Circle of Seasons Charter Sch. v. Nw. Lehigh Sch. Dist.

323 A.3d 656

CIRCLE OF SEASONS CHARTER SCHOOL, Appellee

v.NORTHWESTERN LEHIGH SCHOOL DISTRICT, Appellant

No. 99 MAP 2022

Supreme Court of Pennsylvania.

Argued: March 5, 2024

Decided: September 26, 2024

Appeal from the Order of the Commonwealth Court dated March 14, 2022 at No. 1255 CD 2020 Reversing the Order of the Lehigh County Court of Common Pleas, Civil Division, dated November 9, 2020 at No. 2019-C-3837 and Remanding with directives to transfer to the County of Lehigh Court of Assessment Appeals. Melissa T. Pavlack, Judge

Jonathan M. Huerta, Esq., for Appellant.

Mark David Bradshaw, Esq., Stevens & Lee, PC, Stevens & Lee, PC, for Appellee.

TODD, C.J., DONOHUE, DOUGHERTY, WECHT, MUNDY, BROBSON, McCAFFERY, JJ.

OPINION

JUSTICE McCAFFERY

In this discretionary appeal, we consider two distinct, yet related, issues. The first concerns the obligation of a taxpayer to establish its eligibility for a property tax exemption when the notice of a change in assessment does not comply with the statutory requirements. The second issue contemplates whether nunc pro tunc relief is available to the taxpayer based upon the defective notice, when it failed to request retroactive relief in a prior administrative appeal.

Here, the Commonwealth Court determined that Lehigh County sent property assessment change notices to Circle of Seasons Charter School (Charter School) and failed to include the statutorily required mailing date. Therefore, it found Charter School was entitled to a nunc pro tunc hearing before the Lehigh County Board of Assessment Appeals (the Board) to seek a refund of the taxes it paid to Northwestern Lehigh School District (School District) during the time when it should have been deemed tax exempt.

[1–4] We conclude, however, that once a county assessment office assesses property as taxable, a taxing authority is required to generate a property tax bill, unless—and until—the taxpayer demonstrates the property’s eligibility for a tax exemption in an appeal to the tax assessment board. Contrary to certain beliefs, tax exemptions are not self-executing. Further, we hold that when the county assessment notice does not conform with the statutory requirements, a taxpayer is entitled to an appeal before the assessment board but must pursue relief in a timely manner when it receives actual notice of the change in assessment. Moreover, when a taxpayer files an appeal before the board, it must raise all claims related to the challenged reassessment, including a request for retroactive relief and a refund for taxes previously paid, or risk waiver. Nunc pro tunc relief is reserved for extraordinary circumstances, and absent any negligent or misleading actions by an administrative body, it is not available to parties who simply fail to pursue their claims in a timely manner.

For the reasons below, we reverse the order of the Commonwealth Court, and reinstate the order of the trial court sustaining School District’s preliminary objections and dismissing Charter School’s complaint with prejudice.

I. Legal Background

[5] We begin with "[t]he elementary premise … that the power to tax is exclusively vested within the legislature." Southeastern Pennsylvania Transp. Auth. (SEPTA) v. Bd. of Revision of Taxes, 574 Pa. 707, 833 A.2d 710, 713 (2003) (citation omitted). In Pennsylvania, the legislature authorizes school districts to impose real estate taxes on property within their districts. See 53 Pa.C.S. § 8811(a).

[6] Notably, "property owned by the Commonwealth and its agencies is immune from taxation by a local subdivision in the absence of express statutory authority." SEPTA, 833 A.2d at 713 (citations omitted). See Commonwealth v. Dauphin Cnty., 335 Pa. 177, 6 A.2d 870, 872 (1939) ("The legislators did not intend to upset the orderly processes of government by allowing the sovereign power to be burdened by being subjected to municipal taxes."). Further, the Pennsylvania Constitution authorizes the legislature to, "by law[,] exempt" certain classes of property from taxation, including "[t]hat portion of public property which is actually and regularly used for public purposes." PA. CONST. art. VIII, § 2(a)(iii) (emphasis added). The distinction between property immune from taxation and property exempt from taxation is significant.

[7–9] When property is immune, the taxing body has no "authority to levy a tax." SEPTA, 833 A.2d at 713 (citation omitted). In contrast, a tax "exemption does not implicate the authority to tax, but rather excludes specified property from taxation." Delaware Cnty. Solid Waste Auth. v. Berks Cnty. Bd. of Assessment Appeals, 534 Pa. 81, 626 A.2d 528, 530 (1993) (emphasis added). Accordingly, a taxpayer that claims its property is tax exempt bears the burden of establishing the applicable exemption. See SEPTA, 833 A.2d at 713. See also Four Freedoms House of Philadelphia, Inc. v. City of Philadelphia, 443 Pa. 215, 279 A.2d 155, 157 (1971) ("Since liability of all real estate is the rule with exemption the exception, … the burden is placed on the claimant to bring itself within the exemption.") (citation omitted).

It is well-settled that public school "buildings[, as well as] the ground annexed and necessary for the occupancy and use of the school buildings[,]" are tax exempt under the Consolidated County Assessment Law (Assessment Law).¹ 53 Pa.C.S. § 8812(a)(5). This exemption also extends to particular property of approved charter schools. See 24 P.S. § 17-1722-A(e)(1). Charter schools are created and governed under the Charter School Law. See 24 P.S. §§ 17-1701-A-17-1751-A. Those proposing a charter school must submit an application for a charter to the local school board.² See 24 P.S. § 17-1717-A(c). After a charter is granted, property owned by the charter school "that is occupied and used … for public school, recreation or any other purposes provided for" under the Charter School Law, is "made exempt from every kind of" real estate taxes. 24 P.S. § 17-1722-A(e)(1).

Property assessments are determined by the county assessment office. At any time during the year, the county assessment office has the authority "to make additions and revisions to the assessment roll … to change the assessment of existing properties … or add properties … mistakenly omitted" so long as it provides notice to the property owner "in accordance with [S]ection 8844[.]" 53 Pa.C.S. § 8841(c). Property assessment changes may include, as here, an adjustment from nontaxable status to taxable status following the sale of the property, or an increase in the assessed amount.

Section 8844 requires the county assessment office to mail the assessment change notice to "each record property owner," and mandates that, among other things, the notice indicates the "[m]ailing date[,]" as well as the prior and revised assessed values. 53 Pa.C.S. § 8844(a)(1), (7)-(8). The mailing date is essential because the Assessment Law affords a taxpayer "aggrieved by the assessment" the right to "file an appeal to the [Assessment B]oard within 40 days of the date of the notice." 53 Pa.C.S. § 8844(b). Further, the Assessment Law states that while a "defect in service of any notice" is not grounds for setting aside an assessment, "upon proof of defective notice, the aggrieved party … shall have the right to a hearing before the [B]oard." 53 Pa.C.S. § 8845. An aggrieved taxpayer also may file an "[a]nnual appeal" on or before a date designated by the county commissioners. 53 Pa.C.S. § 8844(c)(1).

Additionally, the Tax Refund Law³ permits a taxpayer, within three years of payment, to file a written claim for the refund of taxes it paid, either "voluntarily or under protest," to a political subdivision which was "not legally entitled" to the taxes. 72 P.S. § 5566b(a). If the taxing authority refuses to provide a refund, the taxpayer has the right to file "an action in assumpsit in the court of common pleas[.]" 72 P.S. § 5566c. Relevant herein, the Tax Refund Law explicitly states: "The right to a refund afforded by this act may not be resorted to in any case in which the taxpayer involved had or has available under any other statute, … a specific remedy by way of review, appeal, refund or otherwise, for recovery of moneys paid as aforesaid[.]" 72 P.S. § 5566b(b) (emphasis added).

With this in mind, we turn to the facts of the case before us.

II. Facts and Procedural History

In May of 2012, Charter School applied to School District to operate a charter school, servicing kindergarten through eighth grade, beginning in the 2013-2014 school year. School District approved the application and issued the charter. On September 21, 2016, the charter was renewed for an additional five-year term.

Charter School operated on two adjacent properties (Properties) located at 8380 and 8384 Mohr Lane in Fogelsville, Pennsylvania. When Charter School began its operations, these Properties were owned by The Pennsylvania State University (PSU) and were tax exempt as part of its Lehigh Valley Campus. In May 2017, Charter School purchased the Properties from PSU, with the intent to continue using them for the operation of a charter school.

Following the sale of the Properties, on or around June 5, 2017, Lehigh County issued two assessment notices (Notices) for the Properties, revising their tax statuses from "Non-Taxable Assessed" to "Taxable Assessed," with an effective date of January 1, 2018. See Preliminary Objections, 1/28/2020, Exhibit D-6 (Notices). The Notices did not include the mailing date, as required by Section 8844(a). Nevertheless, the Notices explicitly informed Charter School of its statutory right to appeal the assessment:

An appeal must be filed in writing on or before 07-17-17. You also have the right to file an annual appeal on this property assessed value in writing on or before the 1st day of August.

Id. See 53 Pa.C.S. § 8844(b), (c)(1). Although the Notices were mailed to Charter School at the Mohr Lane addresses, and neither was returned as...