Posted on January 17, 2013

Pennsylvania State Senator Proposes Payroll Prep Tax for Large Nonprofits

Pennsylvania state senator Jim Ferlo (D-Highland Park) has proposed legislation that would require large nonprofits in Pittsburgh to pay a 0.4 percent payroll preparation tax, the Pittsburgh Post-Gazette reports.

The legislation, if approved, would apply only to nonprofits that have more than two hundred and fifty employees; it would also reduce from 0.55 percent to 0.50 percent the payroll preparation tax paid by Pittsburgh-based corporations. If passed, the legislation would generate up to $10 million in additional revenue annually for the city.

Although the tax would only apply to large nonprofits such as universities and medical centers, which employ more than half the nonprofit workforce in Pittsburgh, some nonprofit leaders feel that asking any tax-exempt group to pay such a tax is "counter-productive," especially at a time of potentially significant government cuts for frontline service providers and higher education.

"I think one of the things that has gotten lost is the reason they are tax-exempt in the first place," Ken Service, executive director of the Pittsburgh Council on Higher Education, told the Post-Gazette. "That is because they provide a service that is too expensive for government to provide on its own."