Nonprofits Hit Hard by Economic Crisis Assessment

Last Friday, the Republican Caucus introduced a new tax on nonprofits to offset the cost of partially restoring municipal revenue-sharing to the budget. They are calling it the “Economic Crisis Assessment” which would apply to a broad swath of nonprofits and is designed to raise $100,000,000 per year for at least two years.

Here is the summary of the proposal as written:

• It would impose a temporary two-year tax on nonprofits (very broadly defined) with annual “gross receipts” of $200,000 or greater and $500,000 in assets (not defined).
• The tax amount would be 2% of the amount entered on an organization’s form 990, line 10c from Part X, less $250,000 [(line 10c – $250,000) * 0.02]. Line 10 c is the value of land, buildings & equipment less depreciation.
• There is no allowance for nonprofits that already pay property taxes or PILOTs.
• The tax would be submitted to the state of Maine, along with an “economic crisis assessment return”, on the 15th day of the 5th month “following the due date” of the org’s 990. I read this to mean that if your 990 was due on May 15th, your economic crisis assessment return and payment would be due on October 15th. Extensions don’t apply to the start of the 5 months.
• The bill is written to cover tax years beginning on or after January 1, 2012, so the first payments would be due this October.
• Theoretically this money would help fund municipal revenue sharing.
• In a cover letter to the bill, Senator Patrick Flood noted that while this is only intended to cover 2 tax years, it could be “transitioned” to allow municipalities to collect after the initial two year period.

Thanks to those of you who did a little math and reached out to me and the Appropriations Committee over the weekend. Many of the members of the Appropriations Committee had very little stomach for this proposal, especially given its lateness and the lack of time for public input; however, I believe your efforts helped in convincing the committee to remove this harmful proposal from the discussions and instead, turn the issue over to a study commission for the summer. This commission will probably be tasked with bringing revenue-raising solutions to the legislature for consideration in the next legislative session.

Representative Jorgensen, Portland, will advocate for a representative of the nonprofit community to be included in the makeup of this committee and we appreciate that.  Here is how you can help:

• Use the information above to calculate the financial impact on your organization. Send that information to me by e-mail along with your thoughts on how this would impact your organization and those you serve, as well as any other thoughts around fairness, effectiveness, etc. We will be able to use this information to educate members of the study commission in order to ensure the most helpful proposal is put forth next session.
• Invite your legislators to visit your facilities/property during the summer recess. This is the perfect time to share with them the important work you are doing in their communities for their constituents. Emphasize public benefits provided by your organization that support goals established by state and local government. You should also emphasize your economic impact – the numbers of people employed, the services and goods you purchase supporting other businesses, the numbers of volunteers you manage in service to the community, and the ways you make your community a great place to work + raise a family. If your organization already pays property taxes or payments in lieu of taxes (PILOTs), be sure to share that as well. Explain how this proposal will negatively impact your work and the lives of their constituents. Be as specific as you can in terms of the financial implications this proposal would have and what services would likely suffer as a consequence.

Watch this blog and our NonprofitMaine Weekly e-newsletter for updates on this important issue.