State-Level Bills Would Prevent Local Challenges to Nonprofit Tax Exemptions

Mar 19, 2013

Two bills up for full votes in the state legislature would prevent municipalities from challenging the tax-exempt statuses of nonprofit organizations by transferring that power to the General Assembly.

On Tuesday, Pittsburgh City Council passed a resolution condemning Senate Bill 4 and its counterpart, House Bill 724. The former is up for a Senate vote on Wednesday.

Because the bill would change the state constitution, it would need to pass in two consecutive legislative sessions and be approved by a voter referendum.

City Councilwoman Natalia Rudiak said she suspects the Hospital & Healthsystem Association of Pennsylvania (HAP) lobbied for the legislation so its members' exemptions from property and sales taxes would be protected from possible challenges by financially struggling municipalities.

"It would perpetuate the trend of these mega-charities reducing their payments to communities across the state while increasing their real estate footprint," Rudiak said.

HAP states on its website that it supports SB 4 and HB 724.

Officials in Pittsburgh and Allegheny County have long discussed a challenge to the tax-exempt statuses of large, local nonprofits such as Highmark and UPMC, both of which have recorded operating "surpluses" of hundreds of millions of dollars in recent years.

Currently, a consortium of Pittsburgh nonprofits gives the city a yearly "payment in lieu of taxes" worth only a fraction of the institutions' projected property tax value.

Rudiak also criticized the speed with which the legislature has taken up these bills. Both have passed their respective Finance Committees after being introduced in February by Sen. Mike Brubaker (R-Lancaster) and Rep. Kerry Benninghoff (R-Centre).

Brubaker's office deferred comment on the legislation until the full Senate votes on the measure near midday Wednesday.