Nonprofit Property Tax Update: 11/08/2010
Supreme Court decision favorable to nonprofits seeking tax exemption
Those nonprofits owning property and earning revenue through rentals or other income producing activities can relax for a moment. Yesterday, the Georgia Supreme Court decided in favor of Nuçi's Space in the Nuçi Phillips Memorial Foundation, Inc. v. Athens Clarke County Board of Tax Assessors.
The Georgia Center for Nonprofits was proud to stand up for our members and to stand by our member Nuçi's Space by writing and financially supporting briefs to the court on behalf of the nonprofit position and by convening leaders around this issue.
Issue History & Potential Impact
Nuçi's Space owns a building in Athens and earns revenue from rentals and concerts. Proceeds benefit its primary mission, which is offering mental health services to artists in the area. Nuçi's was denied tax exemption by the Athens Clarke County Tax Assessors who challenged Nuçi's fitness in meeting the definition of "charitable" as it is defined in the Georgia code. This seemingly small, local issue threatened in reality to change the definition of what is charitable in the state. For those organizations who own property and have a revenue-generating activity on that property, this case would have, if lost, opened the door to a sweeping loss of property tax exemption throughout the state. Literally millions of charitable dollars that would have otherwise gone to cause-related activity would have been redirected to local government as tax payments. Further, a loss would have dramatically narrowed the definition of charitable activity in this state.
The determination of the court was favorable for Nuçi's Space, which can now claim its exemption and use funds currently supporting local property tax to serve the mental health needs of its constituents. The decision also served to clarify conflicting interpretations of the code relative to tax exemptions on the use of nonprofit property for revenue generation in charities.
For those organizations who have previously been denied property tax exemption, or those who currently own property, it would be advisable to read the court's decision in this matter and apprise your boards of the details. If previously denied, this decision offers a strong argument for exemption.
In these economic times, when nonprofits are being urged to diversify funding streams and are struggling to meet rising needs, we celebrate this decision.
GCN's Next Steps on behalf of Georgia Nonprofits
Although this case was positively resolved, the language in the Georgia Code used to define charitable organizations continues to be an issue. For example, arts and cultural causes are explicitly absent from the description. GCN has been meeting with the Georgia Association of Tax Assessors; Georgia Municipal Association and the Georgia Association of County Commissioners to construct legislation that will clarify language in the code which has negatively impacted many organizations seeking property tax exemption. We will continue to pursue this course of action in the upcoming session and will communicate how our members can support this important advocacy initiative as we approach the 2011 session.