As more states are confronting increasing deficits and decreasing revenues, many have begun to look to the nonprofit sector to balance their budgets, according to a February 27 article in The New York Times.
The result, ASAE and other nonprofits have argued, is the weakening of a valuable part of the economy and society that has already suffered with the economic downturn. While states cannot outright remove tax-exempt status from many organizations, they have legislated creative ways to tax their charities, associations, and other nonprofits.
For example, Kansas is considering legislation that would make all nonprofits subject to state sales tax. States like Hawaii and Minnesota are simply charging a usage tax or fee to pay for utilities such as lighting. Last year, Washington and North Dakota failed to pass legislation that would have removed the tax deduction on membership dues for all nonprofits. In November, Alleghany County (Pennsylvania) overrode a vote that would have imposed an "essential services fee" on charitable organizations based on their property size.
Most of these proposals are simply revenue raisers designed to help balance state and local budgets. With traditional sources of revenue failing to help meet costs, states and localities are "looking under the sofa cushions," as Jon Pratt, executive director of the Minnesota Council of Nonprofits, told The New York Times.
ASAE has long argued, in letters to state and local officials, as well as through the Power of A campaign, that nonprofits provide economic and social benefits to their communities. Levying new fees and taxes during the economic downturn takes valuable money away from hiring, offering affordable benefits, education, and other vital services nonprofits provide.