Is Penn Highlands State College a ‘public charity?’ System wants to be tax exempt
More than $785,000 per year in local tax revenue hangs in the balance as a legal battle unfolds over whether the recently constructed Penn Highlands State College is exempt from paying real estate taxes.
In its challenge of a Centre County assessment appeals board decision denying the exemption, the nonprofit argued it qualifies as an “institution of purely public charity.”
The board has defended its decision in court filings, writing Penn Highlands earns millions and operates like a for-profit, corporate healthcare conglomerate in “virtually every sense.” The board valued the market price of the property at $63.1 million.
The looming threat of lost tax revenue prompted both Patton Township and the State College Area School District to intervene in the appeal.
The three-member board denied Penn Highlands’ exemption request in October. In its subsequent appeal, the regional health system said it is organized exclusively for charitable, scientific or education purposes to “promote the general public health of the community.”
In court filings, Penn Highlands said 2,565 patients received charity, free or reduced-cost care during the 2025 fiscal year at its State College location, and its attorney said the system operates “entirely free of profit motive.”
If successful, Penn Highlands would have no obligation to pay more than $785,000 annually in local taxes. A spokesperson for the health system declined comment Tuesday, citing an organizational policy against speaking publicly about ongoing litigation.
Board attorney David S. Gaines Jr. said in a court filing last week that Penn Highlands is seeking the “extraordinary benefit of permanent tax exemption for a substantial commercial healthcare facility.”
Penn Highlands State College opened in 2024 as Centre County’s second hospital. As a result, earlier this year Mount Nittany Medical Center lost its sole community hospital designation from the Centers for Medicare & Medicaid Services, a move that’s expected to have a $9 million annual impact and that the health system is challenging in a lawsuit.
Mount Nittany argued Penn Highlands is not a “like hospital” in a clinical sense as deemed by the federal government, noting that Penn Highlands offers far fewer specialized services save for a 10-bed emergency department.
Penn Highlands State College, meanwhile, recently told the Centre Daily Times that, as a satellite campus of the hospital’s primary Huntingdon facility, it has also been affected by the loss of that facility’s sole community hospital designation. The spokesperson has not provided additional details about the financial impact.
Mount Nittany Medical Center does not pay real estate taxes on its hospital property, though a Mount Nittany Health spokesperson said the system pays property taxes on all of its other properties and facilities.
No hearings in the tax exemption case are scheduled as of Wednesday.