Since colonial times, American churches and charities have been exempt from property taxes. Now Colorado voters, eyeing the lost revenue in an age of tight budgets, are considering revoking the tax-free status.
If approved in November, a ballot initiative would make Colorado the first state in the nation to collect taxes on real estate owned by churches, hospitals, and nonprofit groups ranging from the Boy Scouts to the Elks Lodge.
The initiative is being keenly watched nationwide for the potential impact on city budgets and affected groups. But it's also indicative of a rethinking going on in a growing number of municipalities about what value a society places on such community organizations.
Increasingly, public officials are questioning whether taxpayers should provide free city services to Moose Lodges, Christian camps, health clinics, and other nonprofits.
"It's a fairness issue. There are thousands of properties kept off the tax rolls that still consume police and fire protection," says John Patrick Murphy, who spearheads the Fair-Tax Colorado campaign. "We're saying that these organizations have the same duties as the rest of us. Just because someone starts a church, it doesn't mean we can dismiss a policeman."
But Pat Read, executive director of the Colorado Association of Nonprofit Organizations, depicts the proposal as unfair. "We don't see how anyone benefits from this," she says. "All of the groups that work to help people would be drastically impacted, and many would go out of business." With the federal government slashing funding for social programs, she adds, communities must provide more support, not less.
Mr. Murphy, a Colorado Springs lawyer and radio talk-show host, counters that the proposal allows certain nonprofit groups to retain their tax exemption: Those that pass a "public duty" test would not pay property tax. Among the proposed exceptions are homeless shelters; orphanages; community health clinics; schools; and housing for the elderly, disabled, and abused.
Still, an estimated 8,300 Colorado properties would come onto the tax rolls if the measure passed. About half are owned by religious groups, including churches, synagogues, mosques, and temples. The remainder are a mix of nonprofit groups like charities, hospitals, zoos, fraternal organizations, and arts groups.
EARLY polls suggest as many as 40 percent of the state's voters support the initiative. "There's a tremendous amount of quiet support for this," maintains Murphy. "People are talking about it over backyard barbecues - although not at the PTA meetings." Getting the 90,000 signatures required to put the issue on the ballot was no trouble at all, he adds.
One reason may be that the move could increase state tax revenues by upwards of $100 million. Proponents also believe it will cut their own tax burden. But state projections suggest there's unlikely to be an appreciable reduction in anyone's tax bill.
Critics say the costs to society would be tremendous. "This is the most detrimental initiative to come before the voters," says Janelle Jones of Citizen Action for Colorado Nonprofits, a coalition fighting the drive. "It could really change the face of our communities in Colorado."
Though no other state has taken so drastic a step, a growing number of local governments are considering imposing "user" fees on nonprofits to cover services like police protection and sewer hookups. The moves are being driven by reductions in federal aid to state and local governments. "There are just so few places that governments can go to raise revenue," says Don Boyd, director of the Center for the Study of the States in Albany, NY.
In New York City, where 60 percent of the property is tax-exempt, politicians periodically consider charging service fees to nonprofits. In June, some 700 churches in Montgomery County, Md., began paying for trash collection. Other cities - including Philadelphia and Cambridge, Mass. - require nonprofits to pay for such things as street cleaning and sidewalk repair.
Still, some analysts suggest taxing nonprofits doesn't make fiscal sense. "In many cases, these groups are providing services that government might otherwise have to provide," says Mr. Boyd. "And by taxing those groups, you may put those services at risk."