Nonprofit Taxation

LFDA Editor

Nonprofit institutions are exempt from paying property taxes, but many New Hampshire cities and towns are now asking nonprofits to pay for municipal services through so-called PILOT agreements.

Under PILOT (Payment In Lieu of Taxes) agreements, nonprofits such as colleges, hospitals, and human service agencies - all of which are exempt from property taxes - are asked to voluntarily contribute to their city or town's budget. 

According to a recent study by the Lincoln Institute of Land Policy, while some PILOT programs can be flawed, they can have positive effects both for nonprofits and the communities they serve.

The study also notes that great majority of nonprofits which take part in PILOT agreements are universities and hospitals; smaller nonprofits such as human service agencies tend to rent space and thus do not benefit from the property tax exemption. However, since part of that rent goes towards the landlord's property tax bill, they are effectively contributing their full share of taxes to municipal budgets.

PROS & CONS

"For" Position

"Nonprofits should pay more taxes." 

  • Advocates for PILOT agreements say that nonprofits should pay for the services they consume, such as police and fire protection, road maintenance, and sewers.

"Against" Position

"Nonprofits should not pay more taxes."

  • Asking nonprofits to pay more taxes can lead to cuts in services, higher fees, and job cuts.

LEGISLATIVE HISTORY

Killed in the House

Establishes a commission to study the charitable status of certain nonprofit organizations for purposes of state and local taxation.

Signed by Governor

Requires a medicinal marijuana treatment center to give payment in lieu of taxes to a municipality if the center's nonprofit status grants a property tax exemption.

Interim Study

Applies the business enterprise tax to 501(c)(3) nonprofits with annual revenues - less contributions and grants - exceeding $10,000,000. This bill also lowers the rate of the business enterprise tax.

Killed in the House

Requires some nonprofits to pay the Business Enterprise Tax.

Killed in the House

Limits the exemption from property taxation granted to charitable nonprofit hospitals only to the main campus of the hospital.

Should nonprofits pay more taxes?

FOR
REPRESENTATIVES

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Issue Status

New Hampshire's Supreme Court ruled in December 2016 that a Durham church that was renting out parking spaces to college students had to pay property taxes on the parking lot. 

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