Donor Base

Results from a recent survey from John Hopkins University Center for Civil Society Studies, by Lester M. Salamon, Stephanie L. Geller and S. Wojciech Sokolowski show that although non-profits are legally tax exempt, they are paying fees to state and local governments disguised as user fees, field-specific taxes, and PILOTs (“payments in lieu of taxes”).

This survey, with participants in four key fields (children and family services, elderly housing and services, community and economic development, and arts and culture) from across the United States, found that altogether 63% of all respondents are currently paying fees to local governments.  Almost 90% of all organizations surveyed reported that they have been paying these and similar fees for the past 5 years.  Sales tax, property fees, and user fees are the most popular types of payments non-profits make.  PILOTs are mostly common among the larger organizations although they understand that these fees are voluntary.  Salamon explains, “[they] can understand reasons for payment, but it has to be voluntary.  They understood it couldn’t be a free ride.”  Still, it has been a long-standing principle that non-profit charitable organizations should be exempt from taxation by the government.

Oddly enough, the governments that are providing grants to these organizations are taking a small percentage of it back in these fees.  Grants, specifically meant to subsidize program services, are diminished to pay these fees.  When asked how to alleviate these pressures, the majority of organizations responded with increases to program fees or reducing the very services they receive grants to provide.  “The government  should take into consideration that the services provided by non-profits might have to be taken over by the government, should non-profits have much more to carry financially,” one respondent noted.

There are some ways organizations can be reimbursed but these pathways are lesser known.  And some organizations are joining up with larger and umbrella organizations to discuss and tackle this issue.  Salamon suggests a reevaluation of the taxation system, much like the current scrutiny of evasive corporations to corporate tax.  This survey provides the data for a much-needed dialogue between local governments and non-profit organizations, together to find a less self-defeating fiscal answer.

Read full article at www.thenonprofittimes.com.