Arts Nonprofits Struggle to Keep Tax Exemptions

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Mark Skalny /

July 25, 2013; Seacoast Online


Yet another example has surfaced of how competition for scarce funding has resulted in an unfortunate conflict between local government and community-based non-profits serving the same populations.

In this case, two nonprofit arts organizations are challenging a decision by the town of Kittery on the Maine coast that their properties should not be given tax exemptions. The Dance Hall and the Kittery Art Association are seeking relief in county superior court, arguing that they fall under the definition of a charitable organization, according to a recent article in Seacoast Online.

The story is familiar to observers of this phenomenon. Both organizations run on “shoestring” budgets and are volunteer-run, and the new tax levies could result in serious financial problems. Municipal governments across the U.S. have been looking under any rock they can unearth in search of much-needed revenues, and many are looking at local nonprofits that own property. Some deny charitable exemptions, while others seek payments in lieu of taxes, or PILOTs.

At issue in this case is whether, according to Maine law, the two organizations are “charitable and benevolent” or “scientific and literary.” Both are 501(c)(3) nonprofit organizations, but the state standard for property tax exemption is different.

“This is not an attack on arts associations,” said the town’s assessor, who says that the two organizations do not meet the state’s criteria as being charities. “There’s no question they benefit the community. Let’s take that off the table. The question is, are their activities charitable in nature?”

The tax exemption came to light after The Dance Hall applied for tax-exempt status last year. The assessor said he reviewed the state law and found that the building did not meet the criteria. Its annual budget is $40,000, and its tax bill is for roughly the same amount. The Dance Hall says it provides cultural programming, classes, and workshops that benefit all residents of Kittery. It says it keeps its ticket costs low, and offers a limited number of free seats for those who can’t afford to pay.

“The Dance Hall wasn’t looking for a dispute with the town,” said their attorney. “What the Dance Hall is doing is not only good, but charitable.”—Larry Kaplan