Mayor Luke Ravenstahl announced on March 20 that the city would challenge the
University of Pittsburgh Medical Center’s status as an “institution of purely
public charity,” which renders much of the $10 billion global health system’s
properties tax exempt under state law.
UPMC’s tax savings as a result of
its “purely public charity” status amount to $42 million annually, according to
the Pittsburgh Post-Gazette.
move is more than a policy decision concerning what UPMC’s “fair share” of the
tax burden should be. The litigation raises an issue of constitutional
dimensions that has troubled Pennsylvania for decades, and has raised the
question: can UPMC be taxed at all?
Pennsylvania Constitution and “Institutions of Purely Public Charity”
VIII, Section 1 of the Pennsylvania Constitution, known as the “Uniformity
Clause,” typically requires that properties located within the same territorial
limits be subject to the same tax burden. The Uniformity Clause makes it
difficult for state, county, and local governments to tax properties at
different rates, or to provide special tax exemptions for some institutions and
Article VIII, Section 2 permits the General Assembly to exempt “institutions of
purely public charity” from taxation. UPMC is currently considered an
institution of purely public charity, so the properties that it uses for
charitable activities are permitted to be (and are) tax-free.
The criteria by which an
organization is judged to be a purely public charity was created by the
Pennsylvania Supreme Court in the 1985 case Hospital Utilization Project (HUP)
v. Commonwealth. In that case, the court crafted the 5-part “HUP” test,
which demands that the institution in question:
1) advance a
2) donate or
render gratuitously a substantial portion of its services,
3) benefit a
substantial and indefinite class of persons who are legitimate subjects of
4) relieve the
government of some of its burden, and
entirely free from private profit motive.
An institution must meet
all five prongs of the HUP test to qualify as a purely public charity under the
The question of whether
UPMC actually meets the HUP test, however, remains an open question.
“It depends on how the
courts decide to apply the test,” said Nicholas Cafardi, professor at Duquesne
Law School and an expert on nonprofit organizations. “If they apply the test
strictly, its a very difficult test to meet.”
This is particularly true with regard to the
fifth prong of the test, the requirement that UPMC “operate entirely free from
private profit motive.”
UPMC’s tax exempt status
has drawn heavy criticism because many of the organization’s executives receive
Cafardi said that while
“generous executive salaries” by themselves may not be evidence of a private
profit motive, “if there’s a bonus tied to performance, well, then you’re
starting to look like a private business, aren’t you?”
According to IRS filings, UPMC’s CEO Jeffrey Romoff
received almost $6 million in compensation for the calendar year of 2010,
including bonuses tied to performance.
UPMC’s closure of its struggling Braddock facility
and opening of a new facility in the wealthier Monroeville area has added fuel
to claims that the organization is profit-driven, rather than charitable, in
Nonetheless, UPMC is “politically powerful”
Cafardi explained. “Could they convince a court that hitting them with a
property tax . . . would do more harm than good? That’s not the same thing as
applying the test as written. That’s just saying . . . you’re going to do this
to the area, and you’re not going to do good.”
UPMC has over 55,000 employees, and is western
Pennsylvania’s largest healthcare system and employer.
Cafardi suggested that the court may be swayed to
“adapt legal standards” for public policy reasons, and that perhaps this was
“an area where policy is a perfect reason for applying standards less than
A Push Toward the Bargaining Table
Cafardi said that it is possible the litigation is
intended to extract an agreement from UPMC to voluntarily pay a portion of what
it would otherwise owe in property taxes if the organization lost the case.
“Would this be the first time a lawsuit was filed
in order to get big parties to talk to each other?” said Cafardi.
UPMC has similar PILOT (payment in lieu of taxes)
agreements with Erie county and South Fayette township.
“If they can do that in Erie and they can do that
in Fayette, why can’t they do that in Allegheny County?” said Cafardi.
Amending the Pennsylvania Constitution
The General Assembly has
not been content to leave the issue to the courts.
Legislation known as
Senate Bill 4, which was recently approved by the Senate and sent to the House
for consideration, would amend the Pennsylvania Constitution to give the
legislature the exclusive power to determine what constitutes a purely public
constitution may only be amended after approval by the General Assembly in two
consecutive sessions and a vote by the electorate in a referendum.
In 1997, the General
Assembly attempted to wrest control over the definition of “purely public
charity” from the state’s highest court by passing Act 55. The legislation
provided guidance on the HUP test’s five prongs, and deliberately weakened the
test to make it easier for organizations to meet the definition of a purely
public charity. However, because it is the job of the judiciary (not the
General Assembly) to interpret the constitution, and because the HUP test is an
interpretation of the state constitution’s provision on purely public
charities, a narrow majority on the high court ruled that the legislation could
not weaken or otherwise redefine the test.
Amending the Pennsylvania
Constitution through Senate Bill 4 would surmount the obstacle presented by the
separation of powers. Should voters approve the measure, the criteria needed to
reach tax-exempt status would rest squarely with the General Assembly. The
resulting definition would likely be less stringent than the current HUP test,
and could potentially shield organizations like UPMC from litigtion of the sort
it faces now.
We currently reside in a technologically
rich era, and our personal information is constantly under attack, or available
to attack, by hackers. Luckily, the
United States legislature enacted the Computer Fraud and Abuse Act (CFAA) in
1984, and it has been heavily critiqued ever since. It goes without question that technology has significantly
changed since 1984, and for that reason judges and United States citizens are calling for reform of the
29-year-old law. Additionally, every state legislature has enacted a statute similar to the CFAA
(Pennsylvania’s can be found at 18 Pa. Consol. Stat. Ann. § 7611 (West 2012)).
CFAA can be found at 18 U.S.C.A. § 1030 (West 2012), and it specifically states
that it is illegal to “intentionally access a computer without authorization or
exceed authorized access.” In recent
months, there has been public outcry over the CFAA, and, most notably, because
the United States government has used the CFAA to indict a few well respected
members of the hacker community.
recently, Andrew Auernheimer, commonly known in the hacker community as “Weev,”
was sentenced to 41 months in prison for violating the CFAA. Specifically, Auernheimer hacked into
AT&T’s servers and obtained the email addresses of over 114,000 iPad users.
By doing this, Auernheimer was able to
obtain the email addresses of New York City Mayor Michael Bloomberg, New York
Times CEO Janet Robinson, ABC’s Diane Sawyer, and former White House Chief of
Staff Rahm Emmanuel.
considers himself a “gray hat” in the hacking community, which means he hacks
into a company’s servers, strictly to expose the flaws in their cyber security.
When a gray hat finds a flaw in a
company’s cyber security, they will usually let the company know, and offer to
sell them the information so they can fix it.
After a company is hacked, it will usually spend at least $100,000 to
fix the breach, because companies are required to inform every customer who
could be affected, and they have to pay to resolve the breach. In fact, the largest hack in history happened
to the Sony Playstation Network, which caused Sony to shut down the network for
24 days, and pay the 77 million affected users a total of $170 million.
this was not a normal “gray hat” hack for Auernheimer. The jury did not believe Auernheimer’s
argument that he was acting as a gray hat, because, upon obtaining these email
addresses, he subsequently handed the data over to Gawker, which publicly
posted the information on its website.
a week before Auernheimer’s sentencing, federal prosecutors indicted Reuters
social media editor Matthew Keysfor
helping the world-renowned hacker group “Anonymous” attack the website of his
former employer, the Tribune Company.
Keys is facing up to 25 years in prison, as well as fines that could
biggest news story came in January when Aaron Swartz, an internet activist who advocates
for absolute freedom of information, committed suicide while he was awaiting
trial. Swartz allegedly hacked into the
Massachusetts Institute of Technology’s digital archive and stole millions of
scholarly journals that would normally require payment to access. Swartz was facing a potential prison sentence
of more than 30 years. Many devout fans
of Swartz believe that the federal prosecutor’s threats of an extreme prison
sentence are what led Swartz to commit suicide.
Keys, and Swartz were all charged under the CFAA, and many have criticized this
law for being too broad and overly vague.
Many also criticize the CFAA for imposing sentences that are entirely
too harsh for merely computer crimes.
However, many critics do not realize that Keys and Swartz were indicted
under completely separate provisions of the CFAA. Swartz was indicted for violating the
provision of the CFAA dealing with unauthorized access, and Keys was indicted for
violating the provision dealing with damage to a computer.
provision of the CFAA dealing with unauthorized access, which Auernheimer and
Swartz violated, is what has received the most criticism in recent months. It certainly seems that a law enacted in 1984
that deals with computer hacking is most likely out-of-date, and in need of
some serious change. With high profile
cases in federal courts, and the attention that this issue is getting from
mainstream media, an amendment to the CFAA within the next few years appears
It may all unravel soon for the
NCAA, the billion-dollar collegiate sports enterprise, as a class-action
lawsuit barrels down the road. O’Bannon v. NCAA could finally force
payments for the “student-athletes,” the ones that generate all derived
revenues, which are solely enjoyed by the universities and administrators.
Public support for the NCAA’s “student-athlete”
model has been waning for years, but the camel’s back looks like it’s about to
How is it justifiable that
college kids, many of whom come from impoverished backgrounds, are prevented
from making a single dime from their athletic endeavors? Worse yet, how are these
colossal universities able to sell their players’ likeness and talents through
jersey sales, memorabilia, and other licensed products?
All of this is cloaked under
the oxymoronic, PR-department created phrase “student-athlete.” This anachronistic model may have been
feasible back when profits weren’t in the hundreds of millions of dollars, but
now, everyone wants to wet their beak, and the only ones prevented from going
to the well are the kids who are actually making all of this money. Take a look
at what the average Division-1 athletic director makes. After you pick your jaw from the floor, go
ahead and glance at typical head coach salaries. So while NCAA president Mark Emmert rakes in
a cool $1.6 million this year, the athletes are given a $250 stipend. Thanks so much, NCAA bureaucrats!
Now, I’m not saying that
coaches and ADs shouldn’t make six or seven figures. After all, we’re not communists—I’m a
believer in the free-market, and I think that they should rake in whatever the
market will bear; but, the coaches and administrators, aren’t operating in a truly
free market. Hell, it isn’t even a
competitive market—it’s an artificial monopoly.
These salaries are held up at the expense of the players. If, after players are compensated for their
talents, schools still want to pony up and pay Nick Saban $5 million-plus per
year, be my guest. If Alabama believes
that that’s the fair market value and that they can still see a hefty return,
then I’m all for it. Just pay the
players what they are entitled to.
Then, there’s this ever-reliable
straw man argument: “But the players are paid with their scholarships, and
dammit, they should be grateful!” Sure,
the scholarship is definitely a benefit and obviously has some ascertainable
value—not going to argue with that—but why are athletes the only ones on campus
who are prevented from using their talents and making a buck? If, for example,
School X gives a music scholarship to Y, Y can book performances if there’s a
demand and make a profit. No need to stop this, says the NCAA; the concerns
only arise when it’s trying to protect the games in the name of amateurism, administrator short-hand for
“we’re not sharing.”
Back to the O’Bannon case. A former UCLA star is suing to collect profits
made by the NCAA and its licensed video game maker (EA Sports) for using his
name and likeness, after he had graduated.
The NCAA argues that, when players sign the 20-plus pages of mandatory
red-tape, releases, and waivers, it essentially owns an athlete-employee’s likeness for eternity. If you refuse to sign all of the forms, you
are barred from ever competing collegiately.
Not a whole lot of room for the players to negotiate. I’m no Dr. John Murray, but that sounds like
a contract of adhesion to me…unconscionable about sums up the NCAA’s stance on
compensating its athlete-employees.
If the players could somehow
organize and boycott a major championship or tournament—perhaps this March—they
could grind the NCAA to a halt. They
could force them to pony up something, anything. But, this is extraordinarily unlikely, so,
for those of us expecting justice, we’ll have to wait until it’s forced upon
Here’s to holding out hope that
U.S. District Court Judge Claudia Wilken finds in favor of the ever-uncompensated
If you don’t believe
that the athletes—the ones who make the
NCAA a billion-dollar conglomerate—are entitled to any revenues, you’re either
(1) jealous, (2) ignorant, or (3) both. There’s no wiggle-room here. Wise
up. The kids have already earned it, now
let them enjoy it.
These were the words of
several illegal Chinese immigrants on board the Golden Venture, a ship that ran
aground in New York City in 1993. The ship carried 286 desperate immigrants, many
attempting to escape China’s one-child birth control policy.
Documented in the film Golden Venture, these immigrants gave
up almost everything in the hope of working in America to send money back to
“I had no choice but to go
to America,” one immigrant said. “My wife was pregnant with our second
daughter, and they burned our house to the ground.”
As a student of immigration
law, I have seen stories most Americans wouldn’t believe. While I hope they
never experience anything like these stories, I wish they knew these tales of
horror so they could thank their lucky stars that they were born in the land of
On the ship, which was piloted
by professional smugglers called “snakeheads,” the immigrants only had enough
room to stand in. The few women aboard were raped, and many passengers were
beaten. They knew it would be a grueling trip. Each immigrant paid at least
$30,000 and spent months at sea. But what did they get in return?
Ten died in the New York
harbor. The rest were detained and given two options: stay in jail, or go back
After being fed lies that
China had improved, 99 immigrants went back, where they were detained, beaten,
forcibly sterilized, and now carry a name of disgrace. Those who stayed were
imprisoned a total of four years before being paroled by President Bill
Clinton. This didn’t give them a legal status, so they still live with the fear
of being deported.
This story is mild
compared to others I have seen. The world of immigration is full of tragedy:
wives of U.S. citizens or permanent residents are beaten and abused, children
grow up not knowing they are “illegal,” people see their families killed right
in front of their eyes. No, Americans have not seen the truly horrible.
So why do they try to come
here? To take our jobs?
Most of them work jobs
that no one else will take, work harder than anyone else, and earn much less
than anyone else.
To steal our resources?
It is difficult even for
immigrants with a legal status to
obtain government benefits: Immigrants must be a Lawful Permanent Resident (the
highest on the rung of immigration statuses, except naturalization) for at
least five years before being
eligible for these benefits, including food stamps, cash assistance and medical
To ruin our economy?
The IRS doesn’t care if
you are here legally or not—even illegal immigrants pay taxes.
No, they come here because
they have dreams. Dreams of a better life, of a safe life, a free life. They
come here to pursue the desires of their hearts because in their countries,
those desires are stamped out like the remnants of a smoldering fire.
So, to the American who
complains about work, to the one who thinks life is over at 50, to the one who sits
on the couch just waiting for life to happen to him: shame on you. This is
America, where 100-year-olds graduate college and people can have as many
children as they want. This is the country where help is available and everyone
gets a vote. This is the country where you can say anything you want to say, believe
anything you want to believe, go
anywhere you want to go, and do
anything you want to do.
This is the land of dreams. And you don’t
know how lucky you are to be here.