Financial distress has led to a rise in the shuttering of tax-exempt property owned by non-profit organizations. Typically, nonprofits are not subject to property taxes if they use their properties for charitable purposes. Because these now-fallow properties are no longer being used, a debate has emerged over whether to assess them a property tax. On one side of the debate are those who argue for a strict construction of “charitable use”—one that would exclude non-fallow properties from exemption. Proponents of this construction argue that fallow nonprofit property should be taxed to share the burden of cash-strapped local governments. On the other side of the debate are those who argue for a broad construction of “charitable use”—one that reflects the purposes of nonprofit tax exemptions by excluding fallow nonprofit property from taxation. Proponents of the broad exemption argue that taxing these properties only serves to further strain financially troubled nonprofits, leading to fewer services for the people these nonprofits serve, and in turn placing greater demand on the government. Further complicating the issue is the diverse construction of tax exemptions across the fifty states. This Note examines the varying constructions and purposes of property tax exemptions for nonprofits. The Note concludes by suggesting a simple, more uniform system of taxing nonprofit property under the broad construction of “charitable use” so that fallow nonprofit property remains exempt. This approach would best serve the purposes of nonprofit tax exemptions and the people nonprofits serve.
The full text of this Note is available to download as a PDF.