July 11, 2017; Omaha World-Herald
As readers may remember, local property tax exemptions have been actively in play over the past few years, with some judgments being made on the degree to which the organization looks and acts like a nonprofit. In this newswire, we look at two examples of this questioning—one in New Jersey and another in Nebraska.
The line between nonprofit and for-profit activity for hospitals has blurred over time, and New Jersey has been trying for years to clear up some of the complexities of modern nonprofit hospitals. As a result, New Jersey lawmakers have found themselves between a rock and a hard place.
In June 2015, Judge Vito Bianco’s decision in AHS Hospital v. Morristown denied the hospital’s tax-exempt status based on the existence of numerous profit centers within the facility. Tax assessors who looked at the inner workings of a hospital found that hospitals intertwined their activities and operations with those of for-profit entities. This has, according to committee testimony, left 41 of the state’s 58 nonprofit hospitals involved in tax litigation.
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If passed, this bill would delineate a significant difference in how the state views nonprofit hospitals and all other nonprofits.
In Douglas County, Nebraska, challenges have been mounted over the past few years about the property tax exemptions of three local thrift stores owned by the Salvation Army, Habitat for Humanity, and Goodwill Omaha, respectively. The first two have since been ruled property-tax exempt, but no decision has yet been rendered on Goodwill Omaha, which was investigated last year for various issues that included unsavory business practices, nepotism, and ugly compensation patterns.
In the end, the assessor’s office, which recommended against the tax exemptions, argued that the findings of that investigation, including the combination of high executive pay with subminimum pay to some 100 employees with disabilities, revealed an organization driven less by charitable purpose than by profitmaking. These concerns were then brought forward into a reconsideration of the tax status of the Salvation Army and Habitat for Humanity stores, as well as Goodwill’s.
Since the exposé, Goodwill says it has cut its executive pay by about $1 million, reducing the number of executives making more than $100,000 by two-thirds, and subjected itself to a number of reviews of its ethics, management structures, and business practices. Still, if they cannot answer the questions that apparently remain outstanding to the county’s satisfaction, the organization may have to pay between $300,000 and $400,000 in property tax each year.
Again, this case exemplifies the problems that can be built, one on another, upon the foundation of an inactive and inadequate ethical framework.—Suja S. Amir and Ruth McCambridge