NO to new fees and taxes for nonprofits

As a significant economic engine in Illinois and Chicago, nonprofits contribute nearly 10% of state GDP and 10% of the workforce (with 70% of those employees working in Chicago); the nonprofit sector can't afford to lose its ability to operate under the additional burdens of new fees and taxes. But there's a more mission-oriented reason to protest these fees.

Without nonprofits, positive outcomes for education, health, economic stability, public safety, cultural literacy, and basic citizenship are harder to come by. Without nonprofits, our communities worsen. (In the long run, nonprofits are a bargain. See this new report on the specific socio-economic impact some nonprofit services have on our communities.)

Times are tough everywhere. But when calls for shared sacrifice (see the Chicago Sun-Times and the New York Times) specifically target nonprofits, it's time to reexamine whether we as a state and as a City can really afford such sacrifice. 

Here in Illinois, we are #1 in the country for late payment, #3 for contracts failing to cover the full cost of services, and #3 for contract terms changing in mid-stream -- all external pressures constraining the operating environment for nonprofits. Meanwhile, the demand for services from hundreds of thousands of people living in our communities continues to rise.

Across the country, local municipalities - including Chicago and municipalities in Illinois - are looking increasingly to nonprofits as a source of much-needed revenue. The National Council of Nonprofits has collected a sobering tally of attempts across the country of local governments asking nonprofits for Payments in Lieu of Taxes (PILOTS), water and utility usage fees, new property & sales taxes, and other new fees as a way to fill their gaping budget holes. Little by little, the social compact between the public and nonprofit erodes, to the potential detriment to the sector and our communities.

The issue isn't likely to disappear any time soon, so here's what to remember and repeat about new fees and taxes on nonprofits:

• In serving the common good, and easing the burden of government, nonprofits earn their tax exempt status everyday;
• They are a financial burden cash strapped nonprofits are currently unable to bear;
• They impair nonprofits' ability to provide critical services to thousands of people in local communities.

See how Donors Forum responded to the New York Times article here.

Look to Donors Forum as we keep an eye on this issue for you.

~Delia Coleman, Public Policy Manager, Communications & Outreach

photo credit: http://www.flickr.com/photos/nohodamon/3580748194/ via creative commons

Comments

[Allan Drebin]

Nonprofits should not be subject to taxes on property or activities that are used for their charitable purpose. However, there is no reason for nonprofit organizations to get direct subsidies such as free water as Chicago has provided for many years. There is no incentive to conserve by using less or even fixing leaky pipes. There is a real cost to using these resources and it should not be imposed on the citizens we are supposed to be helping.

[Clark McCain]

This is an interesting question. Is it not true that "we" as citizens of the State and of the City already make a sacrifice when nonprofits do not pay costs of services which are borne by other entities (e.g. water fees, property taxes)? "We" citizens then provide indirect subsidies to nonprofits, making our own sacrifice by paying higher taxes. Or other fee-paying entities indirectly subsidize the nonprofits who do not pay.

Perhaps "we" (particularly "we" in philanthropy) might think less about sacrifice and who bears it and concentrate on how to help nonprofits develop the capacity to secure greater financial support directly from individuals. Let us change the mindset from the sacrifice of involuntary taxation to the social stewardship of individual philanthropy. Then nonprofits could meet their costs without the annual consternation over the serpentine, treacherous path of a dollar moving from taxpayer to government to nonprofit.