August 17, 2011; Source: The Virginian-Pilot | Roger Chesley, a columnist for the Virginian-Pilot out of Norfolk, Virginia, approvingly writes that communities in the Tidewater region of Virginia have “begun taking a closer look at agencies seeking government goodies that—frankly—don’t need them.” Chesley calls for other Tidewater cities to “review their policies, especially at a time when the economy has remained stagnant and it’s been tougher for localities to pay for core services.”

For example, Chesley describes the plan of Suffolk City Manager Selena Cuffee-Glenn to initiate a review of policies regarding tax-exempt property owners. The review was prompted by a request from the Obici Healthcare Foundation to exempt its $1.7-million downtown headquarters from property taxes. Chesley describes the Foundation’s services and assets, including a $93 million investment portfolio, and concludes, “The proposed tax bite . . . would hardly make a dent in the foundation’s bottom line.”

Chesley then looks at the local YMCA as an example of “organizations [that] have altered their missions so radically that it’s surprising they still receive special tax treatment.” He characterizes the YMCA of South Hampton Roads as having “morphed into a lucrative fitness juggernaut with more than 100,000 members . . . [and a] chief executive [who] earns nearly $300,000 a year.” He says for-profit exercise clubs “grumble that the Y has an unfair, built-in advantage,” though he suggests that the state would have to decide if whether the YMCA should continue to be tax-exempt.

The City of Suffolk isn’t waiting for the state to make tax exemption determinations, announcing that for now it “doesn’t plan to revoke the exemptions of organizations that already have them”—as if it had the legal authority to do so. And that’s the problem. It may be that some individual nonprofits have drifted so far from their original mission that their nonprofit status is truly in question. And it may be that some classes of nonprofits, such as hospitals, have done little to distinguish them from their for-profit competitors.

But if every locality and every state is going to make its own nonprofit and tax-exemption determinations on their own, prompted by periods of fiscal difficulty rather than legal principle, and based on inconsistent, subjective criteria, the result is a free-for-all. Can you imagine every municipal and county government in the country determining for themselves the public-benefit and nonprofit status of the tax-exempt entities within their jurisdictions?—Rick Cohen