Bill: Pa. Lawmakers Should Chart Tax-exempt Status
PITTSBURGH (AP) – A bill quietly circulating in the state Legislature would change Pennsylvania's constitution to allow state lawmakers rather than the judicial system to decide what nonprofit entities deserve tax-exempt status.
The Pittsburgh Post- Gazette says the state Sen- ate passed the bill 30-20 last month and the House Finance Committee has approved a version. Because the measure would amend the state constitution, it must pass both houses in consecutive legislative sessions and would then have to go before the voters for approval.
Supporters say the measure, which would give lawmakers the final say on what is a “purely public charity” eligible for tax exemption, would provide statewide consistency in defining what is or isn't a charity and keep nonprofits from being subject to different court rulings in different parts of the state.
Opponents, however, call it an end-run by large nonprofits to shift tax exemption authority to state legislators and away from communities that have shown increasing willingness to go to court to force hospitals, universities and other nonprofits to contribute.
“I just think this will undermine the ability of local governments to hold megacharities accountable,” said Pittsburgh city council member Natalia Rudiak. “What also disturbs me is their attempt to make a change to the constitution without a single public hearing. I think that sets a dangerous precedent.”
Supporters include the Hospital & Healthsystem Association of Pennsylvania, the Association of Independent Colleges and Universities of Pennsylvania, the Pennsylvania Catholic Conference and United Way of Pennsylvania. Opponents include the Pennsylvania Municipal League and the Pennsylvania State Association of Township Commissioners who say tax exemptions put an unfair and unsustainable financial burden on municipalities.
Republican Sens. Mike Brubaker and Joe Scarnati told colleagues in a Jan. 28 memo that the legislation was prompted by a state Supreme Court ruling last year that denied property tax exemption to a Pike County camp on the grounds that the camp didn't provide relief to the burden of local government, one of the required criteria under a 1985 court decision. The senators said the camp qualified as a public charity under a 1997 act passed in an attempt to clarify requirements for a tax exemption.
“ By elevating its own judgment above the will of the General Assembly, the court has created uncertainty as to the qualifications for public charities in Pennsylvania,” the senators wrote.
Many officials representing municipalities and school districts say the 1997 law makes it too difficult to challenge a nonprofit’s tax-exempt status.
Richard Schuettler, deputy executive director of the Pennsylvania Municipal League, said many institutions contribute both financially and to quality of life of the local communities, but when tax-exempt entities sit on 30 percent or more of a municipality’s real estate, the tax burden on everyone else becomes onerous.
“It’s part of the reason why there are so many more municipalities entering financial distress,” he said. “Our view is that everyone has to pay some kind of fair share.”
The rationale for tax exemption is that hospitals, universities and other nonprofits benefit communities in a variety of ways, such as providing care for the uninsured or supporting research that benefits the community. A New England Journal of Medicine article that reviewed tax documents for more than 1,800 tax-exempt hospitals concluded that on average 7.5 percent of hospitals' operating expenses went to community benefits.
“Is that enough? For the most part, there are no quantitative criteria,” Gary Young, director of the Northeastern University Center for Health Policy and Healthcare Research in Boston, who led the group of researchers, told the paper in a phone interview. “Nowhere in the tax code at the state or local level is there an explicit requirement for hospitals to provide community benefits in the same amount they receive exemptions.”
Pittsburgh Mayor Luke Ravenstahl has filed suit challenging the nonprofit status of the University of Pittsburgh Medical Center, saying it shouldn’t be treated like a charity because it doesn't act like one. The medical center responded Friday with a federal court suit contending that it had been unfairly targeted and arguing that it contributed $622 million to the community in the most recent fiscal year in terms of free health care, research and education and community service programs.