Budget Commission Considers Taxing Non-Profit Properties

Twenty-five non-profit organizations owning 60 parcels in the city might have to start paying property tax.  

Woonsocket Tax Assessor Chris Celeste asked The Woonsocket Budget Commission Thursday if he should send letters to the organizations telling them they're not exempt from the tax rolls.

Though three members and Rosemary Booth Gallogly, director of the department of revenue, voiced support for the idea, the Commission tabled discussion until their Nov. 27 meeting. The delay, an increasingly common refrain for the panel, was the latest example of the body's frustratingly slow progress for member Mayor Leo Fontaine.

"Every decision is being extended out," Fontaine said, "Every day that goes by is one less to solve the problem." 

That problem, the city's looming $15 million deficit, has remained unsolved since the Budget Commission's appointment in May. If levied, the new taxes Celeste suggested would help the city raise revenues to help rub out some of that red ink. Celeste said he is still figuring how much revenue taxes on the properties would raise for the city.

Commission member City Council President John Ward, who said he supported taxing the non-profits' property, noted the city's most recent assessments of the properties are probably out of date.

Celeste said the letters could be worded to let the non-profits know the city is considering taxing them. He said the letters could also invite the non-profits to discuss tax agreements with the city in lieu of impending tax levies, and avoid a costly ($10,000 to $15,000) appraisal of the parcels.

"I have no problem sending out the letters," said Commission member Peder Schaefer. But, he said, they should have the Commission's counsel Edward Alves have a look at the letters first.

Fontaine suggested that the City Council get a look at the letter beforehand as well. He said they may want to exempt certain groups from any new taxes levied.

"Nobody is saying that these organizations are not doing great things for the city or the state, I want to get that out there. They may be doing great things, but the reality is that they don't meet the statute (for exemption from property tax)." 

RI General Law 43-3-3, Property Exempt, doesn't appear to list non-profit organizations among the list of eligible tax exempt entities. Churches and schools, along with other educational organizations make the cut, but the rest are up to the discretion of municipal government.

501C3 status, which many of the city's non-profits enjoy, applies to federal taxes.

The YWCA and YMCA have a specific state charter that makes them exempt from property taxes, Ward said.

The IRS states, "In addition to exemption from the payment of federal income tax, organizations recognized as exempt under IRC 501(c)(3), may enjoy collateral benefits under the Internal Revenue Code, as well as under state or local income, property, sales, use, or other tax provisions," but it doesn't grant that status.

"If you would like to draw up legislation that makes it clear that they're taxable, I'm sure a lot of communities would approve that," said Gallogly.

"There is a lot of case law on this," Schaefer warned.

"Only for the people who want to put up a fight," Ward said, "And they usually lose."

On Chairman Bill Sequino's suggestion, the Commission tabled the discussion until Nov. 27 for further study.