Two readers posted some interesting questions in response to the last post, Podcast--Q&A: Mayor's UPMC Apology. I decided to try combining them here for some conversation.
edheath said...
Ok, now I am confused in a different way, maybe a more coherent way. If UPMC gets a pass from the school board on future, hypothetical taxes on non-profits, and gets a pass from city council on future, hypothetical taxes on non-profits, does that mean UPMC's donation to the Pittsburgh Promise does double duty? In other words, would UPMC be getting two dollars of tax credit for each dollar of donation, one dollar from the school board and one from the city?
(full disclosure, I sent this question to a reporter at one of America's great newspapers)
Ed,
Your question had occurred to me and my first thought was "no"...but then, one can never presume, so I'll try to check. If this were a deduction and not a credit, the answer would be more clear. You can imagine in your own case getting parallel deductions on, say, federal and state tax returns. A deduction would lower the figure of your taxable income, and then you'd apply the percentage tax rate for each taxing body.
Are you suggesting that if there were to be a tax credit, it should be fifty cents on the dollar for the city, and fifty cents on the dollar for the school district? Or are you suggesting instead that only the school district should give a dollar-for-dollar tax credit, and the city should provide none?
char said...
Bob,
I’m confused. Maybe you can help me out.
- Have you actually read the “side deal”, the proposed legislation or both?
- What exactly is UPMC asking for? A tax credit equal to whatever they put into The Promise or a carte blanche exemption from any/all city taxes which might come their way should Act 55 be changed?
- What about Peduto’s point that council cannot legally exempt UPMC from taxes because of charitable giving without offering that same exemption to every other “non-profit”, for-profit or individual tax payer?
Thanks in advance if you know these things.
Char,
-I have not gotten to read the side agreement yet. I've been asking UPMC for it daily, since Tuesday. This afternoon I got an e-mail back from their public relations spokesman saying that he hadn't received it yet himself. The proposed legislation is
here, but Mr. Cindrich himself says that he believes City Council will get to see the agreement before voting on it.
-Yes, one way or another, they are seeking a dollar-for-dollar credit for money to be donated to the Pittsburgh Promise, in the event that UPMC is ever subject to city or school district taxation. UPMC and the administration don't like it when you use the word "credit"-- but as the mayor himself noted, that's the language currently in his legislation. The word "credit" also appears in the Pittsburgh Public Service Fund agreement that the mayor cites as a precedent for this proposal.
Advocates do acknowledge, when asked, this difference: what they describe as a PILOT (Payment in Lieu of Taxes) in the Pittsburgh Public Service Fund was money that went to the city. Money pledged to the Pittsburgh Promise would go to a newly created non-profit fund, not the city government, and not the school district. Those advocates suggest that--in the big picture--the community benefits, so the effect is the same.
Do they "want a carte blanche exemption from any/all city taxes which might come their way"? Not exactly. They want:
1) a dollar for dollar "credit" equal to what they put into the Promise, should they be taxed, and
2) assurance that the city and school district will not challenge their tax exempt status for ten years. That's because there's a possible scenario in which the state could give them taxing power over any non-profit which failed to meet standards X, Y, or Z. Proving the X, Y, and Z issues could still take a legal challenge. No legal challenge, no liability.
- As you note, critics seem to suggest that the above argument about "big picture" benefits is rhetoric which attempts to mask a violation of state law. As to whether they would have to offer the same exemption to every other non-profit, for-profit, or individual taxpayer--that raises some interesting questions. We're discussing a taxing power which the legislature hasn't granted. If the legislature granted ever the power, could it grant the tax credit or exemption too? Even if the legislature did so, could the courts overturn them?
State law says that taxes must be applied uniformly. The administration's bill proposes a tax "credit" (their word in the legislation, not mine). However, the public comments of the mayor, UPMC, and others also speak interchangeably of UPMC simply decreasing its contribution to the Pittsburgh Promise if UPMC becomes subject to a tax. I haven't heard anyone explain yet why a hypothetical choice by UPMC not to honor a promise to a private charity would legally require a vote by City Council.
.
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