Struggling Allegheny County nonprofits scrutinized over taxes
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Wilkinsburg has plenty of sad stories to tell. On the surface, Strength Inc. doesn't look like one of them.
Housed in a row of brightly painted offices, the organization provides drug and alcohol counseling, as well as transitional housing for adults. In 2007, then-Allegheny County Executive Dan Onorato posed for pictures with its founder, the Rev. Marcus Harvey, at the rededication of one of its many buildings, lauding the charity for its years of service.
There's a problem today, though: According to the IRS and county officials, there is serious doubt Strength Inc. is still a functioning nonprofit, or that its millions of dollars in property should be exempt from property taxes.
As a contentious property reassessment makes clear the advantages enjoyed by tax-exempt giants such as UPMC, county Executive Rich Fitzgerald has pledged a top-to-bottom review of all nonprofits, requiring them to resubmit paperwork proving they're truly a charity.
"I think everybody has got to be treated fairly," he said. "I think the taxpayers in general feel a level of frustration that some folks are not paying their fair share."
He has admitted that the investigation is overdue. A 2007 law he helped pass as a member of county council requires the county to review charities every three years, a mandate the administration never obeyed.
If it had, officials probably would have taken a closer look at outfits such as Strength Inc.
In 2010, the 18-year-old organization was de-listed as a nonprofit by the IRS for not filing tax returns. A year later, the county severed ties after granting Strength Inc. more than $400,000 for drug and alcohol treatment and housing services, citing a troubling audit.
Since then, it has racked up more than $20,000 in liens for unpaid bills and taxes. Most of its properties in Wilkinsburg are shuttered or appear rarely used, save for an apartment complex that's rented to a health care corporation for transitional housing.
Altogether, Strength owns 11 properties worth a combined $4.1 million -- or more than $200,000 a year in potential county, school district and borough tax revenue.
Strength Inc. is one of more than 500 Allegheny County organizations the IRS recently stripped of charity status for not filing tax returns. Many of the cited organizations appear to be defunct or don't own tax-exempt property in the county. Others, including VFW posts and churches, likely would still qualify for exemptions under Pennsylvania law.
But a few do own property and appear to have tax-exempt status. And officials acknowledge the county could never know: Until recently, once a nonprofit's application for tax-exempt status was accepted, it was filed away and never read again.
"You'd have to ask the people who were in charge up until now why they didn't check," county solicitor Andrew Szefi said. "For now, we are doing it, and we are moving forward."
Rev. Harvey, the CEO of Strength, knows his organization has seen better days. He's had to shutter his church, and Allegheny County, Wilkinsburg Borough and Wilkinsburg school district have filed liens against other properties for unpaid fees such as water bills and taxes on commercial buildings not considered tax exempt.
But he maintains that Strength, despite its diminished state, is still nonprofit and still in the business of supporting people getting clean from alcohol and drugs.
"We're there to help the helpless -- that's my mission," he said. "I've been in recovery almost 25 years. I've been there. You run into some problems every now and then. I've done well so far."
There certainly were better times: Between 2006 and 2008, Rev. Harvey paid himself $90,000 to $100,000 a year. At one point, Strength was awarded two federal grants totalling $600,000 for drug and alcohol treatment programs.
Now, Rev. Harvey's church at Mulberry Street and South Avenue in Wilkinsburg lies vacant and spattered with graffiti. A Duquesne Light notice taped to the front door states the power has been shut off for $5,203 in delinquent bills. The county values the property at $2.2 million.
Down the street, Strength's offices are closed, the barred door locked. Only one building shows signs of being used for group meetings, with a few dozen chairs and a sign taped to the door saying there would be no gathering that night.
Across town, no one answers the door at a rowhouse owned by Strength. A nearby vacant lot also owned by the organization shows no sign of being developed.
Strength's situation shows the larger need to review nonprofits in the county, said J.J. Abbott, spokesman for Allegheny County Controller Chelsa Wagner, who has argued for such reform in the past. Allowing tax-exempt properties to go unused violates the spirit of county's charity laws and unfairly shifts the tax burden onto other residents, he said.
Looking over Strength's statistics, Brad Korinski, Ms. Wagner's chief legal counsel, pointed out a number of trouble spots. If the church is unused, it probably should be listed as vacant and pay property tax, he said. And if Strength is getting income from renting its two buildings on South Avenue to Pyramid Healthcare, an Altoona-based private rehabilitation company, the money must be put to charitable use.
"With these sort of facts, it doesn't seem like this meets the test [as a purely public charity]," he said.
Indeed, Rev. Harvey says he is looking at becoming a for-profit company, saying the responsibilities of remaining nonprofit may be too strict.
Mr. Fitzgerald couldn't comment on Strength specifically but said smaller nonprofits would face the same scrutiny as larger entities such as UPMC and the University of Pittsburgh.
Mr. Szefi, who will help run the countywide nonprofit review, cautioned that each tax-exempt property must be considered separately. A shuttered church with an unpaid electric bill still could be tax-free legally, and without having paperwork from Strength, he's not ready to make a recommendation.
But at some point, distinctions become black and white.
"If we find properties where the owner has skipped town, it shouldn't be exempt," Mr. Szefi said.
Rev. Harvey, for one, blames the county for playing favorites among nonprofits. He says he lost his county grant because of politics and he has held together a fragile transitional housing program without county assistance.
He filed for personal bankruptcy in January. Still, he remains defiant, challenging the county's priorities in squeezing more dollars from nonprofits.
"Do they start with UPMC and go down the list, or do they start with the mom-and-pop shops?" he asked. "I don't see them going up against UPMC."
First Published February 11, 2013 12:00 am