Pennsylvania Supreme Court Holds a Municipal Stormwater Charge is a Tax, Not a Fee

On April 30, 2026, the Pennsylvania Supreme Court ruled that the stormwater charge collected by the Borough of West Chester was a tax, not a fee.

While the distinction may appear technical, it has significant implications for tax-exempt entities. Many nonprofits and government-owned properties are exempt from local taxes but may still be required to pay properly structured fees for services.

Background: Stormwater Charges and Tax-Exempt Properties

Municipalities across Pennsylvania have adopted stormwater charges to fund stormwater management programs and related infrastructure.

The legal question before the Pennsylvania Supreme Court was whether the Borough of West Chester's stormwater charge constituted a fee for services or a tax.

The answer is important because tax-exempt entities generally cannot be required to pay local taxes, while properly structured service fees may still be imposed on those properties.

Pennsylvania Supreme Court Decision

The Court examined whether the Borough assessed the charge as part of its public duties or as a paid service tied to the specific characteristics of individual properties.

West Chester described the purpose of its charge as:

• Providing stormwater management services for the general public benefit; and
• Meeting required pollution control obligations.

The Court determined that these purposes were sufficient to classify the stormwater charge as a tax rather than a fee.

Why the Distinction Matters

The Court's ruling affects how municipalities structure stormwater charges and how tax-exempt property owners evaluate their obligations.

Because tax-exempt entities generally do not pay local taxes, the classification of a charge as a tax may affect whether certain organizations are required to pay.

Municipalities seeking to charge tax-exempt organizations for stormwater services will need to ensure that the charge is tied to the benefit each property receives and is separate from the municipality's general compliance obligations.

Practical Considerations for Municipalities and Property Owners

Both municipalities imposing stormwater charges and property owners who believe they qualify as tax-exempt should review how local stormwater charges are described and structured.

According to the Court's ruling, the way a charge is framed may affect whether it can be challenged as an unauthorized tax.

Organizations should consider evaluating:

• How the charge is characterized by the municipality;
• Whether the charge is tied to a specific benefit received by the property; and
• Whether the charge is connected to broader municipal compliance obligations.

Questions That Remain Unresolved

The Pennsylvania Supreme Court left several important questions open for future consideration.

The Court did not address how the ruling may apply to municipalities that possess specific fee authority, including:

• Section 2705 of the Second Class Township Code; or
• Charges assessed through municipal authorities.

Additional guidance is expected as these issues are addressed in future Pennsylvania court decisions.

Strategic Outlook

The Pennsylvania Supreme Court's decision provides important guidance regarding the distinction between taxes and fees in the context of municipal stormwater charges.

At the same time, the ruling leaves open several questions that may continue to impact municipalities and property owners throughout the Commonwealth.

Municipalities imposing stormwater charges and organizations claiming tax-exempt status should carefully review existing charge structures and monitor future developments in Pennsylvania law.

Contact Our Government Services Team

If your organization pays, imposes, or is considering imposing a stormwater charge, please contact MacDonald Illig at 814-870-7600 to speak with a member of our Government Services Team.

Legal Advice Disclaimer: The information presented on this website serves solely as general guidance and should not be construed as legal advice by MacDonald, Illig, Jones & Britton LLP as a replacement for seeking personalized legal counsel from a qualified attorney. MacDonald, Illig, Jones & Britton LLP does not assume liability for the accuracy or reliability of content hosted on any third-party websites accessible through links provided on this site.