Every state exempts some or all of the properties owned by charitable nonprofits from property taxes. However, despite a lack of legal authority to do so, some municipalities attempt to impose discriminatory taxes or fees on nonprofits, or demanding so-called “voluntary” payments in lieu of taxes (PILOTs). Different jurisdictions call the assessment different terms – taxes, fees, or PILOTs – but the goal is the same, to divert nonprofit resources away from mission and into government coffers.

Nonprofit Fees

• Delaware (2014): The city of Lewes considered a proposal to eliminate local nonprofits’ exemptions [1] from certain rental fees, including those charged for renting spaces at libraries parks, and beaches. A decision on the proposal was delayed to give the public more time to consider the issue.
• Maine (2014): Legislation was proposed that would have authorized municipalities to impose service charges [2] on tax-exempt properties owned by certain nonprofit organization.
• Minnesota (2014): Proposed legislation would have granted municipalities authority to establish street improvement districts [3] and assess "street improvement fees” for businesses, including nonprofits.  The legislation was not enacted, but a newer version will most likely exempt most property tax-exempt nonprofits.
• Illinois (2012): Chicago Mayor Rahm Emanuel received national attention for working to revoke waivers that exempted city nonprofits from paying water fees [4]. The effort was seen by some city and county officials elsewhere as a sign that nonprofit resources were becoming fair game to fill budget holes. Nonprofits, led by Donors Forum [5] and others, correctly pointed out that the amounts charged for water fees exceeded costs and were essentially a tax on tax-exempt entities. In response to pressure, the Mayor is now offering a compromise that would reinstate water fee exemptions for nonprofits with net assets of less than $1 million and phases in discounts of 60 percent for nonprofits with between $1 and $10 million in assets and 25 percent for nonprofits with between $10 and $250 million in assets. Museums would maintain a 20 percent exemption regardless of net asset level. Religious leaders in Chicago remain dissatisfied with the Mayor’s offer and are pushing for a broader reinstatement [6] of the exemptions.

Additional Resources

• "From the Fault Line on Nonprofit Property-Tax Exemptions," [7] David L. Thompson, National Council of Nonprofits Blog, February 9, 2015.
• How Will Chicago’s New Water Fees Impact Your Nonprofit [8], Donors Forum (2013)
• The Charitable Property-Tax Exemption and PILOTs [9], Urban Institute (2012)
• “Squeezed Cities Ask Nonprofits for More Money [10],” New York Times (2011)
• State Budget Crises: Ripping the Safety Net Held by Nonprofits [11], National Council of Nonprofits (2010)