Nonprofit Myths Many Don't Pay Property Taxes -- for Many Good Reasons

By Lydon, John | Pittsburgh Post-Gazette (Pittsburgh, PA), March 6, 2013 | Go to article overview

Nonprofit Myths Many Don't Pay Property Taxes -- for Many Good Reasons


Lydon, John, Pittsburgh Post-Gazette (Pittsburgh, PA)


There has been a great deal of conversation recently regarding nonprofit organizations and property taxes. Much has been written regarding the multitude of benefits that our best regional nonprofits add to our community. But my purpose is to remind us why the government made certain nonprofits exempt from the property tax, and to show why that reasoning is still very applicable.

Prior to becoming the CEO of Auberle -- a nonprofit human service agency serving more than 2,300 children and families in eight southwestern Pennsylvania counties -- I was an attorney who sat on Auberle's board for over 20 years. With experience in both the for- profit and nonprofit world, I understand many of the perspectives surrounding the taxing of nonprofits, but it is clearly incorrect that nonprofits do not pay their "fair share."

A key myth is that simply because a nonprofit organization qualifies as tax-deductible (501c3) with the IRS it is exempt from paying property taxes in Pennsylvania. An agency is exempt only if it is a "purely public charity," which is stated in the Pennsylvania Constitution. To qualify as a "purely public charity" under Pennsylvania law, an organization must:

1) Advance a charitable purpose; 2) donate or render gratuitously a substantial portion of its services; 3) benefit a substantial and indefinite class of persons who are legitimate subjects of charity; 4) relieve the government of some of its burden; and 5) operate entirely free from private profit motive.

Another myth is that an organization is either fully exempt or not exempt from property tax. Actually, the exemption applies only to properties "regularly used" for the defined charitable purposes. So, for example, a for-profit subsidiary, such as a youth entrepreneurial business, is not exempt.

To meet the "purely public charity" test means an agency relieves the government of part of its burden. Nonprofits today provide many government functions in a lean, efficient, high-impact manner. They leverage limited government funds to benefit the people of the commonwealth, particularly the taxpayers. Nonprofits have taken over roles that used to be filled by the government, and they do so in a way that ultimately saves taxpayers money and delivers better results.

For example, the government used to operate emergency shelter services for children who had to be removed from their homes for safety reasons. Today, many children in need of emergency shelter in Allegheny and Washington counties are brought to Auberle, which houses, feeds, educates and cares for them until the government can return them to a safe home environment. …

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