Exemptions for Charities Face New Challenges

Posted by Kendall Harmon

Authorities from the local tax assessor to members of Congress are increasingly challenging the tax-exempt status of nonprofit institutions — ranging from small group homes to wealthy universities — questioning whether they deserve special treatment.

One issue is the growing confusion over what constitutes a charity at a time when nonprofit groups look more like businesses, charging fees and selling products and services to raise money, and state and local governments are under financial pressure because of lower tax revenues.

And there are others: Does a nonprofit hospital give enough charity care to earn a tax exemption? Is a wealthy university providing enough financial aid?

In a ruling last December that sent tremors through the not-for-profit world, the Minnesota Supreme Court said a small nonprofit day care agency here had to pay property taxes because, in essence, it gave nothing away.

The agency, the Under the Rainbow Child Care Center, charges the same price per child regardless of whether their parents are able to pay the full amount themselves or they receive government support to cover the cost.

“We were shocked,” said Michelle Finholdt, who founded the center in 1994 and scraped together the money to buy a building in 2002. “There are a lot of other organizations in our area that we’re similar to, and they are exempt from property taxes.”

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Filed under: * Culture-WatchLaw & Legal Issues

2 Comments
Posted May 26, 2008 at 10:19 am [Printer Friendly] [Print w/ comments]



1. TomRightmyer wrote:

The time is coming when the tax ememption enjoyed by religious organizations will also be questioned in court.  States vary about the kind of church property that they exempt. Some allow for houses of worship, others for educational buildings and churchowned housing.  The efforts made by the leadership of General Convention to secure the fiduciary interest of the Convention may well return to bite.

May 26, 1:25 pm | [comment link]
2. Br. Michael wrote:

The basuc problem is the income tax and its use to direct behavior.  The only solution is to get rid of it.

May 27, 6:32 am | [comment link]
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