Nonprofit Exemptions and Homeowner Property Tax Burden

By Calabrese, Thad; Carroll, Deborah A. | Public Finance and Management, January 1, 2012 | Go to article overview
Save to active project

Nonprofit Exemptions and Homeowner Property Tax Burden

Calabrese, Thad, Carroll, Deborah A., Public Finance and Management


This paper examines the question of whether there is any correlation between the prevalence of nonprofit organizations with property, plant, and equipment exempt from property taxation and the property tax burden for homeowners. Data from the Tax Foundation and Internal Revenue Service was used to analyze general-purpose local governments within larger counties (populations greater than 65,000) in the United States for years 2005 and 2006. Several econometric specifications were used to estimate homeowner property tax burden as a function of the value of nonprofit fixed assets, government tax structure characteristics, and a series of control variables. Our estimates suggest that county geographies with greater presence of nonprofits tend to have higher homeowner tax burdens on average. Specifically, the value of nonprofit tax-exempt fixed assets within a county geography that is 10% above the mean of $15.4 million is generally associated with a median property tax paid by homeowners as a % of household income that is between 0.0009% and 0.0154% above the mean or between $2 and $24 higher on average. The median property tax paid as a % of homeowner's home value would be between 0.0006% and 0.0069% above the mean or between $3 and $12 higher on average. Overall, we find a strong, positive correlation between nonprofit fixed assets and property tax burden for homeowners at the local level.

(ProQuest: ... denotes formulae omitted.)


The United States has a culture that encourages charitable giving, which contrasts with that of many countries throughout the world. With a more lim-ited tax and redistribution system as well as public service provision in the United States compared with much of the international community, a sizable nonprofit sector has emerged that is often considered supplementary to gov-ernment. More than one and a half million nonprofit organizations exist throughout the U.S. with a substantial portion of these offering services to improve social welfare within local communities.1 Many of these organizations continue to exist by virtue of charitable contributions received from individu-als and corporations who demand different services or services at a level be-yond government provision. As social service providers, many of these organ-izations help to decrease demand for public services and therefore alleviate state and local governments from leveraging resources to finance provision.

On the other hand, other types of nonprofits like hospitals and universities provide services that do not have concentrated local benefits because the client base either commutes to receive services or relocates only temporarily but does not represent the permanent residency of the jurisdiction or otherwise contribute to the local community. Like social service nonprofits, most of the-se organizations' activities are exempt from federal, state, and/or local taxes. Importantly, many of these nonprofits have significant investments in facilities and other fixed assets and, therefore, greater amounts of property, plant, and equipment exempt from taxation, making them more costly for the local juris-diction. While local governments bear the costs of these nonprofits' exemp-tions, the benefits from services provided by these nonprofits may be dis-persed beyond the locality. In addition, these nonprofits may actually increase demand for public resources. For example, hospitals may increase access to healthcare for citizens with publicly financed insurance like Medicare and Medicaid, and many localities and counties finance indigent care of local pop-ulations either by funding these nonprofit hospitals directly or by opening their own health centers specifically for the uninsured (Meyer et al. 1999); similar-ly, universities may increase demand for infrastructure and public safety.

Exemptions that provide preferential tax treatment for individual taxpayers or for particular uses of property tend to be inefficient and neither horizontally nor vertically equitable.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Nonprofit Exemptions and Homeowner Property Tax Burden


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?