YOUR ARTICLE ON THE tax-exempt status of the District’s many nonprofits was misleading to readers (“The Tax-Free Zone,”12/2/94). The sentiments expressed by some of the civic activists quoted in the article were shortsighted, and could have been balanced by comments from those who recognize the significant economic and civic impact of nonprofits on the vitality of the District of Columbia.
Aside from local service-providing nonprofits and major universities and hospitals, most nonprofits that do business in D.C. have the option of relocating to another jurisdiction. If the District were to attempt an across-the-board revocation of nonprofit tax exemption, it could expect a mass exodus of nonprofits. (Many national organizations have already moved to Alexandria, Arlington, Silver Spring, and Bethesda.) The article was correct in pointing out that most nonprofits in the District do not pay property or sales taxes, but failed to point out that these organizations do employ thousands of workers and help support hundreds of taxpaying businesses.
Jonetta Rose Barras also implied that nonprofits that perform services under government grants and contracts are receiving “handouts” from the D.C. government. Nonprofits are typically given government contracts to deliver social services more efficiently than the city government could. Their tax-exempt status helps them do that, and the city benefits as a result. Taking away that status would reduce their effectiveness.
Similarly, the article’s implied criticism of the Coalition for the Homeless and other organizations for spending substantial parts of their budgets on staff salaries is unwarranted. If a nonprofit’s mission is to deliver services, the salaries of the people who deliver those services are not “overhead,” and the money an organization spends on salaries is not relevant to whether it should pay property taxes.
As an organization dedicated to helping nonprofits operate more effectively, we applaud efforts to point out fraud and abuse in the nonprofit sector. We also are aware of the District government’s fiscal crisis. Taxing nonprofits, which will drive many out of business or to other jurisdictions, is not the answer.
President, National Center for Nonprofit Boards, Downtown