Property tax exemptions remain, but changes loom

The Property Tax Exemption Study Committee members retracted their proposal to levy a marginal tax on public, pious and charitable organizations in Vermont. Photo by Hilary Niles/VTDigger

The Property Tax Exemption Study Committee members retracted their proposal to levy a marginal tax on public, pious and charitable organizations in Vermont. Photo by Hilary Niles/VTDigger

Tax-exempt organizations in Vermont can look at a one-year reprieve from legislative debate over how much they should pay in property taxes, but the delay brings the state’s Education Fund no closer to capturing new revenues to pay for its increasing needs.

Currently public, pious and charitable organizations, plus several other specific groups, do not pay the statewide property tax that funds public education in Vermont. But discussion is afoot to tighten the net on those exemptions and to start charging marginal tax rates to otherwise-exempt property owners.

A committee of lawmakers, administrative staff and some stakeholders met Wednesday afternoon at the Statehouse to draft legislation to that effect. They settled on some provisions, but hit a technical snag that shelved the most controversial proposals.

No new taxes on exempt properties are being proposed as of now. But a majority of committee members expressed willingness to levy property taxes on groups ranging from Girl Scouts and humane societies to hospitals and churches.

Asked whether any other state has removed or partially lifted tax-exempt status for religious organizations, Peter Griffin of the Legislative Council said he was not aware of the precedent being set elsewhere. (Legislative Council advises lawmakers on the legal technicalities of their bills, but does not advise for or against their policy choices.)

Committee members recognized that proposing such a change may be a tough sell to fellow legislators, could be perceived as “dangerous” by the public, may spark strident opposition from around the country and likely would end up in a protracted court battle.

Still, all but Sen. Kevin Mullen, R-Rutland, and Bill Johnson, of the Department of Property Valuation and Review, voted to keep “pious” on the list of organizations to tax. Voting to include religious organizations in the tax net were Rep. Alison Clarkson, D-Woodstock; John Fike, president of the Vermont Assessors and Listers Association; and Steve Jeffrey, executive director of the Vermont League of Cities and Towns.

In addition to opposing a tax on religious property, Mullin said that he wanted the University of Vermont off the property tax table, too.

For all other organizations, the committee’s discussion moved from “whether” to “how much.” The property tax rate calculation would not change, they determined, but only a percentage of any exempt property’s value would be assessed. What started at 25 percent at times came down to 10.

Sara Teachout, of the Joint Fiscal Committee, had been asked to report how much revenue the exemption roll-back would generate if it were levied on 25 percent of the exempt properties’ value. She returned a “very, very, very” rough estimate of $17.6 million.

Because exempt properties are not taxed, listers in many towns do not collect property valuation data for them. Teachout compiled a comprehensive database of all known exempt property values in the state, but there is a lot unvalued property, she said.

Ultimately, the missing data that prevented a more precise revenue prediction also deflated the committee’s momentum. They felt they could not make an effective case for such a controversial proposal without hard figures of how much money the political risk would be worth.

Members had expected to get that data by April 1, 2014, thanks to a provision in Act 73 that requires all exempt organizations to report their “replacement” values to their listers in the spring. But technically, Johnson said, that requirement was written in a way that it will not go into effect until July 1, 2014 — not in time for the 2014 Grand List.

Johnson said nonprofits can voluntarily report their insurance values to their towns in the meantime, and he is working with listers to get them used to valuing property that is traditionally exempted from property taxes.

With the explicit tax proposal gone for now, less controversial legislative language remains that still holds important implications for the nonprofits involved:

  • The definition of exempt hospital properties is refined.
  • Municipal property tax exemptions are extended to utility fixtures such as sewer pipes and culverts.
  • Property owned by a nonprofit must be operated for nonprofit purposes in order to maintain the property tax exemption.
  • The state’s Department of Property Valuation and Review will take charge of certifying whether an entity is exempt.
  • Colleges and universities will have to reach municipal service fee agreements with their host cities and towns.

What’s left of the committee’s draft legislation will be finalized and posted online in advance of a public hearing set for Dec. 16 at 1 p.m. Written testimony will be taken in advance to accommodate those who cannot attend the hearing in person.

Hilary Niles

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  • Jim Barrett

    This atheist and spend group in Montpelier won’t be satisfied until they have managed to run everyone out of the state because of high taxes. Instead of promoting ides for tax reductions, these high spenders would rather tax churches that are now exempt over any discussion of reducing the burden on everyone when it comes to taxes. The anti christian movement appears to be strong in Vermont as we walk down the isle of government confiscation via taxes. Anything to ripoff the residents and the holy grounds of churches is now in the minds of these tax thieves!

    • Lee Stirling

      Is there any way to “dislike” comments on VTDigger???

  • Wayne Andrews

    The tax and spend liberals just dont get it. Last year Shumlin and his ilk wanted to tax break open tickets from non profit clubs. That idea went over like a lead balloon and yes this new idea as well.

  • We wrote a check yesterday for $6,000 to the town of Monkton for 1 year income adjusted (down $1k) for our sad old 4th generation paintless leaking farmhouse and some land. In 2007 Monkton nearly sold it for paying taxes 9 months late. They never told me, a woman landowner. When I requested abatemant in light of our extraordinary circumstances, the board of Civil Authoritarians said no. Pay. Die, go away. A Church? Enviro non profit? …oh come on in for free and stay forever.

  • timothy price

    I certainly suggest that property taxes be reduced by 50% across the board, and all governments, which are totally expendable, reduce their budgets to match. This is part of the conservation effort necessary to improve efficiencies and to reduce poverty. Tax reduction is absolutely in order.

  • Phyllis North

    Tax exempt organizations benefit from local fire, police, snowplowing and other services. That could at least contribute something, though I recognize they could not afford to be taxed at full value. Boston recently started sending tax bills to nonprofits asking them to pay up to 25% of what they would pay if not exempt.

  • Page Guertin

    Property taxes are regressive and capricious. We should be taxing income, including that of religious institutions, to pay for education – a much more equitable solution.

    • Jim Christiansen

      If you wish to be equitable with taxation, you must tax based on total wealth, not income.

    • Lee Stirling

      I don’t disagree with you Page, but what those tax exempt institutions, religious or otherwise, will argue is that their presence and efforts enhance the public good. They’ll further go on to say that assessing them with a tax liability will reduce their ability to fulfill whatever their “mission” is be it patient care, homeless assistance, care for the elderly, food needs…etc.

  • Greg Lapworth

    Simple answer to increased school spending……..STOP IT! When you can’t afford it, don’t spend!!! All the Montpelier clowns should be replaced.

  • David Brown

    If our lawmakers worked as hard to reduce expenditures as they do to increase revenue, we would all be better off….and perhaps more key people would stay in Vermont.

    • Joy Karnes Limoge

      Nicely said David!

  • Joy Karnes Limoge

    And the students are allowed to vote! Why in the world would you allow students to vote on these issues when many of them will not remain in this State to see the destruction their votes have caused!

    • John Greenberg

      Very reasonable. How about a maximum voting age of 90, since anyone over that isn’t likely to “remain in this State to see the destruction their votes have caused” either.

  • Kathy Nelson

    Tim, School spending and teacher (and school admin) salaries are unjustifiably extravagant. Bringing down these costs should be the focus, not trying to swindle more revenue into an unsustainable system. That said, I don’t think any property should be tax exempt, that means any building used for any kind of social or religious function. Keeping the taxation fair on all properties keeps the taxes down for all.

  • David Dempsey

    It should be pointed out that many of the tax exempt entities that can afford to do make sizeable PILOTs. Where I worked, we bought a ladder fire truck for the fire department that could reach the tallest buildings in town. Of course the majority of exempts can’t afford to pay PILOTs, but taxing the ones that can afford to could stop making PILOTs because they are not happy about being charged for property tax. This could result in a net loss of revenue.

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