Ravenstahl challenges UPMC's tax-exempt status | Pittsburgh City Paper

Ravenstahl challenges UPMC's tax-exempt status

Let no one accuse Mayor Luke Ravenstahl of going out with a whimper: In the waning months of his administration, he has launched a lawsuit challenging the tax-exempt status of UPMC, the region's largest employer.

"After a thorough and exhaustive review," Ravenstahl told reporters this morning, "It's very clear to me that the University of Pittsburgh Medical Center is not a purely public charity, and therefore the city of Pittsburgh will take action to challenge that claim." That action will include a lawsuit, being filed today in Common Pleas -- which will demand UPMC being paying city payroll tax -- and a challenge of its property-tax breaks to county property assessors.

The lawsuit -- a copy of which is here -- takes advantage of a window of opportunity opened by the state Supreme Court last April. In a case involving a religiously-affiliated summer camp, the court ruled that in order to qualify for tax exemption, a nonprofit must meet a five-part "HUP test." That test -- which is more stringent than a previous standard in state law -- requires an organization to: advance a charitable purpose; donate a substantial portion of its services; benefit people who are legitimate subjects of charity, relieve the government of some burden; and operate entirely free from private-profit motive.

Working from guidance provided by the city's legal counsel on the issue, the law firm of Strassburger McKenna Gutnick & Gefsky, Ravenstahl said that UPMC failed at least three of those tests.

"UPMC donated less than 2 percent, and perhaps less than 1 percent, of net patient revenues to patients eligible for financial assistance," said Ravenstahl, who called that "unacceptable."

Ravenstahl also faulted UPMC for "participat[ing] in massive advertising campaigns" and for shuttering hospitals in the South Side and Braddock, while opening or acquiring facilities in the suburbs. "They've closed facilities in underserved areas and moved to more affluent areas," said Ravenstahl, who said that proved UPMC's actions "do have a for-profit motive."

UPMC has not yet responded to the suit, but the hospital giant did have harsh words for the city in a Tribune-Review story previewing Ravenstahl's action this morning. A spokesman told the paper that the challenge "appears to be based on the mistaken impression that a nonprofit organization must conduct its affairs in a way that pleases certain labor unions, certain favored businesses or particular political constituencies -- in other words, the way that some local governments are also run." UPMC also noted that it does pay tax on nearly half the property it owns.