A member survey conducted by the Connecticut Community Nonprofit Alliance has found that an increasing number of municipalities in the state are denying or challenging nonprofits’ property tax exemptions.A total of 35 nonprofits responded to the survey, with 66 percent saying that their property had recently been assessed for taxes by a municipality after a history of it being exempt – even though 97 percent of the facilities being assessed had not undergone a change of use.
Among the municipalities reported to be denying or challenging the nonprofits’ tax exemptions are Bethel, Bridgeport, Fairfield, Norwalk and Stratford.
Charitable organizations are exempt from local property tax in Connecticut by CGS Section 12-81; Subsection (7) exempts the property owned by “a corporation organized exclusively for … charitable purposes.”
“Despite this statute and relevant case law, municipalities in Connecticut have been increasingly denying nonprofit property tax exemptions,” the alliance said in a statement accompanying its survey. “This forces nonprofits, burdened by years of state budget cuts, to choose between costly litigation and paying taxes on property that is exempt by state law. Either of these options diverts critical funding away from community services.”
The organization said that “a small number” of nonprofits reported that assessments on their facilities would not hurt their ability to provide services, as they currently receive reimbursement for such costs from the state. However, the alliance noted, rates have remained stagnant for years and would not account for increased taxes.
The group is recommending that the state legislature amend CGS Section 12-81 (7) to codify case law that defines “charity” in order to clarify the tax-exempt status of nonprofits.