- Associated Press - Thursday, April 17, 2014

PITTSBURGH (AP) - The city should send tax bills to subsidiaries of the University of Pittsburgh Medical Center if officials really believe the hospital network shouldn’t be a tax-exempt nonprofit, an attorney is arguing.

That challenge was aired at an Allegheny County court hearing Wednesday about a lawsuit filed by the city, which contends the hospital network behaves more like a business than a nonprofit and should therefore pay city taxes on its properties and payrolls.

But UPMC attorney William Pietrogallo, who has argued the hospital network itself doesn’t have any employees, said the city should focus on whether to tax subsidiaries.

Paul Wood, who works for UPMC’s flagship hospital and serves as a spokesman for the network, said it has 23 subsidiaries that are tax-exempt and 21 that pay taxes.

Pietrogallo argued that, procedurally, the city treasurer should issue the tax bills, which UPMC or its subsidiaries could then appeal. Only then should the issue be decided in court, Pietrogallo argued.

“In this country, we have corporate separateness,” Pietrogallo said. “If the city feels that those separate entities should be paying taxes, they can challenge them individually.”

But attorneys for the city argue it was proper to sue over UPMC’s tax-exempt status even before trying to collect taxes. The city attorneys also contend UPMC’s claim that the $10 billion hospital system has no employees is fiction, noting that its top officials, including CEO Jeffrey Romoff, work for the umbrella organization, UPMC.

UPMC clearly has some taxable entities, and possibly all of them,” said one city attorney, E.J. Strassburger.

“We would like to let a court decide this issue before we slap you with a bill,” said Ronald Barber, another city attorney.

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