Nonprofit Fees

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 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 on tax-exempt properties owned by certain nonprofit organization.
• Minnesota (2014): Proposed legislation would have granted municipalities authority to establish street improvement districts 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. 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 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 of the exemptions.

Additional Resources

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