Property Tax on Non-Profits? Or No Property Taxes at All?

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Discussion about changing California’s property tax system
is never far from the surface when talking taxes in this state. But, in other
parts of the country there are some moves to change the traditional property
tax system that may be surprising even to California’s would-be property tax
reformers. In Boston, Massachusetts the city is asking for a set amount of
volunteer property taxes from non-profit landholders such as universities and
hospitals. And, in North Dakota, initiative signatures have been filed to
abolish the property tax all together.

Boston is rich in non-profit organizations that, along with
federal and state government facilities, occupy 52-percent of the land in the
city.  To deal with its budget shortfall,
the city sent a letter to 40 top non-profit organizations asking them to commit
to paying property taxes for the next five years equivalent to 25-percent of
what they would owe if their property were not tax exempt.

According
to the Boston Globe
, the 25-percent figure was arrived at because that is
roughly the portion of the city budget that pays for basic city services like
public safety, emergency medical treatment and snow removal.

Boston currently has a volunteer property tax program for
non-profits but the take is not enough to get the city out of its budget woes.
The volunteer payments added up to $15 million last year, a third of what it
would be under the city’s 25-percent plan and far short of the $404 million the
non-profit properties would pay if they were not tax exempt.

The
volunteer nature of the proposal has been met with some resistance with a number
of non-profits balking at the proposal, uncertain what other non-profits would
volunteer to pay.

Right
now there is quite a disparity in the volunteer payments of the tax-exempt
institutions. Last year, Boston University made $5.1 million in voluntary
payments while Boston College paid $298,000 and Northeastern University paid
about $31,000.

No one
who follows tax debates would be surprised if resistance from the taxpayers might
cause the city to change the volunteer
request to a demand to secure more
revenue.

California’s
constitution names a number of categories of properties that are tax exempt.
Under Article 13, Section 3 of the constitution, tax exemptions are granted to
libraries and museums, non-profits institutions of higher education, facilities
used for religious worship and cemeteries.

With
local governments complaining about lack of funds and the governor wanting to
shift responsibility of certain programs to local government, how long before
someone decides to suggest something along the lines of the Boston tax plan?

From the
other side of the ideological divide comes the proposal to abolish the property
tax. North Dakota citizens have filed what they say are enough petition
signatures to force a ballot vote on the idea. The measure would allow
substitute taxes; such an expansion of sales and/or income taxes, to make up
for tax loses.

The arguments
made by the supporters of the initiative are familiar ones. Tax on the land
value does not represent the owner’s ability to pay. Switching to sales or
income taxes would have more of an ability to pay connection between the
taxpayer and his or her tax obligation.

Unlike
most states, North Dakota is sitting on a tax surplus. That may play into the
ballot fight if the measure makes the ballot. Remember, there was a big state
tax surplus in the state treasury when Californians supported the Prop 13 property
tax revolt three decades ago.

Comment on this article


Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.