In Business Privilege Tax Case, Court Confirms Phoebe Services Not Liable

FLB Law      Jun. 17, 2020

In a case regarding  business privilege tax, the Lehigh County Court of Common Pleas found in favor of Fitzpatrick Lentz & Bubba (FLB) client Phoebe Services, Inc. and established on appeal that Phoebe Services, Inc. is not liable to the City of Allentown (the City) for the tax.

Photos of Marie K. McConnell and Gretchen L. Petersen, who won the business privilege tax case.

Marie K. McConnell and Gretchen L. Petersen

In late 2019, FLB Shareholder and Chair of the Firm’s Corporate Business & Banking Group Marie K. McConnell, along with Litigation Shareholder Gretchen L. Petersen, represented Phoebe Services, Inc. in contesting the City’s attempt to impose business privilege tax against the nonprofit corporation. The City’s Business Privilege Tax Ordinance prohibits the assessment of this tax against entities that do not “carry on or exercise any activity for gain or profit.” The Ordinance also includes an exemption for nonprofits that qualify as “Institutions of Purely Public Charity”. The City challenged Phoebe Services, Inc.’s status as an “Institution of Purely Public Charity” and, therefore, attempted to impose the tax.

After a trial on the issues, Ms. McConnell and Ms. Petersen convinced the Court that Phoebe Services, Inc. does not conduct any activity for gain or profit in the City of Allentown, and that the City omitted that analysis in its attempted imposition of business privilege tax.  The Court agreed with Ms. McConnell and Ms. Petersen, and found Phoebe Services, Inc. not liable for this tax. The Morning Call has more on the decision, which reaffirms the validity of Phoebe Services, Inc.’s tax exemptions.

FLB’s Property Exemption group regularly assists nonprofit healthcare organizations with respect to challenges to their tax exempt status.

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