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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