Will Rogers said, “The difference between death and taxes is death doesn’t get worse every time Congress meets.”
There is truth in that quote. It seems that every time we turn around, tax rates are increasing or a new tax is being proposed. At the same time it seems that we are receiving fewer services for our tax dollar. One of the most recent “new tax” proposals comes from Maine. Although currently a state discussion, it could easily gain traction and become a significant national issue.
Maine Republican legislators recently considered a proposal by Governor Paul LePage to impose property taxes on nonprofits. If passed, Maine would be the first in the nation to take such action on the state level, (Virginia allows municipalities to decide which nonprofits should be taxed. And in many states, nonprofits voluntarily pay municipalities for the services they use in exchange for their tax-exempt status). Understandably many across the nation, in particular nonprofits, are closely following the developments because they see what could come next, the national taxation of nonprofit property.
The idea of taxing nonprofits has always been thought of as something we don’t do – or even consider. Many even considered the mere mention of taxing nonprofits to be taboo. But with communities searching for new ways to raise revenue, the discussion has started and seems to be gaining some traction. Even though the Maine legislators avoided discussing the governor’s proposal, it is a discussion that will happen – whether in Maine or elsewhere.
Governor LePage’s proposal, which is still on the table, calls for nonprofits within Maine to pay property taxes to municipalities if their properties are worth more than $500,000. Affected nonprofits would pay taxes only on the property value over that threshold and would receive a 50 percent discount on the property tax rate.
I personally think that much of the discussion with taxing the property of nonprofits is aimed towards colleges and large medical facilities. These organizations often have valuable property, so in itself proposals like this seem reasonable, but we need to consider the unintended consequences to this course of action. We also need to understand that taxing the property of nonprofits will fundamentally change the way we treat – and even view – these organizations.
Although I’m not advocating for taxing nonprofits, (I’m still studying the issue), I understand the premise of Governor LePage’s proposal. However, I have concerns.
My main concern with taxing the property of nonprofits is that the benefits they offer to the community could be understated in an effort to gain support for their taxation. Of course, I’m sure that we can all name nonprofit organizations that are property rich and whose contributions do not seem to equal the resources that they use. And there are also nonprofits that do not seem to provide any benefit to the community. These are both valid observations, which is why we need to have open discussion with all parties, including nonprofit advocates, in order to develop an equitable solution. If such a proposal is to become reality, the process needs to be transparent and inclusive.
Opening the door to taxing nonprofits also means that the rates and conditions, (such as the threshold and discount), can change depending on budgetary needs. This also needs to be a major point of discussion because we do not want nonprofits to become revenue machines.
Taxing Manchester nonprofits could only be done if allowed by the state, and even though any discussions haven’t gained much traction, it is something that should be watched closely. I wonder if taxing the property of nonprofits is something that would work in New Hampshire? Would it be more of a benefit or burden? I would imagine that it could be a benefit on the revenue side but could cause a burden to some nonprofits as well as those served by them.
Before any governing body takes on such an important issue, they need to be well informed of the pros and cons as well as of any unintended consequences that could result from such action. They also need to look at the impact such as the ability of people to deduct contributions from their income taxes. In addition, we need to consider the impact to the nonprofit statuses offered by the IRS. And of course we need to consider the impact on those who are served by the nonprofits as well as the potential demand for state aid to assist some who are currently served by the affected nonprofits.
I cannot emphasize enough the importance of thoughtful discussion with input from all sides before even considering this issue. Although laws can be repealed, any damage caused to the nonprofit sector may be permanent and it could take a long time for effected individuals and organizations to recover.
We need to consider the greater good and tread lightly.
About the author: Brian Chicoine is a New Hampshire native who moved to Manchester from Raymond in 1980 at the age of 8. He attended Gossler Park Elementary, Parkside and Southside Junior High, and West High, from which he graduated in 1990. After attending Notre Dame College in Manchester, Brian completed his undergraduate degree at Rhode Island College in Providence. Brian and his wife Jackie then came to Manchester in 2004 and were involved in various outreach organizations. Their two boys were born in Manchester during this time. After his position was eliminated in 2009, Brian and his family returned to Rhode Island. They have been living in Providence since 2010. Brian and his family love Manchester and are planning on returning within the next few months. Brian is currently working at helping the city move forward by connecting with other stakeholders and becoming involved with like-minded groups. Brian is also laying the foundation for an organization that will help strengthen the city and help it move forward.
Brian holds a Bachelor’s degree from Rhode Island College and a Master of Public Administration degree from Grand Canyon University. Brian currently works at Boston Children’s Hospital. He is also founder of a Facebook Group, Manchester Forward. You can contact him at firstname.lastname@example.org.