Study of Property Tax Exemptions in Louisiana Recommends Tightening Parameters

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March 2, 2016; New Orleans Advocate

A few weeks ago, NPQ covered Oklahoma’s “crazy quilt” of nonprofit sales tax exemptions, and we have also been following the questioning of the property tax exemptions for nonprofit hospitals and universities occurring in New Jersey and elsewhere. In general, it appears that looking at the taxability of nonprofits is all the rage lately.

In Louisiana, where a budget hole projected to be approximately $900 million will have opened up by the end of the fiscal year, the state is looking for savings everywhere and part of the budget plug may come from nonprofits. The Bureau of Governmental Research (BGR) has recently released a report calling the state’s existing array of property tax exemptions “poorly crafted and idiosyncratic.” According to the report, in New Orleans, about 60 percent of the real property value was either government- or nonprofit-related, taking it off the tax rolls in 2011 and leaving those who are required to pay property taxes on the hook for “services provided to the expanding base of nonprofit entities.” Expanding nonprofit entities does not actually fit with the fact that nonprofits and government was estimated to occupy two-thirds of real property in 1996.

The report recommends narrowing the allowable focus exemptions and mandating proof of ties to specific public benefits—in effect, showing they are “deserving of an indirect government subsidy.” It also recommends that use requirements be employed on nonprofit-owned property.

Currently, groups need be nonprofit to qualify for the property tax exemption; the report asserts that these exemptions apply even to property not associated with the primary mission and designed to make a profit—like commercial or rental property. BGR is recommending that legislators put a constitutional amendment before voters that would eliminate exemptions for any nonprofits “except those for religious, educational, charitable or cultural groups and cemeteries; provide parameters for the exemptions; prohibit lawmakers from granting property tax breaks to specific groups; and eliminate exemptions for groups with private memberships.”—Ruth McCambridge