Why is that nonprofit tax exempt?
I was recently in Asheville, NC and as I was driving around I passed a beautiful private, gated community called Givens Estates. The grounds were expertly manicured around numerous buildings, homes, and cottages. Givens is a high end retirement community with extensive programs for seniors, hiking trails, swimming pool, cultural classes, 
restaurant, computer lab, greenhouse, and much much more. Givens also has an assisted living facility and a Health Center for elderly residents in need of continuous care. It is, by any definition, an excellent place to retire and live comfortably in the beautiful Great Smoky Mountains. Oh, and one other thing – Givens Estates is a United Methodist Retirement Community and is not subject to property taxes. The residents, who pay an upfront fee starting at $28,000 for a small apartment, up to $250,000 for a cottage, plus a monthly services fee ranging from $1200 to $3000 per month, for the vast array of services including 1 meal per day, on-site medical services, housekeeping, and more, get to deduct the portion of those expenses attributable to medical expenses. And finally, as a tax exempt organization, Givens Estate pays no sales taxes on anything purchased running the place — food, medical supplies, flower seeds, fertilizer, sheets, ….everything tax free.
To the best knowledge of my friends in Asheville there are four such 
communities in town with different religious affiliations. They house hundreds of residents and they pay no property taxes. Clearly they require and receive public services – they just have the luxury of not having to pay for it. UMRC is over 100 years old and has many similar facilities all over the country so this is not a recent innovation. Yes, there is religious element but it’s not like this is a group of people who have chosen to devote their life to God. This is a retirement community, no different than any other secular community, except all the residents share a single faith and there are religious programs available. Yes, they provide “outreach ministries in the larger region” but by a show of hands who really thinks that’s what this place is about? I thought so. No, this is a very nice set-up that takes complete advantage of the deduction for religious institutions, imposes upon the other members of the Asheville community the burden of financing the public services provided to the Givens Estates residents, and advertises its devotion to Christian values. Is it just me or is something seriously wrong here?
A charity is supposed to be just that – charitable. That means it’s supposed to give things away for free. The idea of nonprofits is that they do things that local and state government would otherwise have to do. They provide a public benefit and therefore they are granted a tax deduction. Off the top of my head the only tax exempt organizations that don’t fit that description are religious based and they are granted tax exemption in order to avoid any church/state conflict. But it seems that there are an inordinate number of nonprofits that claim tax exemption that simply don’t meet the criteria. Just because a group operates with a goal of not earning a profit doesn’t mean it’s a tax-exempt nonprofit organization. Some hospitals are nonprofit while others are for profit – I wonder how many people even realize there is a difference and know which hospitals in their region are which. Are the services any different? Is the care any different?
There is a very expensive private school in a neighborhood not too far from where I live. They wanted to expand their playing fields and provide housing to some senior members of the faculty. When two homes bordering the school were put up for sale the school dug into its endowment war chest and bought them. It added the back yards to the playing fields while offering up the homes to faculty. Terrific right? Yes, except the town, which had been receiving very nice property taxes from the homeowners, suddenly lost those taxes because the school is a tax-exempt organization.
In recent years several nonprofit day care centers have been denied property tax exemption when they were found to operate without offering anything back to families who used the facility. The fee for all children, regardless of the family’s ability to pay, was the same. Basically the property tax commission said “no financial aid, no tax exemption.” By definition, to get tax exemption you must give something back – for free or at a steep discount.
I fully support continuing to provide public schools, public hospitals, churches and synagogues, and genuine charitable organizations (United Way, Red Cross, soup kitchens, halfway houses, etc) with complete tax exemption. But it seems to me that there are groups that are simply using the advantages the tax code offers to nonprofits without meeting the standard we should demand from such organizations. My town and state are suffering in the current economic climate just like every other town and state in the country. We need to reduce spending and find tax dollars in places we’ve not looked at closely before. I deeply resent the residents of Givens Estates, and others like them, abusing the tax system for their benefit and leaving the rest of us to pay for the public services they expect on demand. Next time a house is on fire in such a community I hope they are reminded that they contribute not a cent to the fire department that just saved their homes. It’s wake up time!
It certainly seems as though there is a loophole that some of these organizations are flaunting. This community doesn’t have anything to do about religion other than the name, and probably the church pays for the maintenance. But would taxing this community be any kind of violation to the separation of church and state, it doesn’t seem so to me.
I think you have a very valid point, Mike. It’s one thing if this community is centered around their faith, but that doesn’t seem to be the case. I see no reason they should be exempt from local taxes.
This is related somewhat to your subject, but I have seen something like this in Fort Smith, AR, where I work. There is a huge steel plant in one of the industrial sections of town. You may have heard of Mac Steel? I don’t even like doing maintenance on their vehicles because they are tax exempt, due to negotiations that took place before they built the plant. I tried to question them on it, as the work we do for them is not for resale, but they are very adamant about it and there is nothing we can do. They get out of paying a very large amount of tax revenue that the community could use and I do not see how that is fair and equatable to the rest of us who are paying taxes right and left.
States have often dangled the carrot of tax exemption in front of companies seeking to build new plants. The states argued, and with reason, that attracting the plants brought jobs to the region and that, in the long term, was more important than the tax revenues they would forego on the property. It’s very difficult to tell whether those deals made economic sense at the end of the day but some certainly did. So I can see a reasonable argument for that tax exemption. It’s the so called nonprofits that flaunt the tax code that really get me going. There are hundred, maybe thousands, of these religious-affiliated retirement communities around the country and they strike me as a complete tax scam to the detriment of the greater community. I don’t know if it’s possible for local communities to revisit their tax-exempt status but I also doubt the public has any clue. If they did the public furor would be well placed perhaps at least to generate some voluntary contribution as happened recently in Pittsburgh where a proposal to impose a college tuition tax was stopped when several tax-exempt private universities agreed to make multi-million dollar contributions toward city services.
I live in VA and here they use the term “fee” or “user fee” in addition to “tax.” Years ago, I heard that the various municipalities began using the term “fee” as a way to get around tax-exempt status of various entities. In doing so, the various municipalities were able to tax them without actually calling it a tax. For example, some places assess non-residential property a storm water runoff fee. Additionally, there can be a solid waste fee. Basically, anything can be a fee. My guess is that the town where you saw these buildings does the same. Never underestimate the power of government to tax- LOL
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Wow! Liberal agrees with conservative and libertarian! I agree,assess a “user fee” on these tax exempt entities (-yes, churches, synagogues, temples, and mosques) since they ALL burden our local facilities such roads, sewers and water service.
LOL! David, I wonder if you were referring to me as a liberal. I’m a conservative and actually support lower taxes/ fees. I prefer smaller government instead of larger government. I don’t consider houses of worship to be a burden but rather congregations of people who, through their faith, make a positive impact in our society.
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Making such bold negative comments about the ministry and residents at Givens Estates shows the ignorance of someone who doesn’t know much about Givens Estates. My grandmother lives in the health care facility at Givens Estates and before that lived in the low-income apartments. My grandmother has been blessed to be able to live at Givens Estates. She is not wealthy, nor is my family. She has recieved excellent care, alot of it coming from kind and giving individuals who recieve nothing in return for the assistance ministries they provide. Also, her son, my father, is a firefighter. After seeing how Givens has been so generous, providing numerous ministries to our community, my father anf his fellow firefighters would and have had no problem risking their lives for any member of the community.
Thank you for your comments Joe but I think you’re confusing excellent care with the qualifications for tax exempt status. What did I say in my post that isn’t true? A charity is supposed to give things away for free. An effective charity spends no more than 25% on admin and gives the balance to benefit the community or purpose it serves — free med care, free food, free shelter, etc.. But Givens probably doesn’t use the charity exemption but rather the religious org exemption. So tell me, do you really think Givens is a religious org? Or is it a retirement community with a religious affiliation? Those are two VERY different things.
I am sorry if I offended you. I’m certain your grandmother receives superb care in a warm, loving environment; but I fail to understand why Givens should be tax exempt and why the rest of the Asheville community should pick up Givens portion of expenses on public services (not to mention the sales tax revenues lost to the state).