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February 28, 2010; New York Times | Probably the only thing that’s surprising about a New York Times story on states and cities threatening to revoke tax exemptions for charities around the country is what took them so long? The Nonprofit Quarterly has been covering this snowballing story in the newswire for many months. Just a few examples are here and here. Reeling from declines in tax revenues, and scrambling to fill growing budget gaps, city and states say they “have no choice” but to remove exemptions or hike modest fees nonprofits currently pay. Matt Greller, executive director of the Indiana Association of Cities and Towns, told the New York Times, “We’re having to look at the public services nonprofits use and how we can adequately cover those costs. We can’t give them away for free any longer.” Nonprofits fire back that such moves by local governments would do more harm than good, forcing many charities to cut back on services cities and states rely on them to provide, such as mental health and emergency foster care services. Tim Delaney, chief executive of the National Council of Nonprofits, a trade association notes that nonprofits, too, are suffering revenue declines but that “demand for the services they provide, services that government expects them to provide, is way up.” Some charity leaders say that because so many local governments are way behind on payments due to nonprofits for the social services they provide to communities, charities are actually giving a free ride to states and cities. “We’re effectively providing interest-free loans to state governments, which have been very slow to pay what they owe us, and now they’re asking us to pay more,” said Lisa Maruyama, chief executive of the Hawaii Alliance of Nonprofit Organizations. Among the revenue-generating proposals being floated around the country include requiring charities to pay a 1 percent tax, subjecting them to sales taxes, and revoking property tax exemptions from all but churches.—Bruce Trachtenberg
