Maine Nonprofits Face Hefty Property Tax

In a move to cut state taxes, Maine Gov. Paul LePage has provoked the ire of a number of his state’s towns and nonprofits.

Ending state revenue sharing with municipalities is an essential component of the governor’s proposal. The revenue sharing system currently in place helps keep property taxes down across the state, enabling towns to tap into state resources to pay for vital services. In order to make up revenue lost in his budget plan, LePage hopes to implement a regressive sales tax increase and to begin charging property taxes on nonprofits that possess $500,000 or more in land holdings.

LePage’s budget plan would reduce income tax of the wealthiest citizens – slashing the rate from 7.95 percent to 5.75 percent – and terminate the estate tax. Analysts predict that the proposal will take up a lion’s share of the state legislature’s attention this session, describing the plan as a cornerstone of the governor’s agenda.

According to the Maine Municipal Association, most towns and cities would suffer from the legislation, compelling local governments to hike taxes in order to pay for services including education and snowplowing. Communities with large nonprofit institutions – from scientific labs to private colleges – could theoretically benefit from the scheme, albeit at the expense of these organizations. Rural areas with low concentrations of nonprofits would likely feel a squeeze and witness property tax increases as well as service cuts.

Maine has 86,000 individuals working for charities and nonprofits state-wide. Of these workers, 37 percent are employed by hospitals, which consist of four out of ten of the state’s largest employers. Hospitals would pay up to $20 million under the tax proposal. A number of other nonprofit institutions – including colleges, museums, summer camps, veterans’ fraternal groups, food pantries, and shelters – would be adversely affected by the property tax expansion.

In South Portland, the American Legion Post and the Girl Scouts stand to lose out due to the high value of their properties. Another nonprofit – Auburn’s Good Shepherd Food Bank – announced that the tax would force it to cut its free meal distribution by 100,000 units. Shalom House, which provides mental health services, would face a $90,000 tax bill, drastically curtailing its services.

Private colleges and schools would face large tax increases. Berwick Academy – the oldest private school in the state – maintains property valued at $14 million, meaning that the governor’s plan would compel the school to pay a six-figure tax. Berwick Academy’s small endowment falls far short of the funds necessary for this expense. The school would have to slash financial aid, reduce staff, and raise tuition in order to cope.

The property tax would not apply to religious groups or government-owned institutions. The list of potential parties affected by the tax, however, is extensive, and could hit nonprofit cemeteries – which often possess highly valued land – community theaters, and land trusts. Additionally, nonprofits that receive bequeathed property could face steep taxes, diminishing the intended value of philanthropic gifts.

The plan appears to be part of a larger trend of states tapping into nonprofits to provide for revenue shortfalls or tax cuts. The nonprofit sector is worth billions of dollars, and may seem to be a prime target for taxation. Take the current New Hampshire legislation which aims to apply the state’s Business Enterprise Tax to nonprofit institutions. This strategy poses great risks, considering that nonprofits’ tax-exempt status is one of the chief reasons why they are capable of providing essential services otherwise neglected by the private sector. With scores of nonprofits facing radical tax hikes, the availability and efficacy of their services are under threat, as well as the livelihoods of nonprofit workers.

Nonprofits and Marijuana: Lawsuit Threatens Tax-Exempt Groups

A small nonprofit is at the center of a legal battle in central Illinois concerning the contradictory relationship between the federal government and state governments that have enacted some degree of marijuana legalization.

An attorney representing Shiloh Agronomics – a private company which was denied a medical marijuana license – has asked a judge for permission to file a lawsuit against license-recipient Shelby County Community Services, an organization that assists people with issues ranging from autism to substance abuse. According to Executive Director Tom Colclasure, the medical marijuana license is to provide jobs for between 25-30 people with disabilities, as well as revenue for the nonprofit in the face of declining state government funding.

In 2013, Illinois became the 20th state to legalize medical marijuana. Several states – including Oregon, Washington, and Colorado – have legalized the recreational use of marijuana. A handful of cities and towns, such as Portland and South Portland in Maine, as well as Washington D.C., have also passed recreational cannabis laws (though the implementation of D.C.’s law was blocked by Congress).

Under federal law, marijuana is still classified as an illegal narcotic, though the Obama Administration announced that it would permit states to proceed with legalization so long as they adhere to a number of guidelines, largely designed to prevent interstate trafficking.

Shiloh Agronomics’ petition is an attempt to leverage federal law against the nonprofit. Jude Sullivan, daughter of company stake-holder James Sullivan, told the Chicago Sun Times that, “because Shelby County Community Services is a federally recognized 501(c)(3) tax-exempt entity, it is not eligible to apply for a permit to engage in an activity that violates federal law.”

The legal classification of cannabis – however slowly – is changing. As the process inches forward, various legal challenges will emerge. Perhaps this lawsuit presents an opportunity for nonprofits operating in cannabis-friendly states to iron out any issues that could bar them from fully taking advantage of local laws, and could even lead to a higher court and a federal ruling in support of equal rights for nonprofits under the law.

Considering the positive ends for which Shelby County Community Services applied for the license, as well as the de facto legalization granted by the federal government, the petition’s argument against the nonprofit is more technical than it is reflective of the moral and legal zeitgeist. The legal entitlement expressed by Shiloh Agronomics is arbitrary, and should not lead to a precedent that unnecessarily puts tax-exempt nonprofit organizations at a competitive disadvantage.

Goodell’s Big Bonus Adds Scrutiny to the NFL’s Nonprofit Status

The NFL released its 2013 tax filing on February 13, revealing a gigantic sum awarded to Roger Goodell for his work as the league’s commissioner: a whopping $35 million.

Goodell’s net earnings consisted of his annual $3.5 million salary, along with an additional $31.1 million bonus decided upon by a small coterie of NFL team owners.

The announcement comes at a sensitive time for the NFL. Amidst high-profile domestic abuse cases and the ongoing debate concerning players’ long-term health issues, the tremendous size of Goodell’s paycheck throws yet another controversial element of the league’s operations into sharp relief: the NFL’s status as a 501(c)6 tax-exempt nonprofit.

Technically a “trade organization” under its unique nonprofit status, the NFL does not pay any corporate taxes, even though its annual revenue hovers around $9.5 billion. Other sports enterprises share this unique designation, including the National Hockey League, the Professional Golfers Association Tour, and the Professional Rodeo Cowboys Association.

The NFL’s special treatment dates to 1966, when the National Football League merged with the American Football League. Congress passed Public Law 89-800, an arcane provision which essentially expanded antitrust exemptions to include professional football, allowing the newly established league to act as a monopoly in setting highly lucrative television fees.

The same year, NFL lobbyists successfully procured an addendum to Section 501(c)6 of 26 U.S.C. of the Internal Revenue Code that broadened the criteria for what sorts of organizations qualify for tax-exemption to specifically include professional football leagues.

The NFL’s privileged role vis-a-vis the average tax payer is further underscored by the generous amount of public funding the league’s highly profitable teams receive. According to urban planning specialist and Harvard faculty member Judith Grant Long, a number of teams – 12 in all – have turned profits on public subsidies alone, not including any of the immense profits garnered by the teams through ticket sales, concessions, or broadcasting rights.

A bipartisan group of lawmakers, however, are challenging the league’s tax-exempt status. Rep. Jason Chaffetz, representative of Utah’s 3rd district, is championing such a bill. ”To say establishments like the NFL are not for profit organizations is laughable. They are a for-profit and should be taxed as such,” the lawmaker told Buzzfeed.

Local politicians are putting the pressure on as well, as a group of legislators in New York City are pushing bills that would revoke the NFL’s nonprofit status within the state. This measure wouldn’t hold up against federal tax law, but is designed to pressure national legislators to take action.

Currently, public opinion concerning the league’s tax exemption is tepid. Indeed, only 13 percent of survey respondents could accurately identify the league as a nonprofit. But debate over the issue is growing. A petition on titled “Revoke the Tax-Exempt Status of the National Football League” currently has nearly 429,000 supporters.

In the long-run, a number of factors will likely influence what ultimately happens to the league’s tax exemption status. The NFL’s extraordinary profits alone make it easy to question its nonprofit categorization, but the added scrutiny brought about by its bungled response to recent domestic violence controversies as well as the longterm medical issues suffered by retired players will likely elevate the discussion further.

Fundraising Essentials: Mobile Giving

Earlier this month, Paypal announced its 2014 charitable giving statistics. If there is one thing that the numbers tell us, it’s that donors are moving toward mobile devices as their preferred means of digital giving.

Paypal – an online payment service – saw a 50 percent overall increase in year-end giving, totaling $212 million in donations. #GivingTuesday had its best year since its founding in 2012. Donors gave 66 percent more than they did through Paypal the previous #GivingTuesday, and mobile giving leaped an astonishing 101 percent.

The trend in mobile spending is not unique to nonprofits. On Black Friday this year, retailers witnessed a 62 percent increase in Paypal purchases made through mobile devices.

The biggest reason for this development is that mobile giving is extraordinarily easy. Revolutionizing during the tragic earthquake in Haiti, nonprofits adapted text-based donations into their campaigns with great success. By simply responding to or sending text messages, donors could send gifts in response to ongoing events completely hassle-free.

Political campaigns took the strategy one step further during the 2012 presidential election. Campaigns stored their donors’ credit card information, soliciting funds via emails that allowed repeat donors to merely click a giving level to immediately send a gift.

Mobile fundraising simultaneously taps into the immediate psychological gratification that derives from charitable giving, while also satisfying consumers’ ever-growing preference for convenient, streamlined, and user-friendly digital designs that simplify financial transactions.

Take tipping at restaurants and cafes, where a similar trend has emerged. Tipping has increased due largely to the intuitive design of iPad checkouts, through which a click of a button enables the consumer to tip without experiencing any interruption to flow of the transaction

Advancements in computer technology have driven the size of consumer electronics down, while greatly increasing their capability and utility. In thirty years, we’ve seen seen the arc of technological progress span between the release of the household desktop to this year’s highly anticipated iWatch.

Consumer behavior – part catalyst for this rapid change, but itself molded and affected by technological progress – now evolves at a quicker rate than ever before. Keeping track of this evolution is essential market-watching for fundraising professionals.

Proposed Legislation Would Apply Business Tax to New Hampshire Nonprofits

State Rep. David Hess has proposed legislation that would treat large New Hampshire nonprofits as private businesses, subjecting them to the state’s Business Enterprise Tax (BET). If successful, the bill would exact a heavy toll on the state’s nonprofit sector. New Hampshire Catholic Charities, for example, would have to pay out around $200,000 annually in BET taxes if the bill passes.

The BET is among the most profitable taxes in New Hampshire, responsible for $219.6 million in state revenue during 2014. It is currently a fixed rate of .75 percent on interest, dividends, and wages at large private businesses. Currently, 501(c)3 organizations are exempt from the tax.

An estimated 88 nonprofits would feel the effects of the legislation, among them the New Hampshire Alliance of YMCAs, institutions of high learning, and nonprofit hospitals.

The effort appears to be part of a larger, party-line battle on taxation and the future of state budgeting. Republicans have proposed two bills which would deprive the state government of a combined $42 million in revenue. One bill would reduce the state’s profits tax from 8.5 to 8 percent, and the other would address the BET, with an aim of lowering the rate from .75 percent to .675 percent.

Discussing the proposed legislation, Rep. Hess remarked that the legislation was not to raise additional revenue for the state, but rather to pave the way for a general lowering of the BET by spreading the burden of taxation. As for putting nonprofits on the hook to pay the difference, Hess commented that, “If it acts like a business, has a business plan, walks like a business … maybe it should be taxed under the Business Enterprise Tax like its competitors.”

Criteria for what “acts” and “walks” like a private business, however, differ among leading nonprofit voices in New Hampshire.

As Mary Ellen Jackson of the New Hampshire Center for Nonprofits states in an op-ed appearing in the Concord Monitor, “nonprofits are able to conduct their work in highly economical ways is because they operate on business models that leverage volunteers, donations and private grants and because they pour all profit back into mission, not shareholders pockets.”

Jackson points out that a number of institutions providing essential services to New Hampshirites would be affected, including mental health centers, disability services programs, nonprofit nursing homes, and affordable housing groups, and that their work would be undermined by the addition of an onerous tax that was not designed for application to nonprofits.

Outside of the financial pinch on nonprofits, the tax cuts would also result in an overall loss in state revenue that would nearly amount to the entire annual budget of the state’s community college system, thereby threatening such vital services.

Considering that the Tax Foundation ranked New Hampshire seventh in the nation for ideal business tax environment, the proposed legislation is misguided and unnecessary. By sequestering a sizable portion of nonprofits’ resources, the legislation would force organizations to cut their services, having a direct negative impact on the nonprofits’ beneficiaries while simultaneously dampening the appeal of vital jobs in the nonprofit sector.

Anti-Domestic Violence Groups Leverage Controversy During Super Bowl

Amongst the comedic advertisements promoting avocados and smartphone games during Super Bowl XLIX, one dramatic anti-domestic violence PSA stood out.

The spot begins with the camera drifting through a seemingly average house. The viewer notices minor disturbances, including a disheveled rug and various items tossed about. Over the footage, a real 911 call plays in which a woman orders pizza from the emergency operator. Initially confused, the operator soon realizes that the caller cannot speak openly and is actually coding her distress by feigning a food order. He asks if there is someone in the room with her.

The caller responds: “Yes.”

Sponsored by No More – an anti-domestic violence consortium including businesses, foundations, and nonprofit advocacy groups – the advertisement is chilling yet powerful, using dialogue from an actual emergency call that attracted widespread attention last year when it was posted on Reddit.

The PSA’s launch during the Super Bowl is not surprising; following a number of domestic abuse incidents involving players, the league is still scrambling to save face – and its credibility.

NFL commissioner Roger Goodell provoked the ire of women’s advocates around the nation through his fumbled response to Ray Rice’s violent assault on his fiancé (now wife) last year. When the Baltimore Ravens running back struck his partner unconscious, he initially received a light reprimand. It was only following the TMZ release of the security footage that depicted Rice’s assault that the league acted more forcefully.

Several other incidents dovetailed with Rice’s: the Florida Panther’s Greg Hardy is appealing a conviction he received for attacking his former girlfriend; the San Francisco 49ers terminated a contract with Ray McDonald following a sexual assault probe; and Minnesota Vikings’ running back Adrian Peterson recently reached a plea deal to avoid jail time on child abuse charges.

Grappling with the fallout from these controversies, the NFL teamed up with No More. The league aired the advocacy group’s Super Bowl ad pro bono and also covered its production costs. Additionally, the NFL has spent millions of dollars broadcasting its own ads that feature pro-football players speaking out against domestic violence under the No More banner.

Another advocacy group took a more direct, less conciliatory approach during the build-up to the Super Bowl. Ultraviolet – a nonprofit women’s advocacy group – released a jarring and provocative ad on ESPN, featuring a fully equipped football player violently tackling a woman. The ad ends with the combative hashtag #GoodellMustGo.

PSAs, of course, offer discussion but do not necessarily result in action. Activists and commentators – including Hillary Crosley Coker at Jezebel – argue that face-saving PR campaigns do not provide for real, frontline work in the fight against domestic violence. This point is valid. Raising awareness is important, but at the end of the day nonprofits and philanthropists need to step forward and underwrite invaluable support services for abuse victims.

Nonetheless, No More and Ultraviolet wisely leveraged the NFL’s poor handling of its domestic violence controversies. Ultraviolet’s confrontational approach – directly criticizing the league and its commissioner – was likely one of the factors that pushed the NFL to co-opt No More’s campaign as a sort of pressure-release in the face of public scrutiny.

Recognizing the league’s distress and capitalizing on the missteps of its executives, these organizations compelled the highest-grossing sports organization in the United States to free up a substantial amount of resources to at least provide token support for the anti-domestic violence cause. The end result was a cost-effective publicity blitz that propelled a tremendously important issue into the forefront of the nation’s consciousness.

Philadelphia, the Democratic National Convention, and the Nonprofit Sector

On January 14, the Republican Party announced that its 2016 national convention will take place at the Quicken Loans Arena in Cleveland, Ohio. The Democratic Party has narrowed its field down to three contenders, including Columbus, New York City, and Philadelphia.

The event is no small matter. Conventions during the 2012 election cycle – Tampa Bay for Republicans and Charlotte for Democrats – attracted tens of thousands of people to the two host cities, along with a flush of consumer spending.

Pundits and academics debate the economic benefits of hosting the convention. The National Journal cited one study in 2012 that claims that the financial gain is minimal. The reality most likely rests somewhere in between the wildly optimistic projections of city officials and the reductive conjecture of one study that trades causality for correlation; cities enjoy both an injection of spending as well as intangible rewards, including the the elevation of the city’s cultural brand.

Should the Democratic Party pick Philadelphia, the benefits would be manifold. The influx of civic-minded delegates – energized by the democratic process – would be drawn toward one of the highest concentrations of U.S. cultural treasures and symbols in the entire country. In turn, the city’s world-class cultural institutions and performing arts community would undoubtedly benefit from the uptick of visitors, especially convention delegates habituated to the giving culture inherent to political activity.

The list of Philadelphia’s historical offerings is extensive; the city boasts the Liberty Bell, the Constitution Center, Independence Hall, Betsy Ross’ House, and the entirety of the Independence National Historical Park.

The arts are similarly well-represented. Philadelphia is third in the nation for per capita spending on the arts. From the iconic Philadelphia Museum of Art to the unparalleled Barnes Foundation; the internationally renowned Philadelphia Orchestra to the ever-innovative Philly POPs; the options for arts and cultural performances are as abundant as the talent pool is deep.

In choosing Philadelphia, the Democratic Party would provide their delegates and other convention-related visitors with an unforgettable experience, and the city’s institutions would enjoy both short-term and longterm profits.

The immediate financial rewards, of course, would contribute further to a rebounding economy and a growing nonprofit sector. In the wake of the recession, nonprofits are recovering at a faster rate than the private sector. Philadelphia’s arts nonprofit community alone employs over 44,000 people, who would stand to gain from the inflow of ticket-buying delegates from across the county.

Additionally, the national stage would elevate Philadelphia’s status as a U.S. cultural center. In cultivating national interest, the convention would entice future visitors. The city’s institutions can further profit from the satisfied patronage of philanthropic delegates, potentially creating a new wellspring of fundraising prospects.

Philadelphia is the logical choice for the 2016 Democratic National Convention. Nonprofits should look forward to sharing their mission and goals with U.S. citizens from every corner of the nation, and anticipate ways to educate, entertain, and grow during the convention weekend.

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