UPMC: Court is not the place to settle tax-exemption issue


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An attorney for UPMC suggested Wednesday that if the city of Pittsburgh wants to challenge the medical conglomerate’s tax-exempt status, it first should send them a bill.

William Pietragallo, who is representing UPMC in the city’s lawsuit, said the court is not the place to settle the issue of whether it should pay payroll taxes. That’s a matter for the city treasurer, who’s empowered to make that determination and then compel it to pay the taxes, he said.

“They have a procedure where the city treasurer could act, could look into this,” he said in a hearing before Common Pleas Judge R. Stanton Wettick.

The hearing marked another tussle over procedural issues in the slow-moving case, which was initiated more than a year ago when the city sued UPMC to strip it of its tax-exempt status, claiming it did not meet the criteria of a public charity. Since then, the case has bounced between Allegheny County and federal court, finally landing back with Judge Wettick late last year.

Ronald Barber, an attorney for the city, countered that the city was well within its rights to sue UPMC even if it had not attempted to collect taxes from them.

“We would like to let a court decide this issue before we slap you with a bill,” he said.

The judge has not ruled on another critical issue: whether or not UPMC has employees. Last fall, Mr. Pietragallo argued it had none and that the doctors, nurses and administrators worked for subsidiaries. Without employees, Mr. Pietragallo said, UPMC could not be compelled to pay payroll taxes.

If the judge agrees with his interpretation, the city would have to challenge the tax-exempt status of individual subsidiaries, which attorneys Wednesday said they are prepared to do. UPMC claims it has 44 subsidiaries, 23 of which are tax-exempt and 21 of which pay taxes.

Mr. Pietragallo said Wednesday the court should respect that “they are separate business entities.”

Mr. Barber, however, countered that state law holds the parent company responsible for its subsidiaries to pay taxes. Attorney E.J. Strassburger added after the hearing that IRS forms indicate the company’s higher echelon of administrators — such as CEO Jeffrey Romoff — are paid by UPMC, not by a subsidiary.

Judge Wettick called for both sides to re-file briefs on both matters.


Moriah Balingit: mbalingit@post-gazette.com, 412-263-2533 or on Twitter @MoriahBee. First Published April 16, 2014 2:40 PM

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