« Courts - Chicago courtroom artist who covered Chicago 7 and Gacy trials writes book | Main | Law - "Technical glitch" necessitates farm bill do-over »
Monday, May 26, 2008
Law - "Exemptions for Charities Face New Challenges"
So reads the headline to this lengthy, front-page story by Stephanie Strom in today NY Times. Some quotes:
RED WING, Minn. — Authorities from the local tax assessor to members of Congress are increasingly challenging the tax-exempt status of nonprofit institutions — ranging from small group homes to wealthy universities — questioning whether they deserve special treatment.The Minnesota Supreme Court opinion, dated Dec. 6, 2007, in Under the Rainbow Child Care Center v. Goodhue County, is available here - it is cited in this article from Charity Governance Consulting LLC.One issue is the growing confusion over what constitutes a charity at a time when nonprofit groups look more like businesses, charging fees and selling products and services to raise money, and state and local governments are under financial pressure because of lower tax revenues.
And there are others: Does a nonprofit hospital give enough charity care to earn a tax exemption? Is a wealthy university providing enough financial aid?
In a ruling last December that sent tremors through the not-for-profit world, the Minnesota Supreme Court said a small nonprofit day care agency here had to pay property taxes because, in essence, it gave nothing away.
The agency, the Under the Rainbow Child Care Center, charges the same price per child regardless of whether their parents are able to pay the full amount themselves or they receive government support to cover the cost. * * *
The idea behind tax exemptions is that the organizations provide a public service or substantially reduce the burdens of government. Standards from property-tax exemptions are set by the states, while the federal exemption means charities are not taxed on their income.
Almost 88 percent of overall nonprofit revenues in 2005, the most recent year for which figures are available, came from fees for services, sales and sources other than charitable contributions, according to the National Center for Charitable Statistics. Nonprofit health care providers, day care centers and retirement homes, among others, are often difficult to distinguish from their tax-paying competitors.
“We’re all seeing the growth of revenue in this area we call earned income,” said Audrey R. Alvarado, executive director of the National Council of Nonprofit Associations, adding that the Minnesota court decision “is saying, ‘Wait a minute, charities are supposed to give things away for free.’ ”
“It goes to the core of how nonprofits are classified and defined,” she said, “and I think it is an example of the confusion in the public, and even among folks in the sector itself, about what a nonprofit is.”
Evelyn Brody, a professor at Chicago-Kent College of Law and an expert on nonprofits and property taxes, said that, in studying the issue in 2002 and revisiting it last year, she had seen an explosion of cases across the country in which charities were challenged to say why they deserve their property tax exemptions.
See this list of ILB entries on the charitable exemption and the Indiana property tax.
Posted by Marcia Oddi on May 26, 2008 11:07 AM
Posted to General Law Related