We've mentioned the dilemma, for cities and states, of hosting large nonprofits: On one hand, these organizations provide services, create jobs and all sorts of good stuff; on the other hand, they use city services and occupy valuable land without paying taxes. Fiscal times being what they are, more states and localities are starting to think this trade-off is not entirely OK. The New York Times had an article about the situation this weekend:
Faced with steep declines in tax revenue, an increasing number of states and localities are considering eliminating various tax exemptions for nonprofit groups.
City and state officials say they have no choice.
“We’re having to look at the public services nonprofits use and how we can adequately cover those costs,” said Matt Greller, executive director of the Indiana Association of Cities and Towns. “We can’t give them away for free any longer.”
Nonprofits meanwhile, say these governments are trying to squeeze blood from a stone:
“Nonprofits are really hurting in this economy,” said Tim Delaney, chief executive of the National Council of Nonprofits, a trade association. “Their revenues are down, too, and demand for the services they provide, services that government expects them to provide, is way up.”
Philadelphia and several other cities solicit voluntary Payments in Lieu of Taxes (PILOTs) from tax-exempt organizations (more on this soon), but presumably when times are hard those voluntary payments don't come so easily.
However this shakes out, Pennsylvania may be in the vanguard -- Pittsburgh recently finagled larger voluntary contributions out of some big nonprofits by proposing a 1% tuition tax, and State Senator Wayne Fontana is proposing legislation that would tax newly-acquired property of large nonprofits.