OFFICIAL OPINION No. 24

OFFICIAL OPINION No. 24 Ta.rntion-E.remption-Fnel Use Tax-Liquid Fuels Tax Non-public School- Nonprofit 1. A "non-public school" is any school other. than a public school within the Com- monwealth of Pennsylvania wherem a resident of.the Commonwealth ma)'. legal- ly fulfill the compulsory school attendance requirements of Pennsylvania law. 2. A general definition of school does not include institutions of higher learning. 3. A school not operated for profit is one in which there is no contemplation of pecuniary gain or profit, one which does not pay dividends or distribute any of its income to its owners, officers, or directors, and one m which any mcidental profits are not distributed to its owners. Honorable Vincent X. Yakowicz Secretary of Revenue Harrisburg, Pennsylvania Dear Secretary Y akowicz: Harrisburg, Pa. April 30, 1974 Acts Nos. 9 and 10 of 1974, effective February 1, 1974, amended the Fuel Use Tax Act of Januury 14, 1952, P.L. 1965, 72 P.S. §2614.1 and the Liquid Fuels Tax Act of May 21, 1931, P.L. 149, 72 P.S. §2611a et seq., respectively by granting an exemption from these taxes, inter alia, to "non-public schools not operated for profit." As a result of these amendments, you have asked our office to define and construe the terms "non-public school" and "not operated for profit", as applied to the above-mentioned Acts. I. A "non-public school" or "private school" has been defined as: "One maintained by private individuals or corporations not at public expense, and open only to pupils selected and admitted by the proprietors or governors. or to pupils of a certain class or possessing certain qualifications (racial, religious, or otherwise) and generally supported, in part at least, by tuition fees or charges." Black's Law Dic- tionary 1512 (Revised 4th Edition 1968). A "public school'', on the other hand, has been defined as a school es- tablished and maintained at public expense and comprising the eleme_ntary grades and, when established, the grades of high school. R0:11k111 '" Lo11_e, 125 Mont. 184, 232 P. 2d 998 (1951). That case im- plies that a private scho<?l ;v~rnld be one not m~intained at public ex- pense; therefore, the defm1t10n would be consistent with that quoted from Black's Law Dictionary. OPINIONS OF THE ATTORNEY GENERAL The word "school" itself has been defined as: " ... a generic term, denoting an institution or place for in- struction or education, or the collective body of instructors and pupils in any such place or institution. In the ordinary acceptation of its meaning, a school is a place where in- struction is imparted to the young. It is an institution of learning of a lower grade, below a college or a university; a place of primary instruction." Lawrence v. Cain, 144 Ind. App. 210, 245 N.E. 2d 663 (1969). 85 These definitions indicate that institutions of higher learning are not generally included in the definition of school. In addition, our own General Assembly has twice had recent oc- casion to define the term "non-public school". Both the Nonpublic Elementary and Secondary Education Act, 24 P.S. §5601 et seq. and the Parent Reimbursement Act for Nonpublic Education, 24 P.S. §5702 defined "non-public school" as: "Any school, other than a public school within the Com- monwealth of Pennsylvania, wherein a resident of the Commonwealth may legally fulfill the compulsory school attendance requirements of law." 24 P.S. §5603, 24 P.S. § 5703. Although both these Acts have been declared unconstitutional by the United States Supreme Court as contrary to the religion clauses of the First Amendment, Lemon v. Kurtzman, 403 U.S. 602 (1971); Sloan v. Lemon, 413 U.S. 825 (1973), the definition of "non- public school" was in no way affected by those cases. Since the General Assembly has twice in recent years defined "non-public schools", we are of the opinion that it is the best definition of "non- public school" in Pennsylvania, notwithstanding the fact that the Acts have been declared unconstitutional for other reasons. 1 As it is not necessary to attend college to "fulfill the compulsory school attendance requirements of law" and since the other cases we have cited define "school" to exclude institutions of higher education, in our opinion, the non-public school exemption of the Fuel Use Tax and the Liquid Fuels Tax would not be applicable to colleges and universities. II. The Corporation Not-for-profit Code. 15 Pa. S. §7101 et seq. defines "non-profit corporation" as "a domestic corporation not for profit incorporatM under Article B of this part .... " 15 Pa. S. §7103. 1. Act 194 of July 12, 1972, P. L. 861, which concerns auxiliary services to non- public school children and Act 195 of July 12, 1972, P.L. 863, which concerns the loan of books and equipment to non-public school children both contain asimilar definition of non-public school. Neither of these acts has been tested as to its con- stitutionality. 86 OPINIONS OF THE ATTORNEY GENERAL Article B known as the Non Profit Corporation Law of 1972, 15 Pa. S. §7301, provides in part that the articles of incorporation must contain the following: "A statement that the corporation is one which does not contemplate pecuniary gain or profit, incidental or otherwise." 15 Pa. S. § 7316. It is this provision which distinguishes a corporation not operated for profit from one that is operated for profit. Two other provisions of the "Corporation Not-for-profit Code" help clarify exactly what is intended by the words "not operated for profit." "All such incidental profits [of a nonprofit corporation] shall be applied to the maintenance and operation of the lawful activities of the corporation, and in no case shall be divided or distributed in any manner whatsoever among the members, directors, or officers of the corporation." 15 Pa. S. §7546. (Insert supplied). * * * "A nonprofit corporation shall not pay dividends or dis- tribute any part of its income or profits to its members, directors, or officers." 15 Pa. S. §7553(a). It is clear from the provisions quoted above, that any profits a non- profit corporation makes cannot be distributed to its shareholders, members, directors or officers. This basic theory of the Nonprofit Corporation Law would seem to be applicable to any kind of entity not operated for profit. Thus, a school not operated for profit would be one in which there is no contemplation of pecuniary gain or profit, one which does not pay dividends or distribute any of its in- come to its owners, officers or directors and one in which any in- cidental profits are not distributed to its owners. By the same token any school "not operated for profit" and not incorporated un- der the "Corporation Not-for-profit Code" may still fall within the exemption provided by Acts Nos. 9 and 10of1974 if it meets the re- quirements set forth above. The General Assembly has not defined "not operated for profit" except as provided above and it is our opinion that this definition should be applied to Acts in question. In conclusion, it is our opinion, and you are accordingly advised, that for purposes of Acts Nos. 9 and 10 of 1974 a "non-public school" is any school other than a public school w'ithin the Com- monwealth of Pennsylvania wherein a resident of the Com- mon":"ealth may legally fulfill the compulsory school attendance reqmrements of Pennsylvania law. A "non-public school not OPINIONS OF THE ATTORNEY GE NERAL 87 operated for profit" is a non-public school which does not con- template pecuniary gain or profit, incidental or otherwise. Sincerely, Jeffrey G. Cokin Deputy Attorney General Israel Packel Attorney General