Last updated: March 20. 2013 11:56PM - 825 Views

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HARRISBURG — The interests of nonprofit institutions and Pennsylvania’s financially struggling cities in which they often reside clashed Wednesday on the state Senate’s floor, as Democrats decried tax-exempt protections as having run out of control.

The debate coincided with Pittsburgh Mayor Luke Ravenstahl’s announcement of two actions designed to force regional health system giant UPMC to pay tens of millions of dollars annually in local property taxes and the city’s payroll tax.

The Senate’s debate and vote on a resolution to amend the state constitution were, in a sense, about two different things.

The resolution, which passed on a 30-20 vote, is designed to amend the constitution to clarify that lawmakers can decide what kinds of institutions qualify as charities immune from local taxes — a category that already includes hospitals, social service agencies, universities and houses of worship.

It was motivated by a state Supreme Court ruling last year that limited lawmakers’ power to broaden the definition of a tax-exempt charity. Instead, the Supreme Court said judges hold the constitutional responsibility to identify those boundaries and a court-devised test for a tax-exempt charity remains in force.

Ravenstahl cited the court’s ruling as his motivation, and said UPMC has failed the court’s test.

“The reality of the situation is the taxpayers … are currently subsidizing UPMC’s nonprofit status,” Ravenstahl told a news conference in Pittsburgh, and ticked off a list of foreign countries where UPMC operates.

The Republican sponsors of the Senate bill cautioned that, since the Supreme Court’s ruling, the tax-exempt statuses for Warren Hospital, the Warren County YMCA, Habitat for Humanity and other nonprofits already have been revoked.

All 27 Republicans voted “yes,” while three Democrats broke party ranks to vote with them.

But most Democrats — including those who represent Pittsburgh, Johnstown, Harrisburg and Philadelphia — insisted that a constitutional amendment should not simply resurrect the 1997 state law at issue in the state Supreme Court ruling. They complained that it allows some institutions to escape paying taxes under questionable circumstances and makes it difficult for municipalities to challenge that status.

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