In Features

Taxing nonprofits is an exercise in shortsightedness

Jul. 24, 2015 @ 12:47 PM

http://www.heraldsun.com/opinion/x399479219/Taxing-nonprofits-is-an-exercise-in-shortsightedness

Businesses, including charitable nonprofits, are a powerful and efficient force for positive social change – and we need their services now more than ever.

As board chair of United Way of the Greater Triangle and a long-time supporter of YMCAs, I am concerned about the Senate budget provisions that propose new financial burdens on North Carolina’s charitable nonprofits. If passed, these burdens would harm not only nonprofits, but the people and communities that depend on their services. Ironically, because non-profits often step in to cost-effectively relieve acute social problems that government can’t or won’t solve, these measures may actually increase the financial burden on the taxpayer and harm the long-term economic prosperity of our state.

If fiscal responsibility is our goal, then taxing nonprofits is a self-defeating move that legislators can and should reject.

Just two years ago, nonprofits received full refunds on the sales taxes they paid to support their charitable missions. In 2013, the Senate put a cap of $45 million on the refunds. This year, the Senate’s proposed budget includes a phased lowering of sales tax refunds, resulting in a roughly $1 million cap by 2020. The package would also limit the deductibility of charitable contributions on state income taxes, effectively eliminating any tax incentive for giving to nonprofits, regardless of size.

Taxing nonprofits will directly affect the communities they serve. Taking away an individual’s ability (some may say incentive) to claim a charitable exemption has the potential to dramatically reduce investments into the community. For an organization like United Way of the Greater Triangle, it puts $14 million at risk. To place an added burden on nonprofits, already struggling with increasing demands and shrinking resources, is to take resources away from North Carolinians in need.

This is a one-two punch that nonprofits and North Carolinians can ill afford.

Through my work with the Redwoods Group — a social enterprise dedicated to insuring and protecting youth-serving organizations — I have seen firsthand how nonprofit organizations often complement and work with both for-profit businesses and government agencies to advance the public good – a goal everyone, especially legislators, should strive for.

While I understand and respect the goal of tax reform, I am confident placing additional tax burdens on nonprofits is not the best way to achieve it. One simply cannot look at nonprofits solely through the lens of a budget. Rather, I implore legislators to consider the ripple effect that harming nonprofits would have on the entire state.

This proposed measure may be well-intended, but it appears to be short-sighted and counterproductive. Nonprofits should be allowed to continue to do the very thing they exist to do– provide programs and services that maximize community benefit and public good for all residents of North Carolina.

Kevin Trapani is president and CEO of The Redwoods Group and board chair of the United Way of the Triangle.