Tax Law

Bill Would Allow Pennsylvania Municipalities to Tax Real Estate Owned By Charities


Pennsylvania State Sen. Wayne Fontana (D-Allegheny) and Rep. Timothy Solobay (D-Washington) are urging their colleagues to support legislation that would allow municipalities the option to impose essential service fees on real estate owned by charities. The legislation will be introduced in the Pennsylvania Senate and House on December 7, 2009.
 
This tax would be based on the square footage of the property. The fee may be up to $100 per 1,000 square feet of tax-exempt property, with the first 5,000 square feet exempt. Alternatively, municipalities could continue with the existing voluntary agreements for payments in lieu of taxes or establish a limited real estate tax. This bill is based on a 2007 bill, SB1328, that died in committee. The new legislation would amend the Purely Public Charities Act (Act 55). The sponsors acknowledge that the legislation will require considerable amendment before passage, but intend the bill to be a starting point for dialogue at the state level about the effect of tax-exempt properties on the fiscal health of Pennsylvania municipalities.
 
Rep. Solobay pointed out that smaller municipalities, not only large cities, are affected by tax-exempt real estate. He announced that the purpose of the bill is to redress the situation that "the burden of paying for services falls on the shoulders of the property owners who do pay taxes. The intent of this bill is to help combat this problem by having non-profit/tax-exempt entities pay a partial tax."
 
Pennsylvania charities are gearing up to oppose the bill. They note that a 2009 State Legislative Budget and Finance Committee study found that nonprofit hospitals and public and private universities are already substantially contributing to their local municipalities.
 
Cash-strapped Pennsylvania cities may be setting their sights on nonprofit organizations and their constituents. Pittsburgh is presently proposing a 1-percent tuition tax on local university and college students. The city claims that this "Post Secondary Education Privilege Tax" is justified because the students use city services and should pay for them, whereas university presidents and students contend that the tax is unfair, particularly because they inject millions of dollars into Pittsburgh's economy and pay commuter, parking and entertainment taxes.
 
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