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Nonprofit Tax Would Hit Hospitals, Services for the Disabled

As Connecticut’s budget problems trickle down to municipalities some nonprofit organizations – including churches and hospitals – who are normally exempt from property taxes, may find themselves having to pay.

Two proposed bills would end the property-tax exemption for nonprofit hospitals or allow municipalities to decide whether or not to tax a nonprofit, which could cut the bottom line for organizations that do some of the heavy lifting for Connecticut’s social programs.

Jeff Shaw, public policy director for the Alliance – an association of nonprofit groups in Connecticut which serve over 500,000 people – said the changes would be “a cataclysmic change in state policy,” in his testimony before the Finance, Revenue and Bonding Committee.

“Nonprofits should be able to focus on fulfilling their missions and not having to use scarce resources and time to fight over a foundational component of why nonprofits exist in the first place – to serve community needs that would otherwise fall in the responsibility of government,” Shaw said.

Connecticut’s social services departments like the Department of Children and Families, the Department of Developmental Services and the Department of Mental Health and Addiction Services have long waiting lists for residents who need services.

The departments don’t have adequate staff to serve all those in need and the state of Connecticut essentially operates a dual program – paying state nonprofits to help take care of those individuals.

The nonprofit agencies say they are able to care for many more needy individuals than the state and can do so for nearly one-third the cost. 

State agencies like the DMHAS come with significant costs for taxpayers, including overtime payments to its unionized workforce. The state has recently started trying to shift more services to nonprofits. 

Meanwhile, Connecticut municipalities are struggling to find more revenue as the state pulls back on municipal aid to help fill budget gaps created by Connecticut’s unfunded pension liabilities, prompting towns and cities to chase after nonprofit organizations and hospitals for property taxes.

The change to property tax exemptions could also hit churches, particularly those that have properties that are money-making ventures.

In an interview with WNPR, Kevin Maloney of the Connecticut Conference of Municipalities said “In many of these cases with nonprofits, either part of their working space or other properties they own could be used for profit-making ventures, which then makes it taxable.”

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