Senate Bill Taking Control of Nonprofit Qualifications Comes Under Fire

Jan 26, 2015

Pittsburgh Mayor Bill Peduto is taking a strong stance against a bill making its way through Harrisburg that he says would “would hurt city taxpayers & hamstring efforts to cooperate with nonprofits.”

The state’s finance committee passed and sent to the Senate floor last week Senate Bill 4 , which would clarify the Purely Public Charity Act of 1997 to make the legislature the sole body to determine what qualifies an organization as a charity.

“It would turn the authority to define who’s exempt from taxes over to the General Assembly which is what the constitution intended, it’s what our framers intended,” said Democratic Chairman of the Senate Finance Committee, John Blake of Lackawanna County.

The bill passed the General Assembly during the 2013-14 sessions after concerns of a 2012 Supreme Court decision. The court denied public charity status to a religious summer camp that Pike County attempted to tax because the event was not a purely public charity even though the sponsoring organization qualified under the Pennsylvania Institutions of Purely Public Charity Act (Act 55 of 1997).

The court said charitable organizations can only receive public funding if they meet criteria determined by the court.

The decision could bring a public charity’s status into question; a conflict between charities and local governments which Blake says is dangerous.

“Right now you’ve got nonprofits on the defensive and you’ve got aggressive local governments who are dealing with extraordinary fiscal distress trying to figure out how to squeeze a little bit of money out of these nonprofits. It’s really an issue for the legislature to try to redefine that relationship and to guarantee fairness,” Blake said.

Former Pittsburgh Mayor Luke Ravenstahl sued the University of Pittsburgh Medical Center in March 2013 stating the medical network should not receive tax-exempt status as it failed to pass three of the five parameters determined by the Pennsylvania Supreme Court to be considered a nonprofit. Ravenstahl noted UPMC’s city property and payroll taxes would total $20 million.  

UPMC then filed a suit saying its constitutional rights were violated by the city.

Both suits were dropped this past summer as Peduto administration Chief of Staff said the city and UPMC hope to draft and agreement for nonprofits to invest in neighborhoods.

On Monday Peduto said the bill was “secretive and rushed” and could deal a major financial blow to Pittsburgh.

“My administration has shown good faith by trying to come up with a local solution to the nonprofit issue in Pittsburgh, and Senate Bill 4 further stacks the deck against all communities working to find common sense solutions,” said Peduto. “Those talks have been constructive and robust, as we have focused on ways we can jointly support the city we share.”

Blake said the legislation is needed to remove doubt of what constitutes as a charity in the commonwealth.

“You have circumstances of non-profits that barely have two nickels to rub together to conduct their mission and you have non-profits that, you know, make hundreds of millions of dollars every year to conduct their mission,” he said. “(There are) different types of non-profits who are conducting different missions in our state and that’s where we need to redefine the law.”

The bill would add the clause: “(by law the General Assembly may) establish uniform standards and qualifications which shall be the criteria to determine qualification as institutions of purely public charity under clause (v) of subsection (a) of this section,” to section 2b of article 8.

To amend the state Constitution, a bill must be approved twice in a row. The bill was approved last session and now must be approved during this session. It will then be taken to the voters for a referendum.  

“Even if this goes to the Governor’s desk for signature, there is a referendum that will be on the voters. All 12.5 million Pennsylvanians will make a decision on whether or not this constitutional amendment will occur and of course we will listen to the voice of the people,” Blake said.

The bill could appear on the May primary ballot if it is passed soon.