Monday, May 26, 2008
Some states are starting to conclude that this unfairness is not justified. For a discussion of some recent developments, see Stephanie Strom, Exemptions for Charities Face New Challenges, NY Times, May 26, 2008. Here are some excerpt from this article:
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.
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 tax-exempt status of charities costs local governments $8 billion to $13 billion annually, according to various rough estimates. * * *
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.