Should nonprofits pay taxes?

The town government in Concord, Mass., felt that local taxes were so high, they were driving residents away. So the town’s board sent a letter to the local nonprofits (private schools, hospitals, charities and churches) asking them if they could start paying their fair share, according to a report by Pam Fessler on NPR’s All Things Considered.
Much to my shock, one arts group offered $1,000. The rest of the groups politely declined.
According to the NPR story, state and local governments, eager to close their budget gaps, are increasingly going after charities and other tax-exempt groups.
Besides the Concord example, it points to Boston, which wants its universities, hospitals and nonprofits to pay 25 percent of what they would owe if they weren’t tax-exempt. However, from what I understand from an article in the Boston Globe, that request wasn’t made to put the squeeze on nonprofits.
Here’s the situation, according to the Boston Globe : Nonprofits in Boston already pay cash and provide services in lieu of property taxes. Some pay millions; others pay significantly less. Because each agreement is negotiated individually, payments vary widely and the ill-defined system has long been the target of criticism. A mayoral task force was set up to examine the system. It is suggesting a new formula under which nonprofits would eventually increase contributions to 25 percent of what they would owe in taxes if they were not exempt.
I think the context of how this change came about is important. It’s not a desperate attempt of a government to balance its budget on the backs of nonprofits, but an attempt to make the system that is already in place more equitable for everyone, including the nonprofits who may have been paying more than their fair share.
At the same time, it should be noted that the change would more than triple the current amounts paid by some of the city’s biggest nonprofit landowners. It’s easy to see why they would be concerned.
Philadelphia is looking at a similar situation, trying to make its system of payments in lieu of taxes more equitable, according to a blog post on philly.com, a site that is a partnership between the Daily News and WHYY.
While Kansas and Hawaii proposed repealing the tax-exempt status of nonprofits in budget negotiations, I couldn’t find any news reports that the proposals passed.
Minneapolis has imposed a “streetlight fee” on nonprofits to help pay for electricity and bulbs, and that tactic of imposing fees is perhaps a more real threat to nonprofits than the prospect of having to pay property taxes. As Rick Cohen points out in a blog post on blueavocado.org, it’s easier to impose fees than to repeal property tax exemptions.
“Taking off from charging nonprofits for streetlights, other localities are starting to charge nonprofits for police and fire services and even fire hydrants,” Cohen said.
Is your nonprofit feeling an extra pinch of new government fees? What do you think of these tactics?
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