Monday, December 12, 2011

More Strain on Relationship Between State Governments and Nonprofits

Continued Decreases in State Funding of Social Programs

The Chronicle of Philanthropy reports that nonprofits should expect to see continued decreases in funding and additional increases in demand for services through 2013 as state governments' budgets continue to deal with decreasing revenues.  A new report, issued by Changing Our World, a philanthropy consulting firm, does a historical review of the economic crisis, calculates its negative effects on state budgets, and assesses whether charitable giving can stave off the decrease in government spending on social programs.  Because 44 states have greatly reduced their spending and used federal stimulus money to make up the difference, the loss of that stimulus money will mean further cuts in social programs during the next two fiscal years.  In order for nonprofits to meet the resulting increase in demand for such services in some of the most affected states, the report estimates that charitable giving would need to increase by 30 percent in 2011 and 60 percent in 2012, which the report refers to as “historically unprecedented.”

Taxation of Nonprofits' Real Estate

We continuously blog about state and local governments looking to nonprofits as additional revenue sources.  In another such development, The Nonprofit Quarterly reports that Pennsylvania State Senator Wayne Fontana introduced in October Senate Bill 1281, which would grant local governments the ability to tax the assessed value of nonprofits' land.  The Senator stated that specific exemptions would be enacted to protect "small" nonprofits, such as Boys and Girls Clubs and churches.  The bill as introduced specifically exempts properties owned by local, state, and federal governments, and by “police, fire, including volunteer fire and relief, public works or emergency services.”  According to the article, although there is no mention of small nonprofits, the asserted "small" nonprofit carveout is likely the proposed exemption of the first $200,000 of aggregate land value. The tax would only be imposed on the value of the underlying land, not any improvements on it.  The specified intent of the Bill reads:  “It is necessary and proper for local governments to have the option to ensure the continued viability of certain essential services it provides or causes to be provided by requiring a contribution from owners of tax-exempt properties toward the cost of the services.”  The Senator explained:  “There are nonprofit organizations out there that are sitting on high-valued, tax-free real estate. If they sold this land, these nonprofits would make a handsome profit.”


Current Affairs, State – Executive, State – Legislative | Permalink

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