Congress and state legislatures have long recognized the importance of the work of nonprofit organizations by exempting these organizations from taxation, thus enabling them to dedicate their funds to charitable purposes. The federal government establishes criteria through its Internal Revenue Code for organizations and activities that are exempt from income taxes and those organizations that are eligible to receive tax-deductible contributions. State and local governments set the criteria for organizations that are exempt from state income, property, and sales taxes.

In recent years, there have been a number of challenges through the courts, state legislatures, and local governing bodies to the definitions of which organizations and which properties should be exempt from taxation. The severe fiscal crises facing governments at every level have led to increased calls for imposing taxes and fees on nonprofits and foundations to help pay for government programs and services.

IS is monitoring and will share the responses of our member organizations and their nonprofit partners throughout the country to these challenges on this website.

Nonprofit Tax Exemptions at Risk: A Policy Briefing

Independent Sector hosted a policy briefing on Nonprofit Tax Exemptions at Risk on March 30. Click here to listen to the policy briefing. (It may take a minute to load.  The first voice you hear is Pat Read from Independent Sector.)

IS members will need your member ID and password to access the recording. To get login information, contact the Membership Department by email or by calling 202-467-6161.

Resources: Learn More

• The National Council of Nonprofits' report, State Budget Crises: Ripping the Safety Net Held by Nonprofits, provides an overview of state and local government efforts to impose new fees and taxes on nonprofits and the response of nonprofit organizations.
  
• The Minnesota Council of Nonprofits' charitable property tax exemption campaign site provides materials used to support their successful effort to revise state law to codify the factors for determining which organizations are exempt from property taxes.
  
• The Center on Budget and Policy Priorities provides information on State Tax Changes in Response to the Recession, including actions such as eliminating tax exemptions, broadening tax bases, and raising fees to recoup lost revenues.
  
• Pew Center on the States report on the State of the States 2010.
  
• The Nonprofit Roundtable of Greater Washington has launched its Think Twice campaign with the Center for Nonprofit Advancement to bring awareness to and educate our local and state officials on the contributions nonprofits make in their communities.
  
• The Pennsylvania Association of Nonprofit Organizations has documented recent challenges to nonprofit tax exemptions in their state and plans for their Nonprofit Advocacy Day on the Hill on April 7, 2010.
• Background on Pennsylvania's five-part test for a purely public charity.
  
• The American Hospital Association provides a wealth of statistics and reports documenting the community benefits provided by U.S. hospitals and health care providers.
  
• Americans for the Arts has launched a major effort to document the Economic Impact of Nonprofit Arts and Culture Organizations and Their Audiences, demonstrating how the arts and culture industry supports jobs, generates government revenue, and is the cornerstone of tourism.
  
• Evelyn Brody's summary of state constitution treatment of property tax exemptions. 

Please share your challenges, responses or resources by emailing us at: publicpolicy@independentsector.org.