Property tax debate: What is a charity?

Property tax debate: What is a charity?

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Over the past two years, the Michigan Nonprofit Association has heard from many of its members that their tax-exempt status has been challenged, said President and CEO Donna Murray-Brown.

As municipalities face increasing need to identify new sources of revenue, "it's calling into question the value nonprofits bring," she said.

Nonprofits granted 501(c)(3) status under the Internal Revenue code are considered charitable because they are providing broad community benefit. They receive a tax benefit, but they give up profit, privacy and any involvement in partisan politics in exchange. They include homeless shelters, child development centers and assisted living facilities, Murray-Brown said.

"They are doing charitable work that decreases the burden on government and deserve to be exempt from property taxes."


Michigan's townships and cities aren't unique in looking to nonprofits to pay up, according to the Washington, D.C.-based National Council of Nonprofits.

Local communities, especially in the northeastern U.S. in states including Pennsylvania, Rhode Island and Massachusetts, are bullying nonprofits into being "good corporate citizens" by demanding "voluntary"payments in lieu of taxes, called PILOTs, said David Thompson, vice president of public policy.

Or, municipalities in states such as Minnesota are getting around the tax-exempt issue by charging or attempting to charge fees for things like public street lighting in front of their property.

Cities in Michigan or any other state do not have the power to tax the property of charitable nonprofits used for their charitable purpose, Thompson said.

"The assessors are saying the property is not being used by charities for its charitable purpose. They're not repealing the state law; they're getting around it.

"Assessors are applying their own interpretation of the law ... inconsistently (and) creatively," he said. 

Source Name: 
Crain's Detroit Business

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