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PA Commonwealth Court Flatlines Nonprofit Hospitals Exempt Status for Real Property Taxes

March 6, 2023

On February 10, 2023, in a much-anticipated group of Opinions, the Pennsylvania Commonwealth Court (“Court”) held that four separate Tower Health hospitals (one in Montgomery County and three in Chester County) did not qualify as institutions of purely public charity and thus, the hospitals were not entitled to real property tax exemptions for the 2018 through 2021 tax years.

Relevant Background

In 2017, Reading Health System, n/k/a Tower Health, LLC (“Tower Health”), purchased several for-profit hospital facilities from Community Health Systems (“CHS”), a for-profit entity, in Montgomery and Chester Counties.  Tower Health, a nonprofit 501(c)(3), created separate LLCs (Chester Hospitals and Montgomery Hospital) to run each of the purchased hospital facilities as nonprofit entities.  Those LLCs were:  Pottstown Hospital, LLC (“Montgomery Hospital”); and Brandywine Hospital, LLC, Jennersville Hospital, LLC and Phoenixville Hospital, LLC (“Chester Hospitals”).

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