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Legislation Endangers Nonprofit Property Tax Exemptions

by Jennifer Gray

Much of last week’s blog is still current.  Here’s some new information:

Property Tax Exemption

On Wednesday, the Taxation Committee will hold a public hearing on LDs 1121, 1076 and 727 at 1 p.m. The work sessions are scheduled for Thursday, April 20 at 1 p.m.

  • LD 1121 (MANP opposes) has the potential to be very harmful to the nonprofit community.  It would amend the property tax exemption provided to benevolent and charitable incorporated institutions and to scientific and literary institutions to specify that the exemption does not apply to property that is used incidentally in the provision of goods, services or materials in exchange for any type of consideration.
  • The origin of this bill appears to come in response to court decisions that hold that nonprofits may continue to have their property tax exempt “if its use for non-exempt purposes is sufficiently ‘incidental’ to the organization’s tax-exempt purposes.”  This is counter to common assertion of municipalities that the use of the property must be for exclusively tax-exempt purposes.
  • The bill targets, among others, organizations that are being creative in finding opportunities to generate revenue to support their mission and being good community partners by sharing their available space. For example, some organizations rent space to local schools for events such as graduation or sporting events and others rent space to organizations that need meeting space. If this bill passes, they would be penalized by losing their property tax exemption.
  • LD 1121 raises many questions:
    • What activities would be included?
    • What if there’s a small gift shop?
    • What if there are food and beverage items for sale?
    • What if the organization rents space to an organization with a similar purpose?
    • What if the organization simply charge a fee that is equivalent to the cost to the organization for the rental?
  • ACTION:  Does LD 1121 potentially impact your organization?  If so, contact me at jgray@nonprofitmaine.org and let me know.  Also, contact members of the Taxation Committee.  They need to hear that this is a bad idea.
  • LD 727 (MANP opposes): This bill addresses the effect of the Maine Supreme Judicial Court decision in Francis Small Heritage Trust, Inc. v. Town of Limington et al., 2014 ME 102, by specifying that holding land primarily for conservation or public access purposes is not a benevolent or charitable purpose, which is a condition necessary to obtaining an exemption from property tax. The change applies to property tax years beginning on or after April 1, 2018.
  • LD 1076 (MANP opposes): This bill requires that if a Land for Maine’s Future acquisition removes a taxable property from the tax roll of a municipality or the unorganized territory on or after April 1, 2018, the State annually must reimburse the municipality or unorganized territory in an amount equal to the tax the municipality or unorganized territory would have received for that property.

Additional Activity This Week

The Health and Human Services Committee is holding a work session Wednesday at 1 on LD 967: An Act To Ensure Access to Community Services for Persons with Intellectual Disabilities or Autism (MANP supports).

Johnson Amendment

From our friends at the National Council of Nonprofits: A broad, nationwide coalition of 501(c)(3) organizations, made up of charitable nonprofits, including religious institutions and foundations, delivered a clear message to Congress on April 5: maintain the current law that protects nonprofits organizations from being hounded for partisan political contributions and endorsements. The Community Letter in Support of Nonpartisanship, signed by nearly 4,500 organizations from every state and every segment of the charitable and foundation communities, makes a strong statement in support of nonpartisanship and urges those who have vowed to repeal or weaken this vital protection to leave existing law in place for nonprofit organizations and the people they serve. See News Release.

See some recent news articles:

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