State’s mayors will draft bill calling for tax on nonprofits
December 22-28, 2006
By Richard A. D’Errico
Parent & Child Society just paid $1.25 million to buy one of the
largest office buildings in downtown Schenectady.
In two years,
the 33,000-square foot building that houses Internet service
provider Logical Net Corp. and Social Security Administration
offices will be completely occupied by the nonprofit.
building will fall off the tax rolls.
going to pay taxes on that building,” said Jim Johans, Northeast
Parent & Child Society’s president and CEO.
a year, Johans said.
it’s wrong for nonprofits to get a free ride when it comes to
property taxes, but said it’s a tough sell to contributors that
their donations would be going to pay taxes.
“How much of
that [$64,000] should I pay?” Johans asked. “I don’t have to,
there’s nothing requiring me to pay a PILOT [payment in lieu of
taxes]. I recommend we change the law.”
Johans noted he
does pay more than $20,000 to the city in lieu of taxes anyway,
and other nonprofits should do the same.
The New York
State Conference of Mayors, which represents 575 cities and
villages, plans on making the case for a nonprofit property tax
and is drafting legislation to be ready for the 2007 term.
at coming up with some sort of legislation to address this,”
said Peter Baynes, executive director of NYCOM.
It could cost
nonprofit NYCOM $156,990 a year in city, county and school taxes
on its headquarters, which is assessed at $3 million, on
Washington Avenue in Albany.
that in the 1970s, the state Legislature passed a bill, signed
into law, that requested nonprofits to make payments to
municipalities, but there was such an outcry from nonprofits
that the law was eventually repealed.
The most recent
bill concerning nonprofits and property taxes was introduced in
2003. IN a report titled “Taxpayer Equity” by Sens. John Bonacic
(R-New Paltz) and Elizabeth Little (R-Queensbury), it was noted
that nearly one-third of the property value across the state is
exempt from taxes.
Johans said if
nonprofits pay some form of property tax, it will lower the
property taxes in New York.
every church in New York State,” he said. “Churches should be
paying property taxes as well as every nonprofit. That’s a
debate that needs to happen at the state Legislature.”
Just how much
nonprofits pay would be open to debate.
every nonprofit should pay at least 1 [percent] to 10 percent,”
he said. “I’m interested in paying my fair share. Right now, I’m
not required to pay anything. I think that’s bad policy.”
executive director of Equinox Inc., thinks forcing nonprofits to
pay taxes is a bad idea.
“This would be
a terrible burden for most nonprofits to pay,” she said. “Most
of the revenue generated for our programs goes directly to serve
people. Some money would be taken away.”
Johans has a
forum to make his voice heard. He is head of the Tech Valley
Nonprofit Business Council, which has pushed to make nonprofits
recognized as part of the region’s business community.
“Jim’s a leader
in the not-for-profit world, so his opinion is highly regarded
and respected,” said Assemblyman Paul Tonko (D-Amsterdam), whose
district includes part of Schenectady County.
convinced that if property-owning nonprofits paid some
percentage of property tax every year, New York would be more
attractive to businesses both inside and outside the state,
which would create economic opportunities and jobs and reduce
the burden of all taxpayers.
196,196 nonprofit companies in New York. According to the state
Office of Real Property Services, that translates into $2.29
billion lost in property tax revenue ($19 billion is lost if
government-owned land is included). It’s not clear how much
revenue that would mean for the state or local communities.
Officials at the state Department of Taxation and Finance said
no studies on the subject have been conducted.
Giving Back in
Mayor Brian Stratton has done some math of his own. Stratton,
who is leading a resurgence in a city hit hard by GE layoffs
over the past two decades, said about 30 percent of the property
in the city belongs to nonprofits and is tax-exempt. That’s $12
million a year nonprofits would pay if they were for-profit
properties include Proctor’s Theatre, Sunnyview, St. Clare’s and
Ellis hospitals, and Union College. Stratton estimates Union
College would pay $2 million a year if it were a for-profit
entity. The row of houses Union bough around the campus and the
decrepit Ramada Inn were all renovated and turned into
eye-appealing properties, Stratton said, but they also came off
the tax rolls.
Union and Stratton have been in discussions in the past over
payments in lieu of taxes. Stratton recommended Union pick up
the tab on a five-year lease for a first truck that services the
area where Union is located, a $130,000-a-year proposition. No
agreement has been reached.
Union argues it contributes to the region in other areas. Citing a
report by the Capital District Regional Planning Commission in
2004, Union’s economic impact exceeds $185 million a year in the
city and $211 million in the state. Union was also recognized
nationally as one of 25 colleges deemed a “best neighbor” for
its economic impact and social benefit to the community.
“We have made
it clear to the mayor that PILOT is not feasible at this time,”
said Phil Wajda, a Union College spokesman. “While we are
mindful of the financial challenges facing the city, the college
faces similar daunting financial challenges. As a
not-for-profit, we must remain true to our core mission, which
is to provide the best education possible for our students, and
more importantly, make it accessible.”
He said the
school is willing to explore ways to partner with the city that
would be “mutually beneficial.”
Union charges $45,550 a year for tuition, room and board and fees.
Philip Morris said he was once a councilman in Jamestown,
Chautauqua County, and looked at the impact of lost revenue from
tax-exempt properties. The conclusion was that most of the
properties were municipal.
Johans said he
anticipated the arguments nonprofits might make, such as that
they give back to the community in other ways, or that they are
charities and can barely make ends meet and should get a free
ride, but those arguments don’t stand up.
“I don’t think
it is a free ride,” she said. “We’re paying in different ways.”
Nonprofits Are Created Equal
Laymon, CEO and founder of Consumer Directed Choices Inc., and
Albany nonprofit that helps people with disabilities hire their
own personal assistants, said the issue of just what is a
“nonprofit” was the subject of discussion at the Nonprofit
Congress held in Washington, DC, in October. Laymon was one of
got the haves and the have-nots in the nonprofit world,” she
said. “I know of organizations that rely 100 percent on people
writing a $5 check or a $10 check.”
Tonko said he’s willing to look at the issue, and called it an
interesting concept, especially coming from a nonprofit leader.
“I would have
to withhold my support until I talked to the not-for-profit
community and see what the pragmatic and doable notions are for
such a proposal,” he said.
Johans has a
guess what nonprofits will think of the idea.
it but me,” he said. “But give us a couple years to warm up to