Philadelphia Tax Policies Impacting Non-Profit Real Estate

Non-profits in Philadelphia face new tax challenges in 2025, impacting their real estate decisions. Key updates include:

• Higher Realty Transfer Tax: Increased to 4.578% (city + state) as of July 1, 2025, raising costs for property transactions.

• Citywide Property Reassessment: Affects 580,000 properties, with an average annual tax hike of $330 per property.

• Elimination of Exemptions: $2,000 Use & Occupancy Tax exemption and $100,000 Business Income and Receipts Tax (BIRT) exemption removed, increasing operational costs for some organizations.

Non-profits can mitigate these changes through the Property Tax Exemption for properties used exclusively for charitable purposes, saving $13,998 annually per $1M assessed value. However, compliance requires annual applications, recertifications, and strict documentation.

Philadelphia also offers tax relief programs, such as the phased reduction of the BIRT rate through 2030 and expanded historic tax credits for eligible projects. These changes highlight the importance of careful planning to manage costs and maintain financial stability.

1. Philadelphia Property Tax Exemption for Non-Profits

Philadelphia offers a property tax exemption that waives real estate taxes for qualifying non-profits. With the city’s 2025 real estate tax rate set at 1.3998% - split between the City of Philadelphia at 0.6159% and the School District at 0.7839%  - this exemption can translate into significant savings. For many organizations, it means redirecting thousands of dollars annually toward their core missions.

Eligibility Requirements

To qualify for this exemption, non-profits must prove that their property is used directly for their tax-exempt purpose. According to the Pennsylvania Constitution, only the portion of a property used exclusively for non-profit activities - such as charitable services, educational programs, or social services - is eligible. Any part of the property leased to a commercial tenant would lose its tax-exempt status.

Non-profits need to submit an Application for Nonprofit Real Estate Tax Exemptions to the City of Philadelphia’s Office of Property Assessment. Updated forms are issued annually, with the 2025 form available on February 6, 2024, and the 2026 form on February 26, 2025. Once approved, organizations must complete annual recertifications to maintain their exemption.

Duration and Applicability

To keep the exemption active, non-profits are required to recertify by June 1 each year. This process ensures that properties continue to meet the city’s tax-exempt criteria and allows officials to monitor any changes in property use or ownership. Missing the deadline could result in losing the exemption.

Financial Impact

The financial benefits of this exemption are substantial. For example, a non-profit owning a property assessed at $1,000,000 would save approximately $13,998 annually based on the 1.3998% tax rate. Over a decade, these savings could amount to nearly $140,000 - funds that can be reinvested into the organization’s programs, staff, or facilities. However, it’s worth noting that the real estate transfer tax increased to 3.578% as of July 1, 2025, which could affect transaction-related costs.

Administrative Obligations

Maintaining this exemption requires careful attention to administrative responsibilities. Non-profits must keep detailed records to demonstrate that their property continues to serve its tax-exempt purpose. Setting up a compliance calendar and assigning oversight duties can help avoid missed deadlines or lapses in documentation.

Recent tax policy changes have added new challenges for non-profits. The elimination of the $100,000 Business Income and Receipt Tax (BIRT) exemption and the $2,000 Use and Occupancy (U&O) tax exemption  means that organizations engaging in business activities on their premises could face new tax liabilities starting with 2025 taxes filed in 2026. The U&O tax is calculated at 1.21% of the property’s assessed value for business purposes, with the first payment due on January 25, 2026. These changes highlight the importance of expert guidance to navigate the evolving tax landscape effectively.

2. Philadelphia Ten-Year Tax Abatement Program

Currently, there isn’t much detailed information available about a specific Ten-Year Tax Abatement Program tailored for non-profits in Philadelphia. The criteria and workings of such a program remain unclear. However, the city is continually adjusting its incentive structures, which makes it essential for non-profits to stay informed about the broader tax landscape. Even without a dedicated abatement program, these shifting policies emphasize the importance of strategic tax planning when managing real estate.

Financial Impact

Philadelphia’s upcoming tax changes in 2025 provide a glimpse into its broader tax strategy. One key update is the removal of the $100,000 Business Income and Receipts Tax (BIRT) gross receipts exemption. This means that any organization engaged in business activities will now need to file and pay taxes, regardless of how much revenue they generate. For non-profits, this change could influence how they structure their operations - especially if parts of their property are used for commercial purposes while still supporting their mission.

Administrative Obligations

Philadelphia’s tax environment can be complex, requiring non-profits to maintain detailed documentation. It’s crucial to clearly separate portions of a property used for tax-exempt purposes from those generating taxable income. Pennsylvania is also considering legislation that would specify that only property used exclusively for charitable purposes will qualify for tax exemption. For example, a building dedicated entirely to non-profit activities might be exempt, but spaces used for commercial ventures - like a retail shop on a college campus - would typically be subject to property taxes.

To navigate these challenges, expert advice can be invaluable. Blueprint Commercial (https://blueprintcommercial.com) offers specialized consulting for non-profits in Greater Philadelphia, helping them understand how evolving tax policies and incentives can impact long-term financial planning.

These tax changes underscore the need for non-profits to adopt a thoughtful and strategic approach when managing their real estate tax obligations.

Advantages and Disadvantages

Navigating Philadelphia's tax policies for non-profit real estate involves balancing the potential benefits against the challenges. Each tax program offers specific perks, but they also come with conditions that can affect an organization’s financial planning and day-to-day operations.

The Property Tax Exemption is one of the most impactful tools for non-profits, offering a full exemption from real estate taxes on properties used exclusively for tax-exempt purposes. While this can lead to significant savings, strict rules apply. Any non-exempt or commercial use could jeopardize the exemption. Non-profits must also submit annual applications and maintain detailed records to prove compliance, with the risk of audits or reassessments leading to retroactive tax liabilities.

Recent policy changes have added costs to both property acquisition and operations. For instance, the increased realty transfer tax and the elimination of the $2,000 Use and Occupancy tax exemption have introduced new financial hurdles. Below is a comparison of key tax policies, highlighting their benefits and challenges:

Strategic planning is crucial to balance upfront costs with long-term savings.

Philadelphia’s citywide reassessment of roughly 580,000 properties in 2025 introduces both risks and opportunities for non-profits. For example, commercial properties like office spaces have seen tax reductions due to the rise of remote work. However, reassessments could alter the value of your exemption. If your property’s assessed value increases, the exemption could result in higher annual savings. On the flip side, reassessments require careful monitoring to ensure exemption status remains valid and properly documented.

For non-profits with owner-occupied facilities, the Homestead Exemption, which reduces taxable property assessments by $30,000, provides only modest savings - around $420 annually. Securing the full non-profit exemption is far more advantageous and should be the priority for eligible organizations.

Another opportunity lies in the expansion of historic tax credits, which will increase from $5 million to $20 million annually in 2025. Non-profits that rehabilitate or repurpose historic buildings can combine these state credits with federal historic tax credits, covering 20% of eligible construction costs. This can significantly reduce expenses for organizations repurposing historic properties for mission-driven activities.

Changes to the Business Income and Receipts Tax (BIRT) also present mixed outcomes. While the gross receipts rate will gradually decrease from 1.410 mills to 1.380 mills, and the net income rate will drop from 5.71% to 5.50% by 2030, the elimination of the $100,000 gross receipts exemption means any non-profit with commercial revenue must file and pay taxes, regardless of income levels. This change particularly affects non-profits that use business activities to support their missions.

For non-profits considering property acquisition in Philadelphia, conducting a thorough cost-benefit analysis is essential. While higher acquisition costs may be a hurdle, the long-term savings from property tax exemptions can be substantial. However, organizations must also account for ongoing administrative costs to maintain compliance and the risks of losing exemption status if property use does not remain exclusively tax-exempt.

Blueprint Commercial (https://blueprintcommercial.com) offers specialized consulting to help non-profits in Greater Philadelphia navigate these complex tax policies. Their expertise ensures organizations can make informed decisions about real estate purchases and maintain compliance with evolving requirements.

Carefully weighing these trade-offs is key for non-profits refining their real estate strategies in Philadelphia. By understanding the nuances of these tax policies, organizations can better position themselves for financial sustainability and operational success.

Conclusion

Philadelphia offers two primary tax relief programs for non-profit organizations with real estate holdings: the Property Tax Exemption and the Ten-Year Tax Abatement Program. These programs play a critical role in shaping real estate strategies for non-profits.

The Property Tax Exemption provides permanent relief from real estate taxes for properties used solely for charitable purposes by organizations with 501(c)(3) or 501(c)(4) status. This exemption remains valid as long as the property supports the organization's tax-exempt mission. On the other hand, the Ten-Year Tax Abatement Program grants temporary tax relief, specifically on the increased property value resulting from new construction or major renovations. This benefit typically lasts for a decade, after which the property returns to full tax assessment.

For non-profits operating stable facilities like community centers or affordable housing, the Property Tax Exemption offers lasting financial advantages. Organizations undertaking significant development projects can often combine these programs - using the exemption for their ongoing operations while leveraging the abatement to reduce tax burdens during the costly phases of development. However, strict eligibility criteria govern both programs.

Key Eligibility Considerations

The Property Tax Exemption requires the property to be used exclusively for charitable purposes. Any unrelated commercial or income-generating activities could threaten the exemption. Non-profits must submit annual applications, proving their tax-exempt status under 501(c)(3) or 501(c)(4) and documenting the property's charitable use in detail.

The Ten-Year Tax Abatement Program focuses on development. Applicants must provide thorough documentation, including construction plans, cost estimates, and evidence that the project meets specific improvement thresholds.

Non-profits engaged in affordable housing development should give priority to the Property Tax Exemption. Housing is recognized as a charitable purpose under this program, offering permanent tax relief. Additionally, Philadelphia exempts certain affordable housing projects from the development impact tax, further supporting non-profits in this sector.

Navigating Philadelphia's Tax Landscape

With recent changes like the realty transfer tax increase and the elimination of the Use and Occupancy tax exemption, securing these tax benefits has become even more critical to offset rising transaction and operational costs. A systematic approach is key:

• Clearly define the property's primary use and ensure it aligns with the organization's mission.

• Determine whether significant construction or renovations are planned.

• Gather essential documents, including proof of tax-exempt status, ownership or lease agreements, and detailed records of the property's charitable use.

Seeking expert advice can streamline the process and improve outcomes. Barbara Hammer from Resources for Human Development highlights the value of skilled guidance:

Blueprint Commercial, a woman-owned brokerage specializing in non-profit real estate consulting, offers tailored solutions. Their expertise in navigating Philadelphia's tax policies helps organizations align their real estate decisions with their mission and financial goals.

Ultimately, the right tax strategy depends on your organization's unique needs. Properties used exclusively for charitable purposes benefit most from the permanent relief of the Property Tax Exemption. Meanwhile, organizations involved in large-scale development projects may find the Ten-Year Tax Abatement Program to be an effective complement. By carefully evaluating these options, non-profits can create a solid foundation for long-term financial sustainability.

FAQs

What steps can non-profits in Philadelphia take to maintain their property tax exemption and avoid losing their tax-exempt status?

Non-profits in Philadelphia need to stay on top of local and state regulations to keep their property tax exemptions intact. This usually means the property must be used solely for charitable, educational, or religious purposes. Additionally, organizations are required to submit necessary documentation - such as annual filings or proof of exemption eligibility - within specified deadlines.

For personalized assistance, working with real estate experts familiar with non-profit compliance, like Blueprint Commercial, can be invaluable. They can help you manage these obligations smoothly and minimize any risks to your tax-exempt status.

How can non-profits address the financial challenges posed by Philadelphia's increased Realty Transfer Tax and changes to tax exemptions?

Non-profits in Philadelphia face new challenges due to changes in tax policies, including a hike in the Realty Transfer Tax and the removal of certain exemptions. To navigate these shifts effectively, organizations can take several practical steps:

• Plan ahead for increased costs: Adjust budgets to account for higher real estate transaction expenses.

• Seek additional funding sources: Look into grants or ramp up fundraising efforts to cover the added financial burden.

• Get expert advice: Work with real estate and tax professionals to uncover strategies or incentives that might still be available.

Collaborating with seasoned advisors who specialize in non-profit real estate can provide valuable guidance. This expertise ensures organizations are making well-informed decisions that align with their financial objectives.

How do changes to Philadelphia's Business Income and Receipts Tax (BIRT) impact non-profits with revenue-generating commercial activities, and how can they adapt?

Recent updates to Philadelphia's Business Income and Receipts Tax (BIRT) could impact non-profits that earn revenue from commercial activities, as these earnings might now be subject to taxation. Non-profits involved in such ventures should review these changes closely to understand how they could affect their financial planning and compliance requirements.

To navigate these adjustments, organizations might benefit from consulting tax professionals or real estate advisors. These experts can help clarify specific tax obligations and suggest ways to reduce potential liabilities. For specialized assistance, working with professionals experienced in non-profit real estate, such as Blueprint Commercial, can provide valuable support in managing these challenges.