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Nonprofits face government fees, taxes

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Taxing nonprofits

Taxing nonprofits

Local governments have imposed taxes and fees on a big share of nonprofits in recent years without attracting a lot of attention, with increases now in the works that could hurt nonprofits and local governments alike, a new survey says.

“By increasing the taxes and other burdens they impose on nonprofits, state and local governments are weakening the delivery systems for their own programs and increasing the costs they will have to cover to secure nonprofit help,” says Taxing the Tax-Exempt Sector – A Growing Danger for Nonprofit Organizations, the survey by the Johns Hopkins Listening Post Project.

Among 358 nonprofits responding to the survey, 63 percent are paying some type of taxes or fees, or making alternate voluntary payments, such as payments in lieu of taxes, to local governments.

Sizeable numbers of nonprofits face growing fiscal pressures from state and local governments, with 14 percent of all nonprofits responding to the survey saying they know about actual state and local plans to impose new taxes or fees on nonprofits, and 43 percent indicating concern their state or local government will adopt new fees or taxes targeting nonprofits during the next year.

Those fees and taxes often are quite sizable, the survey says.

The median amount of payments in lieu of taxes paid by the nine percent of respondents making those payments totaled $30,000 in 2009, for example, with the average payments totaling $422,095, reflecting the that fact that some big nonprofits paid significantly more.

Overwhelming majorities of respondents say taxing or imposing fees on nonprofits would have “severe, detrimental effects on nonprofit programs and services,” the survey says.

Eight-eight percent of respondents, for example, indicated that proposals designed to boost government revenues from nonprofits in the face of budget crunches for state and local government will result in nonprofits having to cut critical programs and services.

Eighty-nine percent disagreed such proposals are needed, and 90 percent indicated those proposals “reflect policymakers’ lack of understanding about the nonprofit sector,” the survey says.

Despite their concerns, however, “few respondents indicated that they have taken action to discourage local or state officials from adopting such measures,” the survey says.

“It seems clear that nonprofits have not been sufficiently aware of how widespread the challenge posed by taxes and fees on nonprofits has already become and have therefore not effectively mobilized to resist it,” the survey says.

Nonprofits, it says, are “major employers in their communities,” generating payrolls that “translate into income and sales tax revenues for states and local governments.”

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