PA State Senator Introduces Bill to Require Nonprofits to Pay Real Estate Taxes

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December 5, 2011; Source: Essential Public RadioWayne Fontana, democratic state senator from Pittsburgh, has been watching the slugfest between the steel city and various nonprofits over their contributions to municipal coffers. NPQ has covered the Pittsburgh nonprofit taxation debates over the years, including the recent controversies concerning the University of Pittsburgh Medical Center and Highmark (here and here, for example). Pittsburgh has long been the state’s epicenter for these battles, so it is no surprise that Fontana is on the side of Pittsburgh and Allegheny County officials in trying to exact money from the largest landowners.

Last month, with little coverage in the mainstream press, Fontana introduced Senate Bill 1281, which would permit localities across the board to tax nonprofits on the assessed value of their land. Fontana says that the legislation would protect small nonprofits. “I’m trying to exempt them because this is not for the Boys and Girls Clubs or the small churches. That’s not what this is about,” he said. “We’ll exempt them in some shape or form. They don’t have the big reserves and aren’t buying up real estate all across the city and county, so there is a difference.” The image of rapacious, land-grabbing nonprofits is key, because the legislation does not protect small nonprofit property owners. The bill does exempt properties owned by local, state, and federal governments, and by “police, fire, including volunteer fire and relief, public works or emergency services,” but not specifically small nonprofits. In fact, there’s no reference at all to “small” nonprofits. The legislative intent in the bill reads as follows: “It is necessary and proper for local governments to have the option to ensure the continued viability of certain essential services it provides or causes to be provided by requiring a contribution from owners of tax-exempt properties toward the cost of the services.”

The proposed tax would apply only to the land value, not the structures or improvements on the land, but it would apply to the aggregate of a nonprofit’s property holdings in a city. The possible small nonprofit “break” is the exemption of the first $200,000 of aggregate land value, not per parcel value, from taxation, but in some cities that might not be a difficult threshold to pierce. Fontana sees nonprofits with deep pockets and attractively taxable real estate assets, telling the Central Penn Business Journal, “There are nonprofit organizations out there that are sitting on high-valued, tax-free real estate. If they sold this land, these nonprofits would make a handsome profit.”

Fontana’s animus toward nonprofits is palpable: “While many of our non-profit organizations provide services that save the state a considerable amount of money and are key to thriving communities, others continue to treat consumers as pawns in a game where the main objective seems to be maximizing profits,” he said. “Organizations which do this are non-profit in name only and act without regard for the public good. If we give them benefits for helping the public, they need to do the right thing and make that be the primary mission which drives them.” Has the Fontana bill escaped the public’s attention? Watch out for hearings on this bill early in 2012.—Rick Cohen

  • Michael

    While some might instinctively react in horror at taxing a local food bank, Fontana’s argument ultimately is about correcting a system which allows the upper strata of society to obtain enormous tax breaks.

    One example which we have commented on frequently was the construction of a retirement village at Penn State. They essentially created a non-profit organization to run a for-profit organization that is on tax exempt PSU property. The for-profit was a Who’s Who of Business/Academic leaders (including Paterno) in Happy Valley.

    Yes, they struck a deal with the local township for Payment In Lieu Of Taxes, but our estimate was the PILOT was about 30% of what the municipality would have collected if it was taxed at full value. Of course, many of the township’s governing body had direct employment/business/professional relationships with Penn State.

    Our position is jettisoning the Real Estate exemption would be a net benefit for society.