One of the major issues the Connecticut General Assembly took up in 2014 was how the state treats certain nonprofit organizations for property tax purposes and reimburses cities and towns for the lost revenue from certain state-mandated property tax exemptions. Connecticut is not alone in grappling with these issues. As a recent State Tax Notes article reported, two nearby states, Vermont and Maine, have also been seeking ways to strike a balance between tax exemptions for nonprofits and local revenue needs (“Major Property Tax Developments in 2013,” May 5, 2014).
In January 2014, Vermont’s Property Tax Exemption Study Committee proposed to overhaul the state’s tax-exempt treatment of nonprofit organizations. The report recommended that the state determine each nonprofit organization’s eligibility for an exemption from the state’s education property tax. Municipalities could then vote to exempt qualifying organizations’ properties from local property taxes. The state and local exemption for colleges and universities would be predicated on a payment to the town for municipal services in lieu of local property taxes.
Maine’s Nonprofit Tax Review Task Force, on the other hand, was specifically charged with evaluating a proposal to impose a temporary assessment on nonprofit organizations to generate $100 million in annual state revenue. The report concluded that any proposal to tax nonprofit organizations, whether on a temporary or permanent basis, “is neither a feasible nor desirable recommendation.” It also suggested that any further discussions about taxing or imposing fees on nonprofit entities be limited to “locally applied service charges.”
