Committee OKs Freeman bill to compensate communities with high percentage of tax-exempt properties
Rep. Robert L. Freeman June 26, 2025 | 12:25 PM
HARRISBURG, June 26 – The state House Local Government Committee approved legislation Wednesday sponsored by its chairman, state Rep. Robert Freeman, that would provide special financial assistance to municipalities with high levels of tax-exempt property, such as institutions of higher learning, nonprofit medical facilities, government offices or state forests and game lands.
“Municipalities with a large amount of tax-exempt properties are faced with the challenge of providing residents with essential services but without a sustaining real estate tax revenue base. My legislation would provide annual financial assistance to those affected municipalities, giving them the ability to provide those services that ensure the health and safety of their residents, and it would put their community in a more stable financial position to attract economic development and succeed,” said Freeman, D-Northampton.
Freeman said H.B. 985 would establish the Tax-Exempt Property Municipal Assistance Fund to help municipalities with 15% or more of their total assessed property value as tax-exempt property within their borders. Additionally, the municipality also would be required to have a median household income up to 115% of the statewide median household income or be a county seat.
The plan would be funded by the state's existing 18% Liquor Tax, known as the Johnstown Flood Tax, which was created to help rebuild Johnstown after it was devastated by a flood in 1936.
“It is time to target that money to municipalities that are falling further into financial distress simply because they have significant amounts of tax-exempt properties within their boundaries that deprives them of a stable tax base. This legislation can help hundreds of communities across our commonwealth, including those municipalities that are under the Act 47 Financially Distressed Municipalities program, college towns, county seats and municipalities that host nonprofit hospitals as they have a high percentage of tax-exempt property,” Freeman said.
The legislation would require each county annually to provide the state with information regarding the assessed value of tax-exempt properties. The funding formula would be based on the assessed value of those properties as if they were taxable. No municipality would receive more than 10% of the total revenue in the fund, and property owned by the municipality itself would not be eligible for compensation.
In the Lehigh Valley, the legislation would provide significant funding to Allentown ($13.1 million), Bethlehem ($7.5 million), Easton ($2.9 million) and other municipalities with high percentages of tax-exempt properties such as Fountain Hill where 60% of the assessed value of property is tax exempt.
The bill is supported by the PA Municipal League, PA State Association of Boroughs, PA State Association of Township Commissioners and PA State Association of Township Supervisors.
House Bill 985 moves to the full PA House of Representatives for consideration.