Will Philadelphia squeeze PILOTS out of more nonprofits?

Philadelphia hospitals, universities and other nonprofits are undeniably good for the city. They provide jobs and crucial services. But there’s a catch: Nonprofits pay little or nothing in property taxes.

More than five months ago, a Pennsylvania Supreme Court decision appeared to give Philadelphia leverage to demand money from nonprofit organizations that are exempt from property taxes.

Legal experts say the decision makes it harder for nonprofits to qualify as tax-exempt, giving cities the power to compel them to make “payments in lieu of taxes” (PILOTs). But so far, Philadelphia officials haven’t made a move.

Philadelphia Jobs with Justice, a coalition of labor and community groups, wants Mayor Michael Nutter to make nonprofits prove that they are still tax-exempt under the new ruling.

“We know we need funding,” said Gwen Snyder, executive director of Philadelphia Jobs with Justice. “We’re seeing our library hours cut. We’ve seen pools close over the summer.”  

Currently, nonprofits must apply once for each property tax exemption. But the city’s Office of Property Assessment doesn’t regularly audit all of them.

“We’re just saying, look, if you’re making profit off that property, if it’s not a truly charitable function, you really need to be giving back a little bit,” said Snyder. “Because Philadelphia’s hurting right now.”

Mayor Nutter’s spokesman Mark McDonald says the administration is still examining the case.

After the court ruling came down, a senior attorney for Philadelphia said that the city would review the legal status of nonprofits, in hopes of possibly raking in more PILOTs. But the city hasn’t entered into any new PILOT agreements since.

Nicholas Cafardi, a charity-law expert at Duquesne University’s Law School, says it’s a good idea to require nonprofits to routinely prove that they’re tax-exempt.

“Tax exemption is a privilege,” he said. “It’s not a right.”

The city says audits are coming.