View
122
Download
2
Category
Tags:
Preview:
DESCRIPTION
Citation preview
Tax Exemptions of Charities Face New Challenges
By STEPHANIE STROM
The New York TimesMay 26, 2008
Peter ZehrenMarch 23, 2013
What Constitutes a Charity?
Rainbow Child Care Ruling
Pay property taxes…gave nothing away
Same price per child Regardless of ability to pay
Regardless of government support
95% income from fee for-services (families, county and tribal government)
What ramifications for other nonprofits?
Minnesota State Supreme Court
Questioning Tax-Exempt Status
What constitutes a “charity?”
Run more like a business Charging fees for services
Selling products
Investment/endowment income
Does it give anything away?
Costs local government $8-13 billion
Are Nonprofits Tax Evaders?
“Privileged” Status for Whom? Congress exploring endowment payouts,
MA exploring imposing a 2.5% assessment
How different are hospitals and universities from for profits? (tax-paying competitors)
Accumulating of wealth when a “charity should be giving it away? (% not shown)
Senate Finance Committee asks six evangelical ministries to justify status
What constitutes a charity?
“From soup kitchens, daycare centers, environmental, advocacy, and civil rights groups; to hospitals, educational institutions, theatres, and faith based organizations,
charitable organizations exist to serve and promote the common good.”
Audrey R. AlvaradoED of National Center for Charitable Statistics
What does “tax-exempt” mean?
Provide a public service Substantially reduce government burdens Supposed to “give things away for free”…
Tuition assistance Sliding scale pay
for services
Earned Income does not comprise majority of revenue
Tax Exemption AuthorityState Exemptions– Property Taxes
Federal Exemptions – Income Taxes
The property exemption challenge.
“Local governments are finding their property-tax base shrinking (due to electronic commerce and the digital delivery of information) and large, revenue-generating nonprofits like hospitals and universities can't hide.”
Evelyn BrodyProfessor Chicago-Kent College of Law
A. Charitable Objective: charity primary, if not sole, object.
B. Performance of its Charitable Objective: activities further its charitable objective.
C. Gift or Giving: focus is on performance involving a gift or giving.
Ruling:Hazelden “was founded to provide addicted professionals a high quality, effective recovery experience addressing their unique needs.”
Hazelden Springbrookproperty tax denied
Oregon Tax Court: May 2004
North Star Research Institute vs. County of Hennepin (1975)
1. Seeks to help others without immediate expectation of material reward.
2. Is supported partly or entirely by donations and gifts.
3. Requires recipients of the charity to pay for the aid, in whole or in part.
4. Earns a profit from the income from gifts, donations, or fees.
5. Restricts who benefits from the charity.6. Makes dividends or assets available to private
interests if the organization dissolves.
Minnesota State Supreme Court
Criteria defining a charity
Tax assessor Thomas May Under the Rainbow ruling didn’t change
anything
Mall of America seeks exemption arguing it “aids the state economy”
Hard to define what constitutes a charity, many doing samethings for-profits do
Ruling could impact 3-500 nonprofitsJon Pratt ED MN Council of Nonprofits
1. Extent to which recipients pay for services…whether the organization gives anything away
2. Government payments are not evidence of a charity, the payments where not a gift
Two Key Elements
Russell A. AndersonMinnesota Supreme Court Chief Justice
Under the Rainbow Ruling
Nonprofit Sector Pressure (MN)
To fill services nonprofits do better than the state (Homes for mentally disabled children)
Be more like a business, find ways to fill gap between government funds and program costs
Paying property taxes could force cutting programs and services (The Courage Center)
One year ban on reversing property tax exemptions Set criteria to determine what is “purely
public charity”
Used in many statutes impacting property tax exemption
Era when many nonprofits charge for services and receive negligible donations
Minnesota Legislature
What Constitutes
a “Purely Public Charity?”
“Local government assistance is the great equalizer,” to provide communities with less ability to raise property taxes enough to adequately serve their residents.
Can’t afford to loose nonprofit services
Rep. (MN) Paul MarquartChair House property tax subcommittee
State and Federal Tax exempt challenges.
What constitutes a charity?
Who else will provide public services?
Property tax base shrinking, but is taxingnonprofits the answer?
Summary Points
Tax Exemptions of Charities Face New Challenges
By STEPHANIE STROM
The New York TimesMay 26, 2008
Peter ZehrenMarch 23, 2013
Questions?
Recommended