In The News › Louisiana’s nonprofit exemptions in crosshairs of tax review

Feb 10, 2011

Source: CityBusiness

Filed under: Orleans Parish, Taxation & Assessments

Louisiana’s nonprofit exemptions in crosshairs of tax review

Thursday, February 10, 2011
By Ben Myers

The Landrieu administration is careful to portray the mayor’s Tax Fairness Commission as a vehicle to increase equality, as opposed to revenue. But those two needs will inevitably compete in a debate the commission is triggering regarding nonprofit property tax exemptions.

The commission spent part of its first meeting on Feb. 3 dissecting options for squeezing money from properties owned by nonprofits, namely by amending or circumventing the state constitutional provision that keeps most nonprofit property off tax rolls.

The Bureau of Governmental Research, a longtime critic of the exemption, offers other suggestions should the administration wish to circumvent the legislature. They include asking nonprofits for voluntary “payments in lieu of taxes,” or PILOTs and parcel fees.

That’s a perilous direction when government austerity is already stripping nonprofit funding, said Mike Tusa, a Mandeville attorney who represents Volunteers of America and nonprofits operating locally.

“Government is not only going to cut some of the monies that are given to them to provide these services, it’s now going to take some money back from them?” Tusa said. “I think that’s unfair. “

No one is advocating for the exemption’s total elimination, and the commission’s preliminary recommendations to reform New Orleans’ tax systems aren’t due until March 20. That date coincides with the start of the legislative session, which is where the administration would need to lobby for changes to the exemption.

BGR estimates the provision excludes $385 million in assessed property value in New Orleans, or 10 percent of citywide value, from the tax rolls. BGR President Janet Howard cautions these figures may be “seriously understated” because of unreliable data in the Orleans Parish Assessor’s office.

BGR argues the exemption is too broad, vaguely defined and does not require exempt properties to conform to exempt purposes. Tusa said the provision’s language is the same used by the Internal Revenue Service in allowing exemptions for certain types of organizations, including religious, educational and welfare-based.

The exemption also includes labor unions, trade associations and professional societies. Additionally, regardless of ownership, “property used for cultural, Mardi Gras carnival or civic activities and not operated for profit” is also exempted in the state constitution.

Tusa said he agrees there is room to scale back where the provision stretches beyond charity, a legal term that the IRS defines broadly, but Howard said this also poses a problem.

“What does ‘charitable’ mean?” Howard said. “It covers a very wide range of activity. “

A key point of contention is with the provision’s only exception: commercial property that does not further an exempt organization’s mission. Government should require a “quid pro quo” that defines what services the public receives from specific properties in exchange for exemptions, Howard said.

Tusa said some properties, such as certain ones dedicated to affordable housing, blend commercial and noncommercial uses. Courts have consistently interpreted the exception to apply to strictly commercial properties, he said.

Tusa has a history of frustrating assessors. Darren Mire, who was 1st District assessor before the unified system, considers VOA’s success in keeping an exemption on revenue-generating affordable housing in eastern New Orleans one of a few cases that have forced broad interpretation of the provision.

Another occurred around the time Mire took office in 2002, he said, when undeveloped lots Tulane University owned in Algiers were deemed tax exempt.

“Since then, most of the assessors have exempted anybody that applied who has met the nonprofit criteria – even though we don’t see the law same way as the judges did at the time,” said Mire, who has been retained by Assessor Errol Williams and serves on the Tax Fairness Commission.

Other changes to the state property tax provisions BGR suggests the legislature consider include voluntary “payments in lieu of taxes,” or PILOTs, parcel fees and reduced-rate taxation.

Feb 10, 2011

Source: CityBusiness

Filed under: Orleans Parish, Taxation & Assessments

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