Judge rules Scranton low-income housing complex exempt from property taxes


Oct. 10 – A Lackawanna County judge dismissed the Scranton School District’s challenge to the tax-exempt status of a building complex in the city, finding it a purely public charity.

Judge Terrence Nealon said Midtown Apartments on Adams Avenue proved in a non-jury trial in August that it met each of the five criteria required to qualify as a charity, therefore it is not obliged to pay property taxes.

The school district filed a lawsuit against the Lackawanna County Appeal Board, challenging its 2019 decision to grant the low-income housing complex’s tax-exempt request — a decision the district says Costing him about $78,000 a year in tax revenue, according to court documents. The city and county did not join the case.

The complex was built around 1970 and is owned by TCSI, a non-profit organization overseen by a board of directors made up of Roman Catholic, Presbyterian, Jewish and Episcopalian religious leaders. It provides housing at below-market rents to people who meet low-income guidelines set by the federal Department of Housing and Urban Development.

To be considered a charity, an organization must demonstrate that it pursues a charitable purpose, donates a substantial portion of its services, benefits a legitimate class of people subject to charity, operates on a non-profit basis, and relieves the government of a burden.

In court filings, attorneys for the district acknowledged that the resort offered reduced rent to low-income residents, but argued that this was not enough to meet the guidelines. They also questioned Midtown’s use of excess funds, noting that it provides assistance to tenants in arrears, but will evict tenants who do not make an effort to pay arrears.

Nealon rejected the district’s position. He noted that expert testimony presented at trial showed the resort’s rental rates are about 40% below market value, costing him $962,808 in potential lost rent per year. The complex has also shown that it does not operate for profit, with any surplus being reinvested in the maintenance and improvement of the buildings.

“It can only be seriously challenged by providing affordable housing for the working poor…Midtown Apartments advances a charitable purpose that provides some relief from poverty and achieves a goal that is seen as important and beneficial to the public,” Nealon said. . .

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