupported by substantial
evidence. Walnut-Twelve Assocs. v. Bd. of Assessment of Revision of Taxes of City
of Phila., 570 A.2d 619, 622 (Pa. Cmwlth. 1990). The trial court, as fact finder, has
discretion over evidentiary weight and credibility determinations. 1198 Butler Street
Assocs. v. Bd. of Assessment Appeals, Cnty. of Northampton, 946 A.2d 1131, 1138
n.7 (Pa. Cmwlth. 2008). Generally, Appellants contend the trial court abused its
discretion and erred as a matter of law in determining Lazarus qualifies for a real
estate tax exemption as an institution of purely public charity. R.R. at 442.
Appellants also assert the trial court abused its discretion and erred as a matter of
law in failing to issue relevant findings of fact (Id. at 444); failing to render
11
conclusions of law supported by applicable facts (Id.); misapplying the burden of
proof (Id. at 444-45); and “disregarding relevant precedent of the Supreme and
Commonwealth Courts, including, but not limited to, the Commonwealth Court’s
Opinions in Friends Boarding Home of Western Quarterly Meeting v.
Commonwealth, 260 A.2d 1064 (Pa. Cmwlth. 2021), exceptions denied, 285 A.3d
339 (Pa. Cmwlth. 2022), relied on heavily by the County and the City.” (Id. at 445).
We address these contentions along with Appellants’ more detailed assertions
below:
I. Inclusion of All Charitable Activities by the Conference of Churches in
Lazarus’s Exemption Petition
Appellants contend the trial court abused its discretion and erred as a matter
of law in concluding the operations at Lazarus’s properties by Lazarus’s separately
incorporated parent company should be included in the calculation of Lazarus’s
charitable operations for real estate tax exemption purposes. R.R. 442-43.
Appellants criticize the trial court’s reliance upon Pottstown I to support its
conclusion that a “‘member-managed’ LLC with a single member is simply the alter
ego of a parent corporation and can therefore include the charitable activities of the
parent for consideration of their exemption petition.” Id. at 443. Appellants suggest
that “[t]his conclusion is the opposite of the Commonwealth Court’s holding in
Pottstown [I], where the Commonwealth Court held the member-managed hospital
was in fact a separate entity from the managing corporation, Tower Health; stating
that there was ‘. . . no authority to support the proposition that a member’s
management of an LLC pursuant to statute would entitle an opposing party in
litigation to pierce the corporate veil of the LLC solely by reason of such
management.’” Id. (quoting Pottstown I, supra, at 1149). Appellants advocate that
in Pottstown I, “the Commonwealth Court held that for the purposes of a charitable
12
real estate tax exemption, the fact that an entity is controlled by a single member was
insufficient reason to pierce the corporate veil, and therefore the single member-
managed corporation, and not the corporation that serves as manager, was the true
party in interest.” Id.
Guided by Pottstown I, 289 A.2d at 1148, the trial court considered the
Nonprofit Corporation Law of 1988, 15 Pa.C.S. § 8847(a) and (b), the Lazarus
Operating Agreement, and the Access, Use, License and Managed Services
Agreement between Lazarus and the Conference of Churches. R.R. at 422. The trial
court determined Lazarus is a member-managed LLC, as its Operating Agreement
“does not illuminate any provision expressly providing that Lazarus is or will be
manager-managed, managed by managers, vesting management with managers or
any words of similar import,” and as it has one member, the Conference of Churches.
Id. Accordingly, the trial court found the charitable activities of both Lazarus and
the Conference of Churches should be considered for tax exemption purposes.
During the pendency of this appeal, the Supreme Court disagreed with the
Commonwealth Court’s inclusion of a parent corporation’s activities in instances of
single member-managed LLCs. In Pottstown II, the Supreme Court held that for
purposes of the HUP test, courts must only consider the acts of the individual entity
seeking exemption unless grounds exist to pierce its corporate veil. 335 A.3d at
1144. Such evidence includes gross undercapitalization, failure to adhere to
corporate formalities, substantial intermingling of personal and corporate affairs, use
of corporate form to perpetuate fraud, or where a parent dominates the non-profit
corporation to the degree that it can be rendered a sham corporation or mere alter
ego of the parent. Id. (citation omitted). The Supreme Court found that Tower
Health and Hospital maintained their independent corporate identities, and the
13
excessive salaries and management fees, in the absence of any additional facts, were
insufficient to pierce the corporate veil. In turn, the activities of the parent company,
Tower Health, could not be attributed to the member-managed subsidiary for
exemption purposes. Id. at 1145. The Supreme Court ultimately reversed the
Commonwealth Court and reinstated the trial court’s order granting tax exemption.
Appellants argue that nothing in the record meets any of the factors necessary
to pierce the corporate veil, and thus, following Pottstown II, only Lazarus’s
activities can be used to determine if Lazarus qualifies as an institution of purely
public charity. City’s Supp. Br. at 12-13. Lazarus agrees that Pottstown I no longer
supports the proposition that the acts of the Conference of Churches should be
considered solely because Lazarus is member-managed. Lazarus’s Supp. Br. at 9.
Lazarus also asserts that insufficient evidence exists to pierce the corporate veil. Id.
Additionally, Lazarus distinguishes Pottstown II, which focuses on the
compensation of Tower Health’s executives. Id. However, Lazarus contends that
consideration may still be given to the Conference of Churches’ charitable acts, as
Lazarus has a Services Agreement with the Conference of Churches, wherein it
directs the Conference of Churches to provide services and programs to Lazarus
tenants. Id.
A comprehensive review of the record reveals that no parties challenged the
independent corporate structure of Lazarus and it is not something we should analyze
sua sponte.
Though the trial court initially indicated that it would “assess the totality of
the operations conducted at the Property,” (R.R. at 422) a careful reading of the
opinion reveals that the trial court ultimately focused primarily on the activities of
Lazarus. Because this focus is precisely in accordance with Pottstown II, we will
14
affirm the trial court’s analyses of HUP and the Public Charity Act on other grounds.
Additionally, we give credence to Lazarus’s contention that the Services Agreement
between Lazarus and the Conference of Churches also can factor into a HUP
analysis. Thus, we conclude that the trial court’s determination is supported by
substantial evidence.
II. Purely Public Charity Under HUP Test
Appellants assert the trial court abused its discretion and erred as a matter of
law as to prongs two and three of the Hospital Utilization Project test. R.R. at 443-
44. Regarding the second prong, i.e., that it donates or renders gratuitously a
substantial portion of its services, Appellants contend “the undisputed evidence
demonstrated that [Lazarus] does not provide any uncompensated goods or services
and does [not] provide any direct financial aid or reduced rent options to tenants;
among other things, [Lazarus] presented no evidence that the $500 per unit rent it
charges, which equates to $1,500 to $2,500 per home it owns was lower than the
market rent charged by for-profit landlords in the City of Allentown.” R.R. at 443.
Regarding the third prong, i.e., that it benefits a substantial and indefinite class of
persons who are legitimate subjects of charity, Appellants assert that Lazarus “only
provides services to individuals who can afford monthly rent from their personal
funds.” Id.
The Pennsylvania Constitution addresses real estate exemptions for charitable
institutions. Article VIII, section 2(a) states in pertinent part, as follows:
(a) The General Assembly may by law exempt from taxation:
....
(v) Institutions of purely public charity, but in the
case of any real property tax exemptions only that
portion of real property of such institution which is
15
actually and regularly used for the purposes of the
institution.
PA. CONST. art. VIII, § 2(a)(v). The Pennsylvania Constitution does not define an
“institution of purely public charity;” however, in Hospital Utilization Project v.
Commonwealth of Pennsylvania, our Supreme Court promulgated the HUP test to
fill this void. As mentioned before, under the HUP test, a purely public charity is
an institution that:
(a) Advances a charitable purpose;
(b) Donates or renders gratuitously a substantial portion of its services;
(c) Benefits a substantial and indefinite class of persons who are legitimate
subjects of charity;
(d) Relieves the government of some of its burden; and
(e) Operates entirely free from private profit motive.
HUP, 487 A.2d at 1317. The taxpayer bears the burden of establishing each of these
elements. In re Coatesville Area Sch. Dist., 280 A.3d 1152, 1159 (Pa. Cmwlth.
2022). Whether an entity qualifies as a “purely public charity” under the HUP test
“is a mixed question of law and fact . . . .” Id.
In 1997, the General Assembly enacted the Public Charity Act to “weigh[] in
on questions affecting determinations of charitable exemption[.]” Alliance Home of
Carlisle, PA v. Bd. of Assessment Appeals, 919 A.2d 206, 216 (Pa. 2007). The Public
Charity Act tracks the five criteria set forth in the HUP test and specifies the type of
evidence needed to meet each individual criterion. The Public Charity Act codifies
“the purely public charity test of HUP” and expounds thereon. Church of the
Overcomer v. Delaware Cnty. Bd. of Assessment Appeals, 18 A.3d 386, 392 n.4 (Pa.
Cmwlth. 2011). The HUP test sets forth the minimum constitutional requirements
for a tax exemption. Therefore, the taxpayer seeking an exemption must “establish
16
that it is a ‘purely public charity’ under article VIII, section 2 of the Pennsylvania
Constitution before the question of whether that entity meets the qualifications of a
statutory exemption can be reached.” Alliance Home of Carlisle, 919 A.2d at 222.
Under Section 5(a) of the Public Charity Act, an institution of purely public charity
must meet all of the following criteria: (1) the institution must advance a charitable
purpose; (2) the institution must operate entirely free from private profit motive; (3)
the institution must donate or render gratuitously a substantial portion of its services;
(4) the institution must benefit a substantial and indefinite class of persons who are
legitimate subjects of charity; and (5) the institution must relieve the government of
some of its burden. 10 P.S. § 375(5)(a).
The trial court found Lazarus satisfied all five prongs of the HUP test. As to
prong two, a purely public charity donates or renders gratuitously a substantial
portion of services by providing such services without regard to an individual’s
ability to pay. HUP, 487 A.2d at 1317. The trial court found that while each
apartment lists for $500 per month, rent depends upon what the prospective client
can afford. R.R. at 424. Rent includes “utilities of electricity, gas, water, sewer and
trash, as well as a fully furnished apartment, renter’s insurance, and, and this time, a
waiver of a move-in fee.” Id. With no testimony or evidence to rebut or refute the
items encompassed in the $500 monthly rate, the trial court found the rental amount
well under market value. Id. The trial court also deemed credible testimony of
Milisits that 94 percent of the accounts receivable consist of rents over sixty days
past due, and Lazarus does not enforce an eviction policy. Id. The record also
supports Lazarus provides snow shoveling, lawn care and maintenance of common
areas free of charge. R.R. at 74-75.
17
Procedurally, Appellants contend the trial court improperly shifted the heavy
burden to the City and County to show that Lazarus’s rate of $500 is lower than
comparable for-profit rentals. City Br. at 35. The trial court referenced the
Appellants’ failure to refute or rebut the monthly rental fee. R.R. at 424. Here, the
record reveals that the trial court carefully considered the evidence. We do not
believe that acknowledgment of Appellants’ lack of evidence constitutes a shifting
of the burden of proof. Thus, we find no error. Alternatively, we note that
“[m]isapplication of the burden of proof constitutes harmless error when the
burdened party presents evidence such that it does not lose summarily and the fact-
finder decides the case on evidence presented by both sides.” In re: Petition for
Attorney Ridgebury Twp. Auditors, 965 A.2d 314, 318 n.6 (Pa. Cmwlth. 2009). Any
error in this regard is harmless, as the trial court clearly acknowledged that the party
seeking the tax exemption bears the burden of proving entitlement thereto. Id. at
423. Again, we emphasize the trial court’s careful examination of the evidence
presented in reaching its decision. Accordingly, there is no merit to this contention.
Substantively, Appellants assert that Milisits was “unable to provide any
evidence of comparable properties,” and criticize Lazarus’s failure to present expert
testimony. City’s Br. at 34-35. However, Appellants fail to cite authority that expert
testimony is required. In fact, Milisits testified he regularly performs research as to
comparable properties. R.R. at 70-71. “[A]n owner of land is competent to testify
as to the value of his property.” Dep’t of Transp. of Right-of-Way for State Route
00700, Section 21H, in the Borough of Bentleyville v. Bentleyville Garden Inn, Inc.,
264 A.3d 415, 419 (Pa. Cmwlth. 2021). As the representative of Lazarus, Milisits
can testify as to the Property rental value; no expert qualification is required. As the
sole witness at trial, the trial court found Milisits’ testimony credible. This
18
testimony, along with the entire record contains substantial evidence to support the
trial court’s findings that Lazarus donates or gratuitously renders a substantial
portion of the services at the Property. The trial court did not abuse its discretion by
finding that Lazarus established the second prong of the HUP test.
Appellants suggest that Friends Boarding Home of Western Quarterly
Meeting v. Commonwealth, 260 A.3d 1064 (Pa. Cmwlth. 2021) provides guidance
as to the second prong of HUP, and that the trial court erred as a matter of law in
disregarding same. City’s Br. at 37. In Friends, this Court applied the HUP test and
denied a federally subsidized housing facility for the elderly a real estate tax
exemption, finding that it failed to establish that it donated a substantial portion of
its services. Friends, 260 A.3d at 1074. The Friends Court determined that the
facility charged fees comparable to for-profit competitors; did not accept Medicaid;
could decline admission or request a resident to leave in the event of inability to pay;
and only provided financial assistance to a small portion of residents. Id. Appellants
contend that Lazarus provides less overall assistance than Friends, as Lazarus does
not provide health care or financial aid, and only admits those who can afford to pay
rent, noting Lazarus’s eviction of at least five tenants from its Property. City Br. at
40.
The trial court found rent to be not only well under market value but also
determined by what the tenant could afford. R.R. at 424. The trial court likewise
found that Lazarus does not enforce an eviction policy. Id. The trial court cited to
Friends for certain legal tenets but found it factually distinguishable. Id. at 428.
These findings are supported by substantial evidence. The trial court did not abuse
its discretion by finding that Lazarus established the second prong of the HUP test.
19
Appellants next challenge the third prong of HUP, alleging that the trial court
erred in finding that Lazarus benefits a substantial and indefinite class of persons
who are legitimate subjects of charity. R.R. 443. “Legitimate subjects of charity
are those who are unable to provide for themselves what the
organization provides . . . .” Mars Area Sch. Dist. v. United Presbyterian
Women’s Assoc. of N. Am., 693 A.2d 1002, 1007 (Pa. Cmwlth. 1997) (citation
omitted). Appellants again rely on Friends, supra, in support of their position.
City’s Br. at 48.
The trial court found that “Lazarus serves the poor, and those who have mental
health issues, suffer from addiction, or are re-entering the population from prison,”
all of whom “are in need of help to get back on their feet.” R.R. at 424. The court
also determined that Lazarus “provides benefits to people who are vulnerable to
recidivism and allows such people to more easily transition into productive society,”
which “facilitates the development of supportive relationships.” Id. Overall, the
trial court could “draw no other conclusion than that this program offered at the
Property benefits a substantial and indefinite class of persons who are the legitimate
subjects of charity.” Id. Additionally, the court found that Lazarus adjusts rent based
upon a tenant’s ability to pay. Id. These holdings are supported by substantial
evidence. Unlike Friends, the trial court here determined that a tenant may rent even
in the event of financial shortcoming. Id. We see no error in this regard.
III. Purely Public Charity Under the Public Charity Act
Finally, Appellants assert the trial court abused its discretion and erred as a
matter of law in concluding Lazarus produced evidence that it donated or rendered
gratuitously a substantial portion of its services to satisfy the community service
prong of the Public Charity Act, Section 375(d). R.R. 443-44. Appellants criticize
20
the trial court’s failure to specifically address all prongs within the community
service prong, as Appellants contend that Lazarus did not produce evidence that
Lazarus:
(1) [has] a written and published policy identifying goods or services that
are available to all who seek them without their ability to pay;
(2) [has] a written policy or written schedule of fees based on individual or
family income;
(3) [provides] wholly gratuitous goods or services to at least 5% of those
receiving similar goods or services from the institution;
(4) [provides] any financial assistance or uncompensated goods or
services; or
(5) [provides] uncompensated goods or services which in the aggregate are
equal to or at least 5% of the institution’s cost of providing goods or
services.
Id.
In its overall analysis of the Public Charity Act, the trial court reiterated its
HUP findings, and carefully scrutinized Lazarus’s plan in the event of sale or
dissolution. R.R. at 429-30. Because the Operating Agreement prohibits
distribution of assets to Lazarus Directors or the Conference of Churches, the trial
court found Lazarus had satisfied the private profit prong. Id. at 430. The trial court
found Lazarus satisfied the community service prong as tenants received electricity,
gas, water, sewer, trash, fully furnished apartments, renter’s insurance, and a move-
in fee waiver. Id. Testimony that Lazarus provided for persons who would not
otherwise fully provide for themselves established the charity to persons prong. Id.
The trial court found that the government services prong was established given that
21
Lazarus provided housing for individuals who typically sought government housing
or funding for housing. Id. at 431.
To satisfy the community service prong of the Public Charity Act, an
institution need only fulfill one of the seven enumerated methods to prove
entitlement to a tax exemption. In re RHA Pa. Nursing Homes Health & Rehab.
Residence, 747 A.2d 1257, 1261 (Pa. Cmwlth. 2000). One such method, found in
Section 5(d)(1)(iv) of the Act, states the institution must provide:
Financial assistance or uncompensated goods and services to at least
20% of those receiving similar goods or services from the institution if
at least 10% of the individuals receiving goods or services from the
institution either paid no fees or fees which were 90% or less of the cost
of the goods or services provided to them, after consideration of any
financial assistance provided to them by the institution.
Id. (quotation omitted). In In re RHA, we affirmed the trial court’s determination
that the provision of inexpensive housing is an uncompensated good or service,
sufficient to satisfy the community service prong. In re RHA, 747 A.2d at 1261-62.
Here, the City concedes that Lazarus’s inexpensive housing could constitute
an uncompensated good or service for analysis under the community service prong.
City’s Br. at 46. This is precisely what the trial court found. Specifically, the trial
court determined Lazarus satisfied the community service prong because tenants
received electricity, gas, water, sewer, trash, fully furnished apartments, renter’s
insurance, and a move-in fee waiver. R.R. at 430. Thus, because all Lazarus tenants
paid less than the full cost of goods and services provided to them, it is sufficient to
establish that Lazarus donated or gratuitously rendered a substantial portion of its
services, as required for Lazarus to satisfy the community service prong. See In re
RHA, at 1261-62. We discern no error by the trial court.
22
CONCLUSION
Based on the above, we conclude that Lazarus produced substantial evidence
under both the HUP test and the Public Charity Act to qualify as a purely public
charity for tax exemption purposes. Accordingly, we affirm the trial court.
______________________________
STACY WALLACE, Judge
23
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Lazarus Housing, LLC : CASES CONSOLIDATED
:
v. :
:
Allentown School District, :
Allentown City, Lehigh County :
Board of Assessment Appeals, :
Lehigh County Department of Law :
: Nos. 992, 993, 994, 995 &
Appeal of: City of Allentown and : 1010 C.D. 2023
Lehigh County :
ORDER
AND NOW, this 4th day of February 2026, the August 11, 2023 orders of the
Court of Common Pleas of Lehigh County in the above-captioned matters are hereby
AFFIRMED.
______________________________
STACY WALLACE, Judge