State and local governments, eager to close their budget gaps, are increasingly going after charities and other tax-exempt groups. Government officials are proposing new fees on nonprofits to help pay for services. They're also challenging the exemptions these groups get from sales and property taxes.
In Concord, Mass., for example, the Board of Selectmen sent a letter to the town's nonprofits earlier this year. It said that local property taxes were so high they were driving residents away. The board asked the town's private schools, hospitals, charities and churches if they could start paying their fair share.
"I guess we're just hoping that in times where people are economically really stretched, that to the extent that they're able, they can contribute," says board member Virginia McIntyre.
But the initial response was not what the board had hoped. One arts group offered to contribute $1,000 to the town, but most of the nonprofits responded — politely — that they contributed to Concord in many nonmonetary ways.
'A Slippery Slope'
Kathi Anderson is executive director of the Walden Woods Project in Concord. It preserves property including Walden Pond, made famous by Henry David Thoreau — who, she notes, went to jail rather than pay a tax he opposed.
"The land that is now protected is a wonderful resource, not only for people who live in the community, but for people who visit the community," Anderson says.
She says she feels the town's pain but that her group is hurting financially, too. She says it would be hard-pressed to come up with the $89,000 Concord says the Walden Woods Project would owe if it weren't tax-exempt. Even a "donation" to the town would send the wrong message, Anderson says.
"This is a slippery slope because if indeed a donation is made, then it implies that one supports the notion of having charities essentially pay taxes," Anderson says.
And that would fly in the face of the long-time relationship between government and charity — the idea that nonprofits fill a valuable community role and should be exempt from tax.
But increasingly that relationship is being challenged. Boston wants its universities, hospitals and nonprofits to pay 25 percent of what they'd owe if they weren't tax-exempt. Philadelphia is talking to its universities about similar payments. Kansas and Hawaii considered repealing tax exemptions for nonprofits as part of their budget debates. And Minneapolis has imposed a "streetlight fee" on nonprofits to help pay for electricity and bulbs.
Tim Delaney, president of the National Council of Nonprofits, says these moves couldn't come at a worse time.
"Corporate donations are down significantly. Individual giving is down. Foundation giving is down substantially," even though demand for charitable services is up, he says. Delaney says adding more costs will only hurt taxpayers in the long run because there's high demand for the types of services — such as health care and food pantries — that many nonprofits provide.
"When we can't [provide them], then there's greater needs in the community. And when the needs get so severe, then we're going to find people demanding that government step in. That is going to cost a whole lot more," he says.
But Frank Commisso, a council member in Albany, N.Y., says cities like his have little choice. More than half of Albany's property is tax-exempt because the city is home to so many state offices, hospitals and universities. But he says these institutions still rely on city services.
"We wouldn't need to have a police and fire department of the size we do if these institutions were not here," says Commisso. "They cannot have an expectation that we can maintain police and fire at their current levels if we don't get some sort of help."
So Albany has set up a commission to find ways that tax-exempt groups can contribute more to help the city with its estimated $15 million deficit. Commisso understands that many small charities can't, but he thinks larger institutions — especially those with moneymaking activities, such as parking garages — can.
Doug Sauer, head of the New York Council of Nonprofits, agrees that well-off groups should chip in more if they can. "All it takes is public opinion to switch on this," he says. "So we want to protect the integrity of the exemption, but we also want people to be accountable for the privilege of being able to have exempt property."
Sauer notes that people are angry when they hear about some nonprofit CEOs getting huge salaries. He doesn't want that to tarnish the image of the vast majority of nonprofits, which he says do important work even as they struggle to make ends meet.