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Councilmember Kathy Patterson, the tightfisted freshman lawmaker from Ward 3, is circulating to her colleagues draft legislation that calls for the mayor to provide in 90 days a listing and status of all organizations that receive tax exemptions from the District government. Meanwhile, three District clergy are demanding an official list of freeloaders in a letter they sent to Council Chairman David Clarke, Mayor Marion Barry, and Councilmember William Lightfoot demanding an investigation into the city’s liberal tax-exempt policies. Both actions are the opening salvos in what could become a battle royal between the District government and the city’s tax-exempt institutions.
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Patterson’s list would catalog all property located in the city that is owned by the federal government, foreign governments, churches, and nonprofits. The clergy—the Rev. Graylan Ellis-Hagler, the Rev. Daniel Aldridge Jr., and the Rev. Vernor Clay—aren’t specific about who should be on the list, but their churches are bound to be among the groups since religious organizations are exempted from taxes in the District.
Residents have long complained that millions in needed revenues evade the D.C. tax collector because the city does not levy property taxes on many nonprofits and churches, even where the groups’ activities are not related to their tax-exempt purpose. The District each year foregoes more than $200 million in property tax revenue because of exemptions given to religious and charitable organizations alone. Revenue is also lost because many nonprofits do not pay sales taxes, and if their income is related to their nonprofit tax purposes, the city also does not collect income taxes on their earnings. Some groups such as the International Monetary Fund, the National Geographic Society, and the Brookings Institution receive special exemptions from Congress. Others receive special exemptions because of liberal council legislation. (see “The Tax Free Zone,”12/2/94).
Patterson promises that the tax-exempt list she wants won’t be just another useless compilation of statistical data that the District bureaucracy is famous for creating.
This week, the Washington Post reported that Fannie Mae, a quasi-federal home mortgage company, avoids an annual bill of $300 million in corporate taxes because of the congressional exemption it was provided.
These exemptions are provided at a time the city faces a $531-million deficit and other municipal governments around the country are imposing “payment-in-lieu-of-taxes,” or “PILOTs.” The PILOTs have been implemented in cities including Cambridge and Boston, Mass., and New Haven, Conn., to name a few. Former Mayor Sharon Pratt Kelly proposed PILOTs for D.C. universities, but the plan was shot down before it really took flight.
“Everything ought to be evaluated; everything should be on the table,” says the Rev. Aldridge, responding to questions about whether he is prepared to have city churches and other nonprofits taxed.