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The people of Pittsburgh vs. a giant corporate enterprise

The people of Pittsburgh vs. a giant corporate enterprise

By Claire Prestel, Staff Attorney

Pittsburgh is a great city with a beautiful natural setting, vibrant neighborhoods, and an energetic and dedicated mayor, Luke Ravenstahl, who earned a lot of local respect early on by briefly changing his name to Steelerstahl before the 2009 Ravens-Steelers AFC Championship game. (I’m from Philadelphia, but I’ve gotta love a fellow PA sports fan with that kind of commitment.)

While Pittsburgh has a lot going for it, the city, like many others around the country, has been forced to make serious budget cuts (decimating the public works department, for example). Part of the problem seems to be that one of Pittsburgh’s largest corporations, the University of Pittsburgh Medical Center (pictured), claims immunity from payroll taxes as a non-profit institution “of purely public charity.”

Pittsburgh believes the lost tax revenue from UPMC’s charity designation is significant; UPMC indeed describes itself as a $10 billion operation and Pennsylvania’s largest employer. (UPMC also happens to be Allegheny County’s largest private property owner.)

A few months ago, Mayor Ravenstahl announced that the City of Pittsburgh would challenge UPMC’s tax-exempt status in court because, in the city’s view, UPMC is not acting as a public charity and fails the settled public-charity test under state law. The city’s lawsuit claims, among other things, that UPMC donates less than 2 percent of net patient revenue to poor patients while paying a number of employees more than $1 million and its CEO almost $6 million. The complaint also alleges that UPMC has closed hospitals in poor areas and threatened to reject popular insurance coverage provided by a company it views as a competitor. (On that last point, see former Treasury Secretary Paul O’Neill’s questions for UPMC.)

Just as interesting as the city’s lawsuit is UPMC’s response. UPMC filed the standard motion to dismiss but also its own lawsuit under 42 U.S.C. §1983, claiming that its civil rights are being violated by Pittsburgh’s challenge to its tax-exempt status. The Pittsburgh Post-Gazette says “for shame,” criticizing UPMC for playing hardball with a distressed city that “would be remiss” if it didn’t at least test UPMC’s tax-exempt status in court.

Pittsburgh has filed a strong response to UPMC’s claims, but a judge will have to wade through the issues. At the end of the day, it may be that a court finds some merit in the company’s suit. I hope not. Something seems very wrong about a $10 billion corporate enterprise using one of our oldest civil rights laws (passed originally to protect African-American voters) as part of an effort to avoid paying taxes.