View Research by Author - Evelyn Brody

Citation URL: http://www.urban.org/EvelynBrody

In response to a Senate Finance Committee Staff Discussion Draft of June 21, 2004, comments were submitted supporting those proposals that would improve charity operations in three ways: (1) by freeing the Service to share information with State regulators; (2) by expanding the information relating to good governance practices to be reported on the Form 990, both to educate the charity and to inform the public; and (3) by increasing funding to the Service for increased enforcement of and education about existing Federal tax laws, and by providing revenue to the States for enforcement and education.

If "all politics is local," then no tax issue is more political than the property tax. This explains the battles that are being fought countrywide over the exemption enjoyed by nonprofit organizations. Property taxes fall on local populations, while the benefits of a charity's activities can be spread more broadly. And as property-owning charities such as hospitals, universities, and cultural institutions have transformed themselves into big businesses, the exemption has come to be viewed as a subsidy granted by government. Recently, opposition from revenue-starved local governments has mounted, in the form of frontal attacks on the charity exemption and demands for payments in lieu of taxes. This collection of essays seeks to put the debate in larger context. The editors have brought together authors from a range of disciplines to explore what we know about the property tax exemption. They offer a variety of perspectives--legal, economic, political, historical, and municipal-administration--on this very contentious issue.

Nonprofit organizations engage in a range of income-producing activities: Universities charge tuition, hospitals collect fees, and social-service organizations enter into government contracts. To the extent that an activity is "substantially related" to the organization's tax-exempt purpose, the income is tax-free (and the associated expenses are, essentially, not deductible). By contrast, net income from "unrelated business activities", is subject to the Unrelated Business Income Tax (UBIT), which generally taxes such income at ordinary corporate (or trust) tax rates. Congress, however, has exempted dividends, interest, rents, and royalties from the UBIT.

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