Nonprofits in some communities are losing tax exemptions

January 27, 2014

Nonprofits in some communities are losing tax exemptions

As local governmental organizations look for ways to repair their budgets following the Great Recession, many are turning to the tax exemptions of nonprofit organizations. Like nonprofits, many local governments were dealt hard financial blows as state and federal funding was reduced in the last five years. They also lost sales tax revenue as businesses closed up and the economy slowed down.

As county governments and municipalities search for ways to increase revenue, nonprofit tax exemptions represent one of the few untapped resources. There has a been trend in some communities of exemptions for certain utilities and sales and property tax disappearing.

The Boulder Crest Retreat for Military and Veteran Wellness in Virginia recently received a nearly $20,000 property tax bill, since the country board has for years been denying tax breaks to nonprofits. Boston, Madison, Wisc., and Minnesota are all considering measures that would either reduce tax exemptions or add new fees, according to Governing magazine. 

"The recession hit," David L. Thompson, vice president of public policy for the National Council of Nonprofits told The Washington Post. "And all of a sudden, nonprofits that were the anchor of the community and greatly praised by policymakers – 'Come to our city. Look at the great nonprofits we have!' – started being treated as scofflaws not paying their fair share."

Nonprofits should look to experts to help reduce their own budgets
New taxes mean more overhead for struggling nonprofits that have also been fighting to improve budgetary shortfalls. According to The Post, two-thirds of nonprofits in a national survey reported some type of payment to a local government in the past two years. In some cases, governments ask for payments in lieu of taxes, charge fees or require special-use taxes.

Nonprofits can consult with specialty groups on ways to improve their financial situation by measures such as opting out of state unemployment insurance pools, bringing in outsourced help to improve fundraising and budgets and mitigating for risk. As donations fall and fees rise, nonprofits will need to work to protect their own budgets.

Content presented by First Nonprofit Companies, the leading provider of state unemployment insurance solutions for 501(c)(3) nonprofit employers.


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CCSCT was approached by First NonProfit to discuss its Unemployment Savings Program and ways the program could significantly reduce the amount of unemployment taxes we were paying. At the time, our agency was paying approximately $80,000 per year. First NonProfit conducted an analysis to determine if making the switch would be in our best interest, and it clearly was based on our circumstances. The first year on the program, CCSCT saw a 70% reduction in its unemployment costs and each year, continues to experience further reductions as a result of having minimal claims. Some additional benefits of the program including having a fixed annual cost, an interest-baring reserve account, professional unemployment claims management and representation at all unemployment hearings. This has been one of the best decisions we have made.

Community Council of South Central Texas, Inc., Seguin, TX

We first started using First Nonprofit’s Unemployment Savings Program when we were a small startup nonprofit.  We didn’t have an HR department and needed expertise in the event that an unemployment claim was made.  We knew we were eligible to be a reimbursing employer, but weren’t sure how to navigate that process.  They made it easy to set things up, plan for, and then manage claims when they came at a very reasonable cost. The amount of time and stress they’ve saved us dealing with all this has been worth way more than the cost.  We’ve now grown to a large nonprofit and do have an HR department but have no plans to stop using their services.  I highly recommend them to every nonprofit I come into contact with!


Throughout our membership in the Unemployment Savings Program, First Nonprofit understood our demands, community dynamics, and the importance of seamless services; that allowed us to serve our constituents better.

Prevent Blindness America, Chicago, IL

Because INCS advocates for the operating conditions that allow charter public schools to provide high quality public education, partnering with First Nonprofit was an easy decision. First Nonprofit’s unemployment programs provide our member schools two operating elements crucial to their ability to provide high quality public education: savings and budget certainty. Capable, committed teachers are the key to student success. By participating in the unemployment insurance savings plan, charter public schools gain peace of mind and are able to invest more money in their teachers.

Illinois Network of Charter Schools, Chicago, IL

It has been our sincere pleasure to maintain a strong, vibrant business partnership with First Nonprofit. We greatly admire their strong industry knowledge, technical expertise, constant professionalism, knowledgeable and dedicated staff. They are always extremely responsive, personable and provide us with the necessary guidance and recommendations on a numerous variety of employment scenarios.

Thresholds, Chicago, IL

NYCON members who use First Nonprofit’s programs enjoy enduring savings and improved efficiency. Our association knows that success, because from the beginning, we achieved the same great benefits. Great savings, seamless technology, and responsive service. NYCON highly recommends First Nonprofit’s remarkable unemployment solutions.

New York Council of Nonprofits, Albany, NY

Visually Impaired Preschool Services has been a client of First Non-Profit since it was first offered as a benefit of VisionServe Alliance. We completed a thorough evaluation of cash savings to our agency before taking advantage of this wonderful benefit and it has been a very wise decision. Our experience with the processes from accounting to claims have been professional, expeditious and easy.

Visually Impaired Preschool Services, Louisville, KY

Luckily for us, our interactions regarding any issues with staffing has been very minimal! I can say that all other interactions with regards to billing, 941 reporting, etc. have been extremely pleasant, accommodating and easy to work with. Kim Ghanayem is always prompt, professional and friendly. Thank you so much!

Neurologic Music Therapy Services of Arizona, Phoenix, AZ