Monday, June 29, 2009

Exempt Charities or . . . vacation spots?

The line between an exempt charity and a commercial business has grown ever murkier in our society.  Nonprofit hospitals offer services and operate much like for-profit counterparts, down to using debt collection agencies for past due bills.  Universities raise tuition, build hotels and "research parks," and race to form research partnerships with for-profit entities while shoveling billions into endowments.  But a recent trio of state exemption cases may best describe the tension between what is a charity and what is a commercial business.  In McDuffie County, Georgia, the local property tax assessors are challenging exemption for Fountain Campground, which claims exemption for some 70 acres of land as a site of religious worship - except that the land appears to be fenced, with posted no-tresspassing signs, and is regularly used as a hunt club.  In the Davenport, Iowa, area, local bars and music clubs are claiming unfair competition from River Music Experience, an exempt charity which offers live music acts in its Redstone Room performing venue.  And in Cape May, New Jersey, an order of nuns is seeking tax exemption for property they claim is a religious retreat: three buildings with 160 rooms overlooking the Atlantic Ocean.  Local officials opined that "some of the retreats sound a lot like vacations."


So when, exactly, is an organization an exempt charity or a hunt club, or a bar with live entertainment, or an ocean vacation spot? If the legendary Blue Note in New York City decided to convert to nonprofit status and offer jazz appreciation classes, would it be a tax-exempt charity?  If Tesla Motors was formed by environmental activists as a nonprofit dedicated to commercializing an all-electric sports car in order to save the environment, would it be a charity?

Food for thought . . . 

JDC

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Comments

Comments like these make for good political hay, but unnecessarily hurt nonprofits in the arena of government regulation and exemption. As one who has been through an extended battle (successfully) in the area of property taxes in a scenario where the media was calling a museum a "theme park", I know all too well what these kinds of comments can do. I would hope the professors on this blog would take a more sophisticated approach. Help people understand that there are, indeed, legitimate differences. A retreat may very well be a lot like a vacation, but if it helps rehabilitate a troubled minister or a an addicted teenager, it has a broader purpose. You want to know the differences between a nice outdoor museum and a theme park? I could give you many. But saying something like "Where is the line between the local zoo and the animal-oriented theme park down the road" without any attempt to offer an intelligent answer is not, in any way, helpful to the nonprofit community.

Posted by: Mike Batts, CPA | Jun 30, 2009 3:30:19 AM

"blockquote>But saying something like "Where is the line between the local zoo and the animal-oriented theme park down the road" without any attempt to offer an intelligent answer is not, in any way, helpful to the nonprofit community."

You've got it exactly backwards: the point is to help the public by way of nonprofits, and not to help nonprofits for their own sake.

Posted by: jpe | Jun 30, 2009 1:12:41 PM

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