On January 24, 2023, Pittsburgh Mayor Ed Gainey signed an executive order directing the city’s law and finance departments to conduct a full review of all properties owned by tax-exempt organizations in an effort to determine whether Pittsburgh’s purely public charities were meeting the requirements of their tax-exempt status.
Purely public charities, as defined, must advance a charitable purpose; donate a substantial portion of their services; benefit a class of people that are legitimate subjects of charity; relieve the government of some of its burden; and operate without seeking profit.
More than one-third of all properties in Pittsburgh claim tax-exempt status. The city estimates that in 2021 alone it lost approximately $34.5 million in potential property tax revenue from tax exemptions. During the first round of reviews following Mr. Gainey’s order, Pittsburgh challenged the status of 27 properties and won 12 of those challenges, resulting in about $100,000 in new tax revenue.
The city is now challenging the 2024 tax-exempt status of 104 properties as part of its ongoing review. Sixty-one of those properties are owned by UPMC. If all the properties Pittsburgh is challenging this year were to lose their tax-exempt status and begin making tax payments, the city would collect around $6.5 million in annual revenue. Once Pittsburgh submits its challenges to the county property assessment office, organizations have an opportunity to appeal.
The properties the city is challenging this year include parcels that are owned by private corporations or entities that have lost their nonprofit status; parcels that don’t belong to purely public charities; and properties that are owned by nonprofits but are not being used for a charitable purpose. These parcels include vacant buildings, parking lots and empty lots with no immediate plans for development.
Pittsburgh has now reviewed over 60% of the city’s 940 tax-exempt properties, with hopes to finish the first full review of all properties by the end of 2025. After the initial round, Pittsburgh will continue to review tax-exempt properties on a regular basis. City officials say these challenges are only one part of a larger effort to augment Pittsburgh’s revenues.
Major nonprofit entities, including UPMC, have stated their willingness to participate in payment-in-lieu of tax agreements, or PILOT agreements. City officials have been amenable to the idea; Mr. Gainey said those conversations are ongoing.
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