NONPROFIT PROPERTY TAX EXEMPTION

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					                   NONPROFIT PROPERTY TAX EXEMPTION  

WHAT IS THE ISSUE? 
The “rent-use-restriction” provision in the Wisconsin property tax exemption statute (section 70.11,
intro.) put nonprofit property owners at risk of having their property taxed - whether they owned
and leased housing to individuals who are some of our most vulnerable populations or whether they
owned their own property and leased it back to other nonprofit tenants. For years, these nonprofits
relied on tax-exemption as a way of keeping costs to a minimum - not so they could line their
pockets but so they could direct as much money as possible back into the community and to the
people they serve.

Now, it looks like a “fix” is in the works. It’s not the best answer to the problem because it does
not fix the problem for nonprofits that rent their space to other nonprofits for non-residential use,
but it’s a start. In summary, here is what the Joint Committee on Finance recommended as an
amendment to the State of Wisconsin 2009-11 Budget in Omnibus Motion 700:

      Residential property owned by a nonprofit organization and leased to low-income
       households will be exempt from paying property taxes regardless of how they use the
       leasehold income.
      The earlier acreage limitation is increased from 10 to 30 acres for all low-income property
       under common control in a municipality. In other words, if a nonprofit has several subsidiaries
       under common control, together they could own up to 30 acres (instead of 10 acres).
      Market rate units in a mixed-income housing project will be fully taxed rather than being
       exempt as they have been in the past. NOTE: This does not apply to existing nonprofit-
       owned WHEDA-financed low-income housing projects.
      To be exempt, nonprofit-owned single-family houses and condominiums must be occupied
       by households at or below 60% county median income instead of the 80% generally
       applicable in the past.
      No later than March 1 of each year, nonprofits that own residential real estate must file a
       report with the assessor of the taxation district in which the property is located stating which
       units are occupied by low-income residents. Failure to submit this report will result in a fine.
      All of the above conditions are retroactive to January 1, 2009.
      Nonprofit housing that qualifies as “elderly” housing is spared from the rent-use restriction,
       whether or not its tenants are low-income.
What’s missing is tax exempt language for certain nonprofit-owned non-residential property. It
remains at risk of being taxed. Principally, this includes any nonprofit-owned real estate that is
leased to other nonprofits (not for residential use) and that has been exempt in the past.



    For more information about nonprofit property tax exemption, please visit our website at www.forwardci.org
WHAT NEEDS TO HAPPEN NOW?
We can’t relax until the modified budget is passed - with or without further modifications to the
nonprofit tax exemption. Last year, another fix was proposed and Governor Doyle vetoed it on
procedural grounds. Today, this modification has the support of Governor Doyle. But that’s not
enough since it has to make its way through both the Senate and the Assembly - and a lot can
happen. So, what do you have to do to make certain that the recommendation to preserve property
tax exemption for nonprofit housing providers survives?

      Begin by calling members of the Joint Committee on Finance and thank them for including
       this nonprofit property tax exempt language in Omnibus Motion 700, but tell them that a
       few more changes are needed (as explained in Talking Points section of this handout). For
       contact information, go to: http://www.legis.state.wi.us/lfb/jfc.html.
      Make a special effort to get in touch with the following members of the Joint Committee on
       Finance who were key decision makers in crafting and supporting the recommendation:
       Representative Mark Pocan                              Senator Mark Miller
       Co-Chair of Joint Finance Committee                    Co-Chair of Joint Finance Committee
       Capitol 309 East                                       Capitol 317 East
       PO Box 7882, Madison WI 53707                          PO Box 7882, Madison WI 53707
       Rep.pocan@legis.wisconsin.gov                          Sen.miller@legis.wisconsin.gov
       (608) 266-8570                                         (608) 266-9170

       Senator Russell Decker                                 Representative Mike Sheridan
       Capitol 211 South                                      Capitol 211 West
       PO Box 7882, Madison WI 53707                          PO Box 8953, Madison WI 53708
       Sen.decker@legis.wisconsin.gov                         Rep.sheridan@legis.wisconsin.gov
       (608) 266-2502                                         (608) 266-7503


      And, be sure to extend similar thanks to Governor Doyle. You can reach his office at
       (608) 266-1212.
      And, don’t stop there. Call your own senator and representative and let them know that you
       support this recommendation. Just in case you don’t know who those people are, you can
       find out by going to: http://www.legis.wisconsin.gov/w3asp/waml/waml.aspx.
      You can also encourage the people you serve and their families to call and write their elected
       officials.
      If you have a chance to talk with your local elected officials, use the opportunity to tell them
       about this budget and why it’s important to you and other nonprofits.




    For more information about nonprofit property tax exemption, please visit our website at www.forwardci.org
TALKING POINTS 
Be prepared to make your case why nonprofit tax exemption is important to your organization, the
people you serve and your community - even if you don’t own or operate real estate. You may not
own property today but people you serve may be harmed by higher rents.

Please use these key messages and talking points to guide you in conversations about the importance
of nonprofit property tax exemption. In addition, it is important that you elaborate with details
about your organization’s specific situation and story.

Key Messages: These three guiding key messages about nonprofits provide a basic argument for
passing the amended budget with its language about nonprofit property tax exemption.

   1. Nonprofit property tax liability diverts money from necessary programs and services.

   2. Nonprofits are a vital part of our communities and provide public benefits that strengthen
      our communities.

   3. Donors intend all of the dollars given to nonprofits to be used to provide services and
      accomplish missions.

But there’s more to say. Let them know that:

      Market rate units in mixed income projects need to be exempt because the rent from the
       market rate units is used to subsidize the rent of the low-income units and is key to making
       the project work.
      Proposed legislation defines low-income as 60% of area median income. It should be
       defined as at or below 80% of area median income.
      Many nonprofits own buildings and lease space to other nonprofits - not for the purpose of
       building wealth - but as a way of minimizing expenses and maximizing services to their client
       base. These nonprofit owners will be subject to the current “rent use restriction” and not
       helped by the proposed legislation.
      Without the exemption, these properties, which are owned and operated by nonprofit
       organizations, may not be able to continue operating as is. These nonprofits provide a
       critical service to other nonprofits by making their rent affordable and providing important
       back-office support services.
      Without the exemption, tens of thousands of dollars will be added to the operating budgets
       of these properties. As a result, some will fail, become too expensive for the current
       occupants or require other sources of public subsidy to continue to operate.
      With the loss of tax exemption comes greater costs and higher rents which leads to a need
       for more public or private subsidy - creating a complicated “shell game.”


    For more information about nonprofit property tax exemption, please visit our website at www.forwardci.org
NONPROFITS: AN ECONOMIC DRIVER
Much attention is given to the condition of business and government in our state but little is given
to the role played by nonprofits as a third and independent sector. The most recent available data
provided by a survey conducted by the Wisconsin Nonprofits Association illustrates the significant
role played by Wisconsin’s nonprofits.

       There were 6,447 reporting charitable nonprofits in Wisconsin in 2003, excluding private
        foundations.
       Ninety-five percent of the economic activity generated by Wisconsin’s nonprofits remains in
        local communities, creating significant economic benefit for the state.
       The nonprofit sector is the fifth largest employer in the state.
       The sector provides nearly 250,000 jobs for Wisconsin’s residents. This is less than
        manufacturing, retail trade, services and government but more than finance, insurance, real
        estate, wholesale trade, transportation, communications and utilities.
       Reporting charitable nonprofits had $19.7 billion in expenditures in 2003 – slightly more
        than 9% of Wisconsin’s Gross State Product.
Nonprofits benefit us in ways that can’t easily be quantified: as tools for community building,
fostering civil society and strengthening our social fabric and they are essential to improving the
quality of life in our state. Wisconsin’s residents have and will continue to place their trust in the
responsiveness, performance and quality of services provided by these organizations.

Nonprofit organizations also:

       Attract foundation and federal grants into the state.
       Help improve the workforce. Many people gain valuable job training and work experience
        through volunteering with and working for nonprofit organizations.
       Frequently hire underemployed or unemployed workers and often reduce the labor force
        inequities by offering upward mobility to otherwise disadvantaged groups.
       Help to define the character of Wisconsin communities and improve the quality of life.
        Active nonprofits often prove to be strong incentives for remaining in or relocating to some
        communities.




     For more information about nonprofit property tax exemption, please visit our website at www.forwardci.org