AUGUSTA, Maine (AP) - Nonprofit organizations across the country are closely watching Maine as it considers becoming the first state to impose property taxes on hospitals, private colleges and summer camps under a plan being pushed by Gov. Paul LePage.
The Republican’s contentious proposal has sparked a fiery debate in Maine over what impact nonprofits have on their communities and whether they should have to shoulder the costs for municipal services they consume. It’s also raising questions about whether other states will follow suit if LePage’s effort is successful.
“We are very much aware of it,” said David Thompson, vice president of public policy for the National Council of Nonprofits. “I was talking to a group in Oklahoma about it and they looked horrified.”
All states exempt nonprofits from property taxes either through laws or their state constitutions, Thompson said.
LePage has called nonprofits “takers, not givers” and argues they need to chip in for things like police, firefighters and snow removal. His proposal, which is part of his $6.3 billion budget plan, would require organizations to pay municipalities taxes if their properties are worth more than $500,000. They would pay taxes only on the property value over that threshold and get a 50 percent discount on the rate.
Nonprofit groups contend the proposal would fundamentally change their long-standing relationship with communities, which is built on the understanding that they deserve to be tax-free because they improve the quality of life and provide services that the government would otherwise have to.
In Maine, hospitals, colleges and other groups that are lobbying heavily against the proposal warn that it would force them to raise costs or slash jobs.
The Good Shepherd Food Bank estimates it would owe about $24,500 annually to the city of Auburn under the governor’s plan. Spokeswoman Clara Whitney said that would mean the food bank would have to provide 100,000 fewer meals every year.
“If we have to redirect resources to pay property taxes it will be Mainers who are facing hunger who will be impacted,” she said.
Daphne Kenyon, a fellow with the Lincoln Institute of Land Policy who has studied the nonprofit property tax exemption, said the law could have a big impact in Maine, from lawsuits to nonprofits leaving the state.
“It’s always dangerous to go into unchartered territory,” she said.
Lawmakers in several states, including Maine, have examined similar proposals before, but none have been seriously considered, Thompson said. Virginia allows municipalities to decide which nonprofits should be taxed. In many states, nonprofits voluntarily agree to pay municipalities for the services they use in exchange for their tax-exempt status.
While a small number of organizations already provide payments to Maine municipalities in lieu of taxes, those payments fall well short of the services those organizations receive, said Jonathan LaBonte, director of the governor’s Office of Policy and Management.
Because the proposal is part of LePage’s budget, which also includes a comprehensive tax overhaul plan, it’s difficult to say whether it will survive as it makes its way through the Legislature. The governor’s administration says that it’s open to ideas for how to improve the proposal.
“The governor put this in the budget to start the conversation,” said LaBonte, who also serves as the mayor of Auburn. “If municipalities have another approach … the governor has kept that door open.”
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