Looking for ways to bring in new revenue, Maine Gov. Paul LePage submitted a proposed budget including a property tax for certain nonprofits. Associations say the tax could hurt local communities by forcing nonprofits to cut programs and services.
Last year, before releasing his biennial budget proposal, Maine Gov. Paul LePage (R) offered a little bit of foreshadowing when he described nonprofits as “takers, not givers” and suggested that they should lose their property tax exemption.
If these organizations were forced to pay property taxes, [it] would undoubtedly result in staffing cuts that would diminish services for vulnerable populations and reduce programs that Maine residents rely on and value.
So when LePage’s budget was released at the end of January, it was no surprise that it included a proposal to allow communities to levy a tax on any nonprofit that holds property valued at more than $500,000. Under the plan, such organizations would pay taxes on the portion of the property’s value above that amount at 50 percent of the local community’s property tax rate.
At a town hall meeting on Wednesday, LePage said the proposal is part of a necessary plan to make Maine more prosperous. And when asked if he thinks taxing nonprofits is unethical, LePage responded saying, “I don’t know about the ethical part of it,” but added that a separate provision to cut the state’s income tax would likely lead to a “flood of donations to nonprofits.”
Tax-exempt organizations in the state said the proposed property tax could have devastating effects. In an op-ed in the Portland Press Herald, Scott Schnapp, executive director of the Maine Association of Nonprofits, described the potential impact.
“If these organizations were forced to pay property taxes, [it] would undoubtedly result in staffing cuts that would diminish services for vulnerable populations and reduce programs that Maine residents rely on and value,” Schnapp wrote. “While the governor uses the language ‘taxing large nonprofits,’ his proposal … would also affect social service agencies, land trusts, educational institutions, and organizations that provide healthy outlets for young people, to name just a few.”
Maine Summer Camps, a group that represents more than 100 summer camps and adventure programs in the state, said the added tax could cause some of its members to close up shop.
“We’re worried,” MSC Executive Director Ron Hall recently told the Press Herald. “It makes no sense to put the survival of summer camps in jeopardy by trying to assess a property tax on camps that are already giving so much back to the state and the people and children.”
The Association of Maine Archives and Museums recently surveyed its membership and found that more than half would be hurt by LePage’s plan. A majority of MAM’s members run on operating budgets of less than $25,000 per year, and less than 8 percent receive any kind of government support, but their property holdings—which include historic structures and sites—would put them over the property tax threshold.
“In short, these organizations serve as caretakers to the rich cultural history of Maine, preserving these structures from our collective past for future generations,” MAM said in a statement. “The governor’s proposal would end tax exemptions to the stewards of these historic properties.”
ASAE said it stands behind Maine’s nonprofit community.
“Despite their tax-exempt status, associations are by no means exempt from all taxes. Included among the taxes associations pay are federal payroll taxes, state and local taxes, and sales and use taxes,” said Jim Clarke, CAE, senior vice president of public policy at ASAE. “An outright repeal of the property-tax exemption for property owned by nonprofit organizations would diminish the ability of many of our members to carry out their vital missions.”
If adopted, LePage’s plan would make Maine the first state to formally levy property taxes on nonprofits. Several cash-strapped cities—including Boston; Pittsburgh; Hartford, Connecticut; and Memphis, Tennessee—have adopted payment-in-lieu-of-taxes programs to offset declining revenue.