The exodus of middle-income residents from the District may go down as the last great migration of the 20th century. Citing deplorable municipal services, rising crime, and an ineffectual educational system, these former D.C. stalwarts have become D.C. haters.
Almost to a one, the departing hordes complain about the District’s confiscatory taxes—income, property, and sales—which make Washingtonians’ tax bills among the highest in the land.
But while the polis-sustaining taxpayers escape to Northern Virginia and the Maryland suburbs, a parasite burrows deeper into the District’s flesh: the multitude of nonprofit, tax-exempt organizations.
Nonprofit churches, institutions, and charities have flocked to the city and are growing like kudzu. Drawn by the District’s liberal policies, the nonprofits have taken millions of dollars of taxable property off the Department of Finance and Revenue’s (DFR) rolls. And while residents and businesses have endured the sting of the hike in the sales tax from 6 to 7 percent, the nonprofits have remained immune. They are exempt from sales tax on nearly everything they purchase—pencils, carpets, trucks, and more.
Taxpaying citizens must jump through fiery hoops to secure building permits for backyard decks, but churches are given building permits and zoning waivers for their expansion almost as a matter of right.
All the while, the burgeoning nonprofits are consuming basic services that cost billions to maintain: police and fire protection, the courts, the transportation infrastructure, just to mention the big-ticket items.
In less lean financial times, the preferential treatment accorded the demanding nonprofits wouldn’t turn a head. But the District faces a nearly $500-million budget deficit and a $100-million cash shortfall, an eroding tax base, and an ornery Republican Congress, which already signaled its willingness to reduce the $660-million payment the feds give the city each year.
Some civic activists say the plague of nonprofits is so deadly that it’s time to drag the sacred cows from the barn by their hooves and line them up for the slaughter.
“It’s come to the point where every entity should be taxed!” says Gail Barnes, an Advisory Neighborhood Commissioner in the 16th Street Heights community of upper Northwest.
Barnes’ ordinarily calm discourse on nonprofits and taxes reaches a quick boil.
“I’m looking for money to make this city come alive again!” she adds.
Barnes and others are quietly mounting a tax revolution, seizing on the city’s fiscal crisis to push for changes in the District tax laws. They note that even under optimum conditions, there is a paucity of taxable land in the District. Obviously, the city can’t tax its own numerous schools, parks, office buildings, and other facilities. The federal government has a lock on huge tax-exempt tracts of land, including expansive holdings along the Mall and on the Hill, as well as the National Park Service’s properties and the National Arboretum. The federal government also extends tax-exempt status to various foreign embassies, consulates, and residences, as well as other international organizations. But at least the fools on the Hill acknowledge the federal debt to the city, making an annual payment—which most residents consider insufficient—in lieu of lost property taxes.
But the nonprofits—gigantic organizations like the National Geographic Society, think tanks like the Brookings Institution, mega-universities like George Washington (GW), Howard, and Georgetown, do-gooders like Bread for the City, and the city’s hundreds of churches, synagogues, temples, and mosques—pay zero for the D.C. cop on the beat, the exhausted fireman, or the street cleaner. That bill goes to the taxpayers.
And those taxpayers are angry. Earlier this year, anti-tax activists sought to place on the ballot an initiative that would bar the city from increasing any taxes in the city without the direct consent of the voters (the measure failed to qualify). Meanwhile, another group calling itself Taxpayers’ Right to Know attempted to win ballot status for an initiative that would allow citizens to review and challenge the tax assessment placed on commercial property by the city. A court test knocked it off the November ballot, but both movements portend the fed-up-with-taxes mood in the city.
The neighborhood impact of the nonprofits first came to Barnes’ attention in 1989, as she took a leisurely stroll through her community. She counted more than 20 churches in a 1.4-mile stretch of 16th Street alone.
“That didn’t include the side streets,” she adds.
Some neighborhood activists are chastened by accusations that they are shortsighted, parochial, not-in-my-back-yard (NIMBY) types. Not Barnes: “I’ll own that title. I don’t want anybody in my neighborhood who isn’t paying taxes.”
There are plenty of inhabitants of Barnes’ neighborhood who aren’t paying taxes, from churches to social service organizations. She cites the social service group Renewal in Education and its group homes on Colorado Avenue and Blagden Street NW, and the soon-to-arrive Samaritan Inns, Inc.’s Tabitha House, which will provide low-cost housing for recovering substance abusers on Colorado Avenue NW. Both organizations have purchased large, extravagant homes in the area, and because they qualify as nonprofits, their expensive properties have been deleted from the tax base.
Barnes’ favorite example of how a rapacious nonprofit takes advantage of the District’s liberal attitude toward nonprofits, establishes a niche, and grows at the expense of the rest of the city is demonstrated by Sufism Reoriented Inc.
Located at 1615 Manchester Lane NW and 5916 16th St. NW, Sufism Reoriented Inc. is devoted to the “spiritual, metaphysical, and philosophical principles” of the Sufism Reoriented religious order. The group first nested in the District in 1953, and it boasted only 46 local members in 1980 when Ira Deitrick, its president, applied for a property and sales tax exemption.
By 1992, the order, headquartered in California, touted nationwide assets of $6.7 million and expenses of $2.4 million. About $1.3 million of its income was generated from tuition at the order’s private schools, one of which is located in the District, according to documents filed with the DFR.
Despite its growing assets, the order pays no property taxes on the Manchester Lane and 16th Street “mansions,” the combined value of which was pegged at more than $1.6 million by DFR in tax year 1994. Property taxes for the two houses and land would be more than $31,000 if owned by individuals.
While District taxpayers subsidize Sufism Reoriented, the group appears to violate city law. The Certificate of Occupancy permit granted to Sufism Reoriented by the Department of Consumer and Regulatory Affairs (DCRA) carries the stipulation that no more than 15 people live at the Manchester Lane address. But a recent review of Board of Election voter rolls reveals that as many as 31 claim the Manchester Lane facility as their voting residence. Barnes has filed a formal complaint with DCRA officials demanding that they investigate the group for possible violations. Gilda Warnick, a DCRA spokesperson, confirmed that the agency has received the complaint and is currently “looking into” the violation.
Organization President Deitrick declines to discuss Sufism Reoriented activities at Manchester Lane and also declines to comment about the human rights complaint filed by Barnes, who says she and her husband were denied entry to the religious center.
Most nonprofits shelter their assets and their financial activities under one of a series of tax-exempt categories established by the Internal Revenue Service, the more popular of which is the 501(c)(3) category. To qualify as a 501(c)(3) nonprofit, an organization must prove to the IRS that its mission is, among other things, charitable, educational, or religious, and is for the express benefit of the public, although the group may be privately owned. Universities, churches, social service organizations, and museums, for example, all fall under the general category of 501(c)(3) nonprofits.
The federal tax legislation that shields nonprofits was passed in 1918. At the time, only 200 groups stood to benefit from the change in the law, according to a report released earlier this year by the House Oversight Subcommittee of the Ways and Means Committee. Today, about 1.2 million organizations meet the federal requirements that exempt them from federal and most state income taxes. Each year, another 30,000 to 40,000 organizations are granted tax-exempt status nationally. Most of these groups also receive exemptions from state, county, and local taxes. Excluding religious organizations, the nonprofits annually generate $500 billion in revenues, have assets of approximately $1 trillion, and employ about 7 million people, according to the subcommittee’s report.
Nobody in the government has conducted an accurate census of nonprofits in the District, but the city estimates that they number between 8,000 and 10,000. City officials admit that they have no idea what the combined net worth of these groups is, nor can they estimate the amount of money the District loses because these groups don’t pay sales taxes when they purchase pencils, books, lawn mowers, or automobiles.
The District does, however, compile a register of tax-exempt property, listing the land and building value of more than 8,500 sites owned by the government, religious groups, foreign governments, hospitals, schools, charities, and other nonprofits. If some of the property owned by religious groups, schools, and other nonprofits had been taxed in 1994, the District would have collected more than $200 million; seven of the city’s major hospitals, including Howard, GW, Columbia, Providence, and Washington Hospital Center accounted for nearly $10 million of that amount. The total taxes the city failed to collect from nonprofits and other specially exempted organizations was just $44 million shy of the 1994 budget of the Metropolitan Police Department.
Locally, nonprofits win tax-free status after completing an application with DFR and consenting to an inspection of the property for which the exemption is sought. Each year, nonprofits “self-certify” that they are still using the property as stated on the originally approved application. Unless a complaint is filed about the use of the property or the nonprofit notifies the city of changes in use, the city makes no subsequent inspection, according to Gerald Tolliver, associate director of DFR’s Audit Compliance Division.
Some nonprofits’ tax-exempt status is written directly into the city’s tax laws or was grandfathered into the District tax code at the advent of home rule in 1974.
“Congress had some very set ideas about what should be included in the family of real [property] exemptions,” says Linda Holman, DFR’s supervising attorney adviser.
The National Geographic Society is one of the groups Congress protected when it granted the District home rule. Consequently, the Geographic’s headquarters and museum, which occupy nearly an entire city block of high-priced real estate at 17th and M Streets NW, are exempt from property taxes. Visitors who purchase books, posters, videos, and knickknacks from the Geographic’s store are charged sales tax, but the society doesn’t pay such taxes when it makes any purchases for the organization.
Other groups accorded tax exemptions directly by Congress include the American Pharmaceutical Association, the Medical Society of D.C., the National Lutheran Home, the National Academy of Sciences, the National Education Association, the Brookings Institution, the American Forestry Association, the American Tree Association, the Carnegie Institution of Washington, the American Chemical Society, and the American Association to Promote the Teaching of Speech, just to name a few.
All tax-exemptions come with a caveat: Twenty-five percent of all activities of local groups must benefit District residents. (National organizations are only required to set aside 5 percent of their activities for the benefit of the city.) But who is checking to make sure the District is getting its 25 percent “share”? DFR officials say they rarely monitor the benefits, nor can anyone recall such an inventory of the nonprofits over the history of the District’s 20 years of self-governance. Gail Barnes offers her prohibition from entry to the Sufism Reoriented religious center as tangible evidence that the law is unenforced.
Mayor Sharon Pratt Kelly attempted a harvest of the nonprofit green during fiscal 1992, when she proposed that local universities pay a “fee-in-lieu-of-taxes.” The amount was nominal: 55 cents on each assessed value of $100, which was about 25 percent of the Class 4 (commercial) property tax rate. If Kelly’s plan had succeeded, the universities would have reimbursed the city to the tune of $8 million. That’s a small sum compared to the amount that would be gathered if the schools weren’t exempt from property taxes. GW, one of the District’s largest landholders, would face a D.C. bill of nearly $13 million in tax year 1994 if its properties were taxable. That $13 million is almost enough to fund the city’s rent subsidy program for one year. GW’s imaginary tax bill is high because its downtown location enhances the worth of its land, but the substantial holdings of the other schools could easily generate another $13 million in tax revenue if put on the rolls.
But instead of taxing the schools’ assets, the city is allowing these institutions to quietly gobble up more property and actually shrink the tax base.
There was nothing novel about Kelly’s fee-in-lieu-of-taxes proposal: Yale University pays just such a fee to the city of New Haven, Conn., under a state law. Hospitals, universities, and state-owned property are covered by Connecticut’s program. The fee assessment is determined by a formula that takes into account the amount of property owned by the institution. Yale and other institutions pay the fee to the state, which kicks back the appropriate amount to the designated city—in this case, New Haven.
Michael Betz, New Haven city deputy comptroller and treasurer, says the special program was a lifesaver for the city about six years ago when it felt the pinch of a depressed economy.
“They’re a huge presence here,” says Betz. “You can’t miss them. It was only natural we turned to them. We collected $16.5 million [from Yale and city hospitals] out of the city’s $300-million budget.”
Yale also pays the city an additional $1 million for fire protection. The fire surcharge was negotiated directly with New Haven city officials, Betz says.
Connecticut state officials didn’t stop with the fee charge however; they reviewed all the property owned by universities and hospitals. The state learned that Yale’s golf course, which the school called an “athletic facility,” was simply a gathering site for rich business types who plotted deals while hitting the little white ball. The state immediately put the property back on the tax rolls, says Betz.
MIT and Harvard University wallets also were picked by Cambridge, Mass., city government, and Boston University didn’t escape its host city’s begging. Closer to home, Takoma Park, Md., put the muscle on Adventist MidAtlantic Health Care after it purchased the Heritage Health Care Center. Heritage had been paying the city $25,000 in property taxes, but because MidAtlantic was a nonprofit, it wanted an exemption. Takoma Park officials negotiated a fee-in-lieu-of-taxes agreement with MidAtlantic, although neither side is willing to say how much is being paid. But Nancy Grimmer, Takoma Park’s assistant city administrator, says the city hopes to reach similar agreements as nonprofits acquire new properties.
Ellen O’Connor, outgoing chief financial officer of the District, is proud of the Kelly administration’s success at snaring nonprofits that run commercial ventures. She cites Georgetown and Howard universities, both of which own and operate hotels. In earlier times, the hotels were exempted because university officials claimed the facilities were being used for educational purposes. Kelly administration officials investigated and found ample commercial activity to justify the payment of property taxes.
But O’Connor and her tax team have been reluctant to put the squeeze on churches such as Immaculate Conception, which owns seven properties near 7th and N Streets NW, three of which are apartment buildings. Even though the church collects rent from the inhabitants of the apartments, it pays no property taxes. According to the city register of tax-exempt properties, if it did, the church would have owed the city about $70,000 in tax year 1994. Golden Rule Apartments, owned by Bible Way Church, likewise escapes $31,288.95 in taxes. Both churches draw the tax-exempt status for their properties from special legislation by the D.C. Council, says O’Connor. She adds that “there are no obstacles” to changing such laws.
The Kelly administration isn’t consistent about keeping taxable land on the rolls: The mayor has embraced a proposal to take a square block of prime downtown real estate off the rolls for the sports arena under consideration for the Gallery Place site. The land alone has been valued at $70 million, and the cost for building the arena is estimated to come close to $200 million. The property taxes the city could conceivably collect aren’t a matter of small change.
But the District isn’t the only jurisdiction to engage in tax giveaways. Montgomery County exempted benevolent groups from paying about $27 million in property taxes for 1993, while Fairfax County provided slightly over $10 million in relief. In Prince George’s County, about $30 million of potential tax revenues from nonprofit organizations were exempted.
“The time has come to rethink our waiving of taxes,” says O’Connor. “We’ve got to expand our base and to call on everyone to make a contribution.”
But a council staffer says legislators are unlikely to take a broad-brush approach, requiring all nonprofits to pay some kind of fee-in-lieu-of-taxes: “It’s taboo.
“It’s really a sort of long-range change that won’t affect the city over the next two or three months. It’s more [aimed] at the growing problems of the city over the next several years. They ought to be planting seeds in 1995 for 1996 or ’97 and ’98. But that’s not the way we do business around here: We go from one crisis to the next crisis. But it’s something we should do,” adds the staffer.
Nonprofit executives, university officials, and church leaders claim that they’re pulling their share of the load, and defend the exemptions they receive from the government.
But behind their pronouncements, many nonprofits are shaking: They fear that a mandatory fee-in-lieu-of-taxes set by the District could elicit similar strategies by other municipalities around the country.
“We understand the struggle the city and other jurisdictions are going through in terms of needing funds, but that [a tax on nonprofits] would be a fundamental attack on the whole concept of what a nonprofit is,” says Betsy Johnson, executive director of the Washington Council of Agencies, whose 450 members are nonprofit organizations—350 of them in the District.
Besides, “what would we be like as a community without them?” she asks.
Most nonprofits in the District are small, and many do not own property. Those that do would have a hard time paying their bill, if one were issued, says Johnson. But, she admits, there has been some “loose talk among nonprofits” about maintaining the current status for small nonprofits and reclassifying universities. In essence, the small nonprofits want the fee-in-lieu-of-taxes movement to bypass them and sting only the big guys.
Universities are “notoriously strapped for cash” says Dwight Cropp, special assistant for intergovernmental relations to GW President Stephen Trachtenberg. As rich as GW is, Cropp claims that his school can’t be expected to pay any money.
“There are some universities that are operating on the edge—Howard being one, Mount Vernon, and Trinity,” notes Cropp, “and you couldn’t expect UDC [the University of the District of Columbia] to make a contribution.”
Cropp says GW pays about $6 million for its commercial holdings and is willing to provide noncash assistance to the city. When the Kelly administration dropped its fee-in-lieu-of-taxes bomb on unsuspecting school presidents, Cropp says GW and the other schools offered to “work with the city to figure out how we could contribute.” He says the university presidents suggested a variety of “in-kind contribution” options, such as assigning medical students to city health clinics, helping to manage homeless feeding programs, and adopting one or two city-owned recreation centers.
Kelly administration officials “were only interested in a cash infusion; they weren’t interested in a long-term relationship,” Cropp says.
Trachtenberg and Cropp met with Marion Barry shortly after his September primary victory to discuss the proposals they had presented to the Kelly administration, Cropp says. But Barry has yet to give an indication of his views on charging the nonprofits a fee-in-lieu-of-taxes.
Many in the nonprofit community can’t see the tax-exempt issue beyond their own personal interest—even self-professed radicals like Terry Lynch, executive director of the Downtown Cluster of Congregations. Lynch has waged a decade-long battle against fat cats and real-estate moguls, and sometimes even opposes his own nonprofit colleagues on matters of principle about government contracts and housing downtown.
But Lynch is a total team player when it comes to tax exemptions.
“If you add up the ledger of what the churches don’t pay for as opposed to what they pay in terms of volunteer hours and social services, it would be the government and the public getting more than they are foregoing,” Lynch says, citing such small, service-oriented groups as Bread for the City and the Homeless Services Unit as examples of nonprofits that provide residents with “privately funded” programs that the government normally would have to pay for.
Prodded about whether the city should impose a fee-in-lieu-of-taxes on big guys like the National Geographic Society or the National Education Association, Lynch still refuses to place the burden on the nonprofits: “Congress should recognize our role as home to these national groups and as part of the federal payment compensate the city.”
Lynch says the city’s fiscal crisis wasn’t caused by nonprofits, so they shouldn’t be expected to solve it, and he lambastes the federal government for providing the District with “home rule that has its hands tied behind its back.”
Judging from the revenue tallied by some nonprofits, these benevolent groups may be in a fine position to aid one of the city’s neediest—the D.C. government: Bread for the City, for example, collected about $713,650 last year, 21 percent of which went to management and fund-raising costs, according to the December issue of the Washingtonian. Catholic Charities generates about $12 million in annual revenues, while For Love of Children pulls in $4 million, and MANNA Inc., which has developed a reputation for its low-cost housing programs, tips the scales at $3 million.
Nonprofits are not only beneficiaries of liberal tax laws, they are also beneficiaries of the taxes paid by everyone else. Many of them—large and small—are receiving significant government contracts and grants. The effect is that residents are providing a double subsidy to nonprofits, including churches.
Dorothy Brizill, who made and lost a September bid for a council seat, notes that some churches operate for-profit child care programs and even rent their space at market-rate to outside groups. She says the old image of nonprofits as a struggling bunch of good Samaritans that the public holds does not jibe with the reality of how many of these organizations operate.
“You really have to regard nonprofits, including churches, as a business. Many of them have multimillion-dollar budgets. These are not small-time operations,” Brizill says, citing several groups previously or currently providing shelter to homeless residents.
It’s unfair to level a blanket accusation that several nonprofits cashed in on the city’s homeless problem, but that’s what it looks like from the outside. Following the passage of Initiative 17—the city’s Right to Shelter law—more than a dozen nonprofit groups sprang up to provide housing for the homeless on the government’s tab. Some of the groups were church-supported; others were Johnny-come-latelies that caught the smell of green.
John Shetterly started Seed Ministries after the passage of Initiative 17. At the time, city homeless facilities were filled to capacity, so Shetterly formed his nonprofit organization and sold the government on the idea of housing the homeless in some trailers he purchased.
By 1993, Shetterly’s group was receiving more than $3 million—its entire budget—in contracts from the Department of Human Services (DHS). According to reports in the Washington Post and the Washington Times, Shetterly was paid $60,000. None of the contracts were competitively bid, so Seed Ministries didn’t have to worry about anyone stealing its business. Seed folded when it lost all of its DHS contracts, but the organization wasn’t the only nonprofit to benefit from government contracts: In 1991, the Coalition for the Homeless spent $1.7 million of its $3.3 million on staff salaries, according to its then-Director Diane Flanagan-Montgomery. Neither of the two groups paid any taxes to the city government.
Meanwhile, the nonprofits have learned the fine art of lobbying. Earlier this year, a group of nonprofit housing organizations banded together to battle the downtown housing provisions of the Comprehensive Plan, the city’s master planning document. The plan called for the construction of additional downtown housing, but the nonprofit groups allied themselves with real-estate developers to move the construction into outlying neighborhoods. The developers sought to dodge their obligation to build downtown housing, because it isn’t as lucrative as office space. A clause in the law would allow the developers to pay the nonprofits a one-time cash subsidy for new housing in outlying neighborhoods instead of building downtown.
The posse of lobbying nonprofits included MANNA’s Executive Director Jim Dickerson, Anacostia Neighborhood Development Corp. Executive Director Albert “Butch” Hopkins, and H Street Development Corp. Executive Director William Barrow. Aided by Council Chairman David Clarke, the nonprofits and the developers shifted some housing from downtown, but also raised the ire of residents who accused them of failing to register as lobbyists and turning against the very people who subsidize the operations of their organizations—District taxpayers.
The specter of militant nonprofits making policy sounds like the lunatics taking over the asylum. In New York City, some residents have already been hammered by the political clout of nonprofit social service organizations.
“In the last decade, while the rest of the city’s job base shrunk by 10 percent, private social service jobs surged 60 percent to 150,000,” write Robin Kamen and Steve Malanga in Crain’s New York Business. The writers’ two-part series shows how nonprofit organizations win large, lucrative contracts from the city government and use these contracts to bolster their political power: Drawing on that new status, many of the nonprofits’ directors have run for political office and won, then set out to assist their former colleagues—often funding programs sometimes unwanted by local residents.
In 1978, New York spent about $8 million on shelter for homeless single people; by 1985, the amount had grown to $100 million, much of which passed through the treasuries of the nonprofits, which later lobbied for even more funding.
“The availability of that kind of financing has helped redefine the private nonprofit world. Groups that were having trouble raising money privately transformed themselves into government contractors,” Kamen and Malanga write. And, as in the District, “program managers and other social workers created new agencies to chase funds they knew were becoming available.”
In the District, nonprofit organizations captured more than $100 million in contracts and grants from DHS alone in 1994. Catholic Charities, one of the larger contractors with DHS, receives about $4 million, while the Whitman-Walker Clinic gets about $3 million; neither pays property taxes, according to DHS officials.
Ward 2 Councilmember Jack Evans, a critic of the city’s current tax structure, rejects the notion of taxing churches. But he believes that the large organizations that have had special property tax exemptions bestowed upon them by the federal government—the National Geographic Society, the International Monetary Fund (IMF), and the World Bank, for example—should pay something.
“We could ask the feds to carve out some room to say [to the groups], “You have to start paying property taxes just like everyone else,’ ” he says.
In-kind services from universities is the path of least resistance, says Evans, reasoning that any push by the District for cash infusions would elicit a congressional blitzkrieg of high-paid lawyers and lobbyists “that would stop us from doing it here, so it doesn’t happen someplace else,” says Evans.
Outgoing Councilmember Jim Nathanson (D-Ward 3), whose constituents are poised to secede to Maryland, says revisiting the fee-in-lieu-of-taxes concept “is valid.” However, he cautions that small service groups should not be placed on the same scale as larger organizations.
“There are some large nonprofits who obviously could afford to pay some kind of fee to the city,” he adds.
But most large nonprofits, aside from universities, say they haven’t even been asked to ante up: “Nobody contacted us,” says Stanley Wellborn, director of public affairs for the Brookings Institution, where Alice Rivlin was a fellow when she in 1990 conducted a comprehensive study of the city’s financial future.
The Brookings Institution property on Massachusetts Avenue NW is valued at $17 million, according to the DFR register, and its potential tax bill is $372,449.
Wellborn cites such direct benefit of Brookings to District residents as a “victory garden” it sponsors, and its generosity in sharing its parking spaces with neighbors over the weekends and allowing other nonprofits to use its conference rooms gratis.
“We really like being in the city,” says Wellborn, noting that more than one-half of its staff lives in the District. “The head of our board of trustees, Jim Johnson, who also heads Fannie Mae, lives in D.C.”
He says Brookings would be willing to consider a fee-in-lieu-of-taxes payment agreement if “it were voluntary” and if “it were fair to everybody.”
Barbara Moffet, a spokesperson for the National Geographic Society, says that last year it assisted the District through a multimillion-dollar educational program, including donations of books it values at $1.2 million. The society’s 17th Street property is valued by DFR at $118 million; its hypothetical tax bill for 1994 is $2.5 million.
Shaking the IMF or World Bank money trees for the D.C. Treasury would take an act of Congress. Both organizations, though for-profit, received their congressional exemptions in 1945 as part of the terms of an international treaty. Both groups are exempt from paying taxes on any real estate they hold in the city—regardless of how they expand.
But the Heritage Foundation may find itself paying the fee-in-lieu-of-taxes. The conservative think tank is in a pitched battle with the District government over its property tax exemption for its new building at 2nd and Massachusetts Avenue NE, according to Peter Pover, vice president and director of administration and finance.
Pover says the city wants it to pay for space currently being used by its “fellows,” space that was not previously taxed. The city and the foundation are currently negotiating a settlement to the 18-month dispute, but Pover says Heritage demands that it not be treated any differently than the Black Congressional Caucus or the Hispanic Caucus.
DFR’s Holman declined to comment about the battle, citing the agency’s practice not to discuss litigation while it is pending.
Pover reiterates Lynch’s notion that the nonprofits didn’t cause the city’s financial problems and that they shouldn’t be expected to bail it out.
If DFR Director Lorraine Britton has her way, the nonprofits will be a part of the tax solution. DFR is reviewing the laws with an eye to recommending legislative changes: “The more we can tighten up, the better it is for the government,” Britton says. “I should be coming forward with a package in the next two or three months.”
At the very least, the District should monitor the nonprofits to make sure they are operating within the bounds of the tax code.
Gail Barnes proposes a more elegant way out of the crisis:
“Maybe we all can be a religious residence and get off the tax rolls,” she says.
“The bottom line is, it isn’t fair….We can’t continue to take things off the tax rolls; there’s no tax rolls left,” she continues. “If you are going to take from this city, by golly you ought to put something back in.”
Art accompanying story in the printed newspaper is not available in this archive: Peter Hayes.