Report Targets Property Tax Exemption for New Orleans Nonprofits

With the New Orleans Tax Fairness Commission continuing to examine property and sales tax systems in the city, the Bureau of Governmental Research — a private, nonprofit, independent research organization — has issued a report urging major changes to the property tax exemption received by private schools and universities, churches, charities, and other nonprofits in the city, the Times-Picayune reports.

The report argues that the only way for the city to close its budget shortfall is for nonprofits to start contributing to the city's property tax revenue stream. According to 2011 Orleans Parish property tax rolls, 43 percent of the assessed property in the city was exempt from taxation, with nearly a quarter of those properties belonging to nonprofits. Indeed, because nonprofit property is not regularly reassessed and tax-exempt rolls frequently contain errors, the actual numbers may be larger.

While efforts to alter the property tax exemption are likely to meet legal and political opposition, the report examined several options, including eliminating the exemption for all nonprofits, tightening exemption eligibility requirements, and taxing nonprofits at a reduced rate. Although the report recommends the imposition of service charges such as street maintenance fees for most nonprofits, it dismissed payments in lieu of taxes, which it describes as "unlikely to yield fair or significant results."

"It becomes critical to target the exemption more precisely to nonprofit activities that the government considers deserving of an indirect subsidy," the reports' authors state. "[Local governments,] which bear the brunt of property tax exemptions, should have the power to decide which exemptions to allow within their jurisdictions...[service fees are] the most practical approach to solving the revenue and fairness problems."

Bruce Eggler. "New Orleans Property Tax Exemptions for Nonprofit Groups Targeted." Times-Picayune 03/15/2011.