A Tax By Any Other Name is Still a Tax

by Gian-Carl Casa

Tucked into a large bill concerning local revenues is a proposal that would allow municipalities to assess a tax – this time called a “municipal public safety and infrastructure benefit charge” – on nonprofits of all types.

Section 6 of HB 7408 specifies a formula for determining the tax, which would apply to nonprofits that own real or personal property – pretty much all of them.

By whatever name is used, assessments on Connecticut’s nonprofits makes us all poorer. They take money away from the services nonprofits provide – away from things like homeless shelters, residences for people with disabilities, substance abuse treatment centers and arts and cultural institutions.

In the face of increased demand for services, years of state budget cuts and lower levels of donations due to federal tax changes nonprofits, nonprofits would also have to worry about being taxed by their local governments.

Municipalities and nonprofits have the same basic purpose – to provide services that improve our communities and the quality-of-life in our state. If towns levy taxes on nonprofits it’s like they are saying “we both provide services but I want to provide more -- so you have to provide fewer”.

Nonprofits are exempt from taxes for a good reason: they provide services so that government doesn’t have to. Tax exemptions are a way to compensate nonprofits for doing work on behalf of the community.

Many nonprofits contract with the state government to provide certain types of services. Taxing those entities means money appropriated by the state would – rather than be used for its stated purpose -- be paid to another level of government.  It would make state budgets less transparent, as it would be difficult to follow the fate of money appropriated for nonprofit missions.

How would donors feel if they thought their contributions wouldn’t be going to their local cultural or human services agency but instead be paid in taxes? It’s not a stretch to expect that this change will have a chilling effect on the ability of nonprofits to raise their own funds.

Nonprofit leaders understand that municipalities have their own tight budgets. But taking money from one type of community service to give to another would be counter-productive. The result will be towns that are less attractive to business investment or potential residents because they would lack the amenities provided by things like cultural organizations or important services such as behavioral health and services for children. It is short-term gain at the expense of the long-term health of our communities.

Members of the public should ask their legislators: do they think nonprofits should be taxed and, if so, who is going to provide services if nonprofits close their doors or move to a town that doesn’t tax them? 


Gian-Carl Casa is President and CEO of the Connecticut Community Nonprofit Alliance, a statewide association representing nonprofit agencies across Connecticut.