Nonprofits exempt from taxes, not responsibility

The city of Pittsburgh’s new budget may include a revenue stream where non-profits and educational institutions including UPMC and Carnegie Mellon pay contributions into the city’s budget. The city does not currently collect direct tax revenues from nonprofit and educational institutions. Instead, these institutions and nonprofits make voluntary contributions to city funds.

As the Pittsburgh Post-Gazette reported in September, Mayor Bill Peduto went on the record saying that the city had a 50/50 chance of reaching a long-term deal for financial contributions to the city budget from these non-taxable organizations. This article also said that these contributions had been “erratic” over the past decade, underscoring the desire for the city to strike a consistent, long-term deal for collecting contributions from organizations.

As of last week, the Pittsburgh Business Times confirmed that the University of Pittsburgh, Carnegie Mellon University, UPMC, and Highmark are in dialogue with the city regarding the establishment of a standardized system of contributions to the budget. Carnegie Mellon and other Pittsburgh not-for-profits should make a strong effort to reach an agreement on a long-term payment deal with the city of Pittsburgh.

All four of these organizations bring in large amounts of revenue and are cornerstones of the Pittsburgh economy. The city benefits directly thanks to the employment opportunities provided by these nonprofit organizations, and from the businesses they attract to the region. However, the numerous tax exemptions are widely viewed as being undeserved, particularly in the case of UPMC, which besides being the largest employer in the state of Pennsylvania gives its CEO $6 million in salary and has 26 executives who earn more than $1 million annually.

There are valid reasons for these nonprofits to remain free of taxes. In addition to providing important services to the public, they argue that taxes could lead to them needing to lay off workers and curtail their public services. Removing nonprofit status to fill city coffers could also start a trend of the city using this tactic even on deserving nonprofits whenever a new source of revenue is needed.

Pittsburgh is a more than gracious host for Carnegie Mellon, the University of Pittsburgh, Highmark, and UPMC. So it is not only fair but in the best interest of these organizations that they establish a long-term deal through which they can financially contribute to the city, while maintaining their exemption from standard taxation. Creating a standard deal for these contributions would be a socially responsible action, benefiting the city and the communities surrounding these organizations.