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UPMC: City of Pittsburgh Continues to Ignore Its Own Laws In Its Purely Politically Motivated Challenge of UPMC’s Tax-Empt Status

October 29, 2013

By: Paul Wood

Mayor Ravenstahl and the City of Pittsburgh are continuing on their politically-inspired quest to strip UPMC, the parent entity for the entire UPMC health system, of a payroll tax exemption that it does not claim, and to have it pay taxes for employing people it doesn’t employ.

The Mayor and City have always known which UPMC entities have employees, which of those entities do business in the City, and which of those entities claim to be exempt from the payroll tax. All this information is filed quarterly with City Finance Department, and has been for years. Yet they continue to waste the Court’s time, and the taxpayers’ resources, on a pointless effort to distort clear provisions of their own tax code.

If the City wants to challenge the tax-exempt status of UPMC, it should challenge the organizations that operate the charitable services and have the employees to tax. Suing a parent company with no employees is a sham that seeks to deny the public and UPMC a fair hearing.

Virtually all of UPMC’s tax-exempt land is owned by its hospitals and clinics where tens of thousands of physicians, nurses, and other health professionals are employed and serve the public. These are the patient care activities that are charitable and tax-exempt and where the City must focus its challenge: Children’s Hospital of Pittsburgh of UPMC; Magee-Womens Hospital of UPMC; UPMC Mercy; UPMC Presbyterian-Shadyside. These hospital campuses sit on 51 percent of the land UPMC owns and comprise virtually all of UPMC’s tax exempt property. These properties were tax-exempt when each hospital joined UPMC, they continue to operate as “institutions of purely public charity” in every sense of the phrase, and they are unquestionably tax-exempt. If they are not, then there is no other hospital and clinic in Pittsburgh that would qualify. UPMC already pays real estate taxes on the remaining 49 percent of the property it owns.

If the Mayor and the City want to conduct a legally sound and expansive review of UPMC’s tax-exempt status under the City’s payroll tax law, there is a correct way to do it. They should start with the payroll tax filings in their possession, identify the UPMC legal entities that claim exemption from the payroll tax, review the entitlement of each of those entities to that exemption, and make an administrative determination as to whether those exemptions are properly claimed.

Among the UPMC subsidiaries that have claimed this exemption are Children’s Hospital, UPMC Mercy, Magee-Womens Hospital and several other facilities fulfilling their charitable mission by delivering world-class care to hundreds of thousands of patients every year. All of these entities directly employ their own staffs, file all the appropriate payroll tax returns with the City, and are clearly “institutions of purely public charity” as defined by the City’s own tax code.

That the Mayor and the City have chosen not to do this straightforward review reveals their doubt that any challenge to those exemptions could succeed. Nor would such a challenge lend itself to sound bites or catchy headlines. That clearly is why the Mayor and the City have chosen to target just the UPMC parent holding company (which exists to hold UPMC’s debt and investments), a legal entity they have always known has no employees.

Mayor Ravenstahl and the City should not be allowed to bypass their own law and procedures – or simply invent facts – by pretending that UPMC’s parent holding company employs the thousands of individuals who actually work for separate UPMC legal entities such as Children’s Hospital, UPMC Mercy or Magee-Womens Hospital. Nor does the IRS Form 990 filed on behalf of the “UPMC Group,” which consolidates information for 37 separate and distinct UPMC subsidiary entities support the City’s contentions. Sitting right beside that Form 990 on UPMC’s website is the IRS Form 990 for UPMC’s parent holding company, which on its very first page reports correctly that this entity has “0” employees.