Threats to nonprofit tax exemptions grow

State associations of nonprofits fight to hold the line

As local and state governments scramble to balance budgets strained by the Great Recession, they are increasingly turning to strategies for raising revenues from untapped sources. Since nonprofits are by rule tax exempt, they are looking for ways to chip away at tax exemption.

One example is the imposition of Payments in Lieu of Taxes (PILOTs), which are a way to tax a tax-exempt organization without calling it a tax. The City of Boston has been aggressively pursuing a PILOT plan in the past year, which has met with considerable opposition from the nonprofit community.

The idea is now spreading to other cities, such as Providence, Rhode Island, and Lowell, Massachusetts. Officials are seeking “voluntary” contributions from organizations such as American Legion, local churches and summer camps. State associations, such as HANO, networked through the National Council of Nonprofits, have been actively opposing PILOTs and other attempts to collect “taxes” from nonprofits.