Stopping the Free Ride for Nonprofits on Property Taxes

New Orleans   Talking recently about greater accountability for nonprofit hospitals with a health expert from Massachusetts, she kept bringing up PILOT programs and why they were important in funding health care expansion in her state.  PILOT in the tax world stands for “payments in lieu of taxes.”  It perked my interest to find out how prevalent such payments might be, so let’s take a look.

First, the backstory.  All of the states in these United States offer property tax exemptions of one kind or another to tax exempt nonprofits.  Nonprofit educational institutions and hospital combines dominate their specific industries.  In cities where they are important service providers and employers, their historic and institutional footprint often also makes them significant landholders.  If these property holdings were taxed in the same way that other real estate properties, either residential or commercial, are taxed, the revenues received by their home cities would be a game changer for all citizens.

All of these “payment in lieu of taxes” situations are voluntary.  Some are wrested from nonprofit operators by cities using leverage when the institutions want to build or develop on public land.  Others have been able to negotiate PILOT arrangements when nonprofits are involved in what otherwise would be classified as for-profit enterprises like running food and lodging establishments.

A working paper by several people at the Lincoln Institute for Land Policy offered the most comprehensive view.  They undertook some exhaustive research and found that “218 localities in at least 28 states since 2000” have collected such payments and “these payments are collectively worth more than $92 million per year.”  Not chicken feed, but not a cure-all either.

The Lincoln Institute also found that most of the action is in the Northeast, more specifically in Massachusetts and Pennsylvania.  They mention that if Palo Alto in California, the home of Stanford University and health system in the West were separated and Baltimore was not included in the South, then 95% of PILOT revenues are collected in the northeast.  They also were clear that the bulk of the money comes from universities rather than hospitals.  The working paper indicates that “the majority of revenue comes from just 10 organizations: Harvard University, Yale University, Stanford University, Brown University, Boston University, Massachusetts General Hospital, Dartmouth College, Brigham & Women’s Center, Massachusetts Institute of Technology, and Princeton University” in that order.  Sadly, not a lot of money goes to local entities from what the researchers found.  Where they could get the numbers, they concluded that the payments were less than 1% of tax revenues.

Given the robust competition between nonprofit and for-profit hospital chains, it was surprising to see the small potatoes most of these tax-exempt operations are providing in local revenues.  Senator Chuck Grassley (R-IA) made this point a cornerstone of his contribution to the Affordable Care Act.

Seems like a lot of cities would be well advised to make PILOT a major goal for revenue enhancement, especially given the contention of how much charity really exists in charities.

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Please enjoy John Fogerty’s The Holy Grail (featuring Billy Gibbons of ZZ Top).

Thanks to KABF.

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Tax Preparers Refund Anticipation Loans are Out of Control – Again!

AP_Tax_Refund_Advances_t_w600_h3000New Orleans         After years of campaigns by ACORN and agreements with the major tax preparers, H&R Block, Jackson-Hewitt, and Liberty Tax Services, to rein in the abuses and predatory pricing of “refund anticipation loans” or RALs, as they are known in the industry, it appears that the rats will play “while the cat is away.”  Nina Olson, the IRS’ national taxpayer advocate was quoted in an AP story calling the situation now the “wild, Wild West” and “called the level of risk for abuse in pricing and quality of service unprecedented.”  What the heck?!?

It seemed just yesterday that the tide was going the other way and that the earlier ACORN victories were being to be set in concrete.  The IRS had announced that they were promulgating rules to restrict the use of RALs – finally.  The IRS was finally going to create some rules of the road, including licensing at some level or something to assure a degree of competency by tax preparers.  Major banks like HSBC and others had refused to continue to offer the lines of credit to the preparers for such products for “reputational” reasons.  The Consumer Financial Protection Bureau had announced that it was on the case as well and strict rules were coming.   And, now it’s the wild West?

Refund anticipation have soared 17% to 21.6 million taxpayers in 2014 compared to 2011 according to IRS data given to the Associated Press.  Worse the big prep companies are hooked on this drug.  RALs and prepaid cards loaded with anticipation refunds make up 10% of H&R Block’s gross sales now, and the even more bottom feeding, Liberty Tax Services, is sucking up 20% of its revenues through such pure and simple exploitation.

Drive through any low-and-moderate income area and the tax payers are housed cheek to jowl along the main thoroughfares.  When you see the young people dressed in atrociously green Statute of Liberty costumes dancing with arrow signs to lure you into fast service at a Liberty storefront, don’t laugh, because the bait is luring victims into the trap.  Make no mistake about where the predators are feeding.  The IRS data reveals that “about half the purchasers are EITC recipients.”  The Earned Income Tax Credit touted by Presidents of both parties as their major anti-poverty program for low income, working families is only available for such families as a way to get ahead and survive, but those are the pockets being picked.  Of all victims of these high interest loans charging usurious rates between 250 and 400%, 84% are low-income.  There’s no question about what’s going on here.

The IRS is whining because they lost a court appeal on their licensing effort for tax preparers, but what happened to their efforts to rein in the RALS.  They have tools a plenty.  The Consumer Financial Protection Bureau now claims they are close to having something written up, but their scope seems limited to more transparency, and looks good, but has little practical impact on the predation.  ACORN got all of the companies to make posters with the rates that preparers would show at their desks and on their computer screens, but that was just the toll people had to pay to get on the faster highway to get their money.

The IRS and other agencies of government are essentially allowing an income transfer from the federal government intended for lower income families to become a direct remittance to private companies’ bank accounts, because they are unwilling to either put their foot down on the practice or step up and move all or part of the refunds to families more quickly themselves or through preferential preparation sites.

This ought to be a scandal, and, if intent counted, it’s a crime.  Without a doubt it’s a government approved swindle.

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Street Dogs – Unions and the Law (Alt Version)

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