For many large and small cities across the United States there’s a growing tension between stretched budgets and tax-exempt properties. The problem has existed for decades, but it’s getting more attention recently as budgets are increasingly strained and nonprofit organizations expand, taking more property off the tax rolls.

In Harrisburg, the issue is getting attention thanks to legislation intended to clarify the definition of a tax-exempt charity. If passed by the House, the issue could appear before voters later in the year for approval as a constitutional amendment.

Most cities have churches, and traditional, smaller nonprofits providing social services. County seat cities such as Butler and state capitals have more than the usual amount of government buildings, which are not on the property tax rolls, despite benefiting from services, including fire protection, provided to those buildings by the municipality.

In some larger cities, universities and big hospital complexes increase the percentage of properties exempt from property taxes. Pittsburgh is an example, with several major universities as well as UPMC’s large network of hospitals and physician practices. Highmark, the region’s dominant health insurer, is another big nonprofit that is now creating a health care system.

As corporate giants, UPMC and Highmark, look more like Fortune 500 companies than traditional nonprofit organizations. They each have thousands of employees and pay top executives multimillion-dollar salaries.

In Harrisburg, lawmakers have been advancing a bill, Senate Bill 4, which would give the Legislature the authority to define nonprofit charities. The issue arose after state courts established a five-point test for nonprofits’ tax-exempt status.

Local governments in many areas have gone to court to challenge some aspect of the tax exempt status of nonprofits.

Opponents of SB 4 worry that it will allow more organizations to take property off the tax rolls, further straining city and school budgets. Supporters of the legislation, dominated by the state’s large health care organizations, say SB 4 will provide clarity to the rules for tax exemption.

Instead of just focusing on which part of state government decides qualifications for tax-exempt status, lawmakers should rethink the yes-or-no approach when it comes to non-profits and taxes.

Instead of being either tax exempt or not, it makes sense to consider ability to pay by looking at an organization’s budget, its real estate holdings, its payroll and the salaries of top executives. The small church down the street is in a different league than the University of Pittsburgh or Highmark. The small nonprofit with three staff members and dozens of volunteers would not be in the same category as UPMC, which owns billions of dollars of real estate in and around Pittsburgh.

Shifting the power to define nonprofits to the Legislature looks like a bureaucratic issue or even evidence of a power struggle between the General Assembly and the courts. But the impact on nonprofits as well as city, county and school district budgets could be big.

The recent focus on SB 4 makes this an ideal time for lawmakers to go further — carry the discussion beyond defining the basic criteria to qualify for tax-exempt status. The Legislature should look at today’s realities, featuring some large nonprofits with billion-dollar budgets, vast real estate holdings and executives paid multimillion-dollar salaries — then create a new nonprofit category, with several levels based on budget size, that would require payments in lieu of property taxes. Those payments would still be deeply discounted from standard tax rates, but they would provide needed financial support to local municipalities and school districts.