In The News › Amid budget crisis in Louisiana, group urges lawmakers to rein in local tax breaks for nonprofits

Amid budget crisis in Louisiana, group urges lawmakers to rein in local tax breaks for nonprofits

By Jeff Adelson

March 2, 2016

The Legislature should move to tighten rules in the state constitution that exempt property owned by nonprofit organizations from taxes as a way to offset the impact of the ongoing budget crisis on local governments, the Bureau of Governmental Research recommended in a report released Wednesday.

The nonpartisan group’s report describes the state’s existing exemptions as “poorly crafted and idiosyncratic.”

It’s part of a continuing campaign by the think tank and various local officials who argue that state policies on tax exemptions have caused local governments to lose as much as $125 million a year.

It comes during a special legislative session in Baton Rouge, where lawmakers are trying to close a $900 million shortfall before the state’s current fiscal year ends in June. Some of the proposals under consideration, the BGR statement argues, could “have a negative impact on local government revenues.”

The Legislature “will therefore need to consider ways to offset the fiscal impacts on local governments, which face their own budgetary challenges,” according to the BGR report.

The report sets its sights on property tax exemptions as the means of bolstering local government revenues and ensuring that the cost of running cities and parishes is shared fairly. That’s a problem in New Orleans specifically, where about two-thirds of the real property value was off the tax rolls in 2011, according to the report.

BGR argues that the individuals and businesses in Orleans Parish who do pay property taxes “pick up the tab for services provided to the expanding base of nonprofit entities.”

Narrowing the focus of the exemptions — which include “highly unusual” or “specifically crafted” breaks for properties used for Mardi Gras activities, labor organizations, tourism groups, housing nonprofits and Tulane University — could reduce some of that impact, according to the report.

The report notes the exemptions do not require nonprofits to show they are engaged in specific public services or provide amenities that improve quality of life and therefore are “deserving of an indirect government subsidy.” The constitution only requires that a group be a nonprofit to qualify.

The report also notes nonprofits can claim exemptions on property that does not further their primary mission.

The BGR statement argues that legislators should put a constitutional amendment before voters that would limit the exemptions to religious, educational, charitable or cultural groups and cemeteries; provide parameters to limit the exemptions; prohibit lawmakers from granting property tax breaks to specific groups; and eliminate exemptions for groups with private memberships.

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