The Sector Faces Redefinition
A New York Times report earlier this week about the fiscal implications of a Minnesota court decision instructing a nonprofit daycare to pay property taxes created quite a buzz throughout the sector, but reporter Stephanie Strom buried the lede, as they say in the newspaper biz.
It’s easy to see why nonprofits are worried that they could be on the hook for taxes, but what caught my eye was a paragraph stashed way down low in the story:
This month, the Minnesota Legislature passed a tax bill that establishes a one-year ban on reversing property tax exemptions held by existing nonprofits.
The bill requires legislators to set criteria to define what is “purely public charity,” a phrase included in many state statutes on charitable property tax exemption, in an era of nonprofit groups that charge for their services and receive only negligible amounts of donations.
Don’t be surprised if other states follow Minnesota’s lead. There are already several instances of state and municipal governments sniffing around the whole tax-exempt issue. Moreover, with disgruntled alumni of deep-pocketed universities continuing to grumble about massive endowments that don’t do a thing for educational missions and with populist legislators targeting health-care systems that pay their executives salaries well in line with those seen at for-profit ventures, it seems well past time to update the guidelines governing what, exactly, a nonprofit is. It will be a painful period for the sector. But, if done correctly, it should help protect the organizations that truly need the tax shelter while compelling the nonprofits-in-name-only to pony up. | 501(c)
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