Don’t harm soup kitchens and homeless shelters!
That’s the feedback state Representative David Nangle got last year when he proposed that some Massachusetts nonprofits be forced to pay property taxes.
Despite complaints that some tax-exempt groups aren’t paying for their fair share of municipal services, his plan was derailed by concerns it would hurt small, low-budget charities.
Now the Lowell Democrat is back with a new proposal that addresses those fears: It targets only nonprofits that pay their executives hundreds of thousands — and sometimes millions — of dollars each year.
Nangle’s revised bill, filed Thursday, would apply just to public charities whose five highest-paid employees collectively make more than $2.5 million annually, such as at colleges and hospitals. That amount would include not only base compensation, but retirement benefits, bonuses, and perks like cars and housing.
“The nonprofits I’m looking at are the ones that pay excessive compensation packages — nonprofits that, in my opinion, hide under the guise of a nonprofit,” Nangle said. “If large nonprofits are going to compensate their executives like they’re Fortune 500 companies, then they should have the same tax obligations of a Fortune 500 company.
“Your YMCAs, your sober homes, your boys and girls clubs — all of those nonprofits would be excluded from my bill,” he added, “simply because their top five salaries would” be unlikely to exceed $2.5 million.
The proposed legislation comes after a Globe report showing that at least 93 employees of Massachusetts nonprofits made $1 million or more in 2014. That includes the former president of the Quincy-based National Fire Protection Association, James M. Shannon, who earned $4.1 million, and its chief financial officer, Bruce H. Mullen, who made $1.2 million.
An association spokeswoman said their compensation included lump-sum payouts from pension benefits accrued over decades.
Nationwide, at least 2,692 nonprofit employees made $1 million or more in 2014. Yet many of those organizations operate tax-free while using public services such as roads and policing, even as real estate taxes escalate statewide.
By not taxing nonprofits, said Nangle, “we’re leaving hundreds of millions of dollars on the table that could be going to the coffers of cities and towns for schools, public safety, infrastructure, parks, improving the quality of life of residents, and, most important, helping keep property taxes down.”
The CEO of the Massachusetts Nonprofit Network, Jim Klocke, said it would oppose the bill.
“Nonprofits are doing a lot, they’re being asked to do a lot more, and resources available to them are shrinking or on the brink of shrinking,” he said, noting that several Trump administration proposals would cut funding to the nonprofit sector and reduce incentives for charitable giving.
Nonprofits also say they provide community services that reduce the burden on government, such as caring for the disadvantaged. Their tax-exempt status preserves their revenue for charitable work, they note.
‘The nonprofits I’m looking at are the ones that pay excessive compen-sation packages.’State Representative David Nangle, Democrat of Lowell
For all those reasons, Klocke said, “this is the wrong time to take money away from nonprofits.”
Nangle’s bill would require affected nonprofits to pay taxes on their property, with the amount declining over four years until it reaches 25 percent of what it would be if they weren’t tax-exempt.
His previous bill, filed last year, applied to all nonprofits. This one would mainly affect hospitals and colleges, which routinely pay their top executives seven-figure salaries, plus generous benefits.
It was prompted by the University of Massachusetts Lowell’s purchase last year of a 230-unit apartment complex in the city, which it plans to turn into a dormitory. As a result of the sale, Lowell will lose $321,000 in annual property taxes because UMass is exempt from paying them.
“But this is way bigger than
UMass Lowell and way bigger than the UMass system,” Nangle said. “This is about the large nonprofits paying exorbitant compensation packages to their CEOs.”
To make the bill more palatable, it would be “local option” legislation, meaning cities and towns could decide whether to adopt it.
It would also allow nonprofits to avoid being taxed if they agree to make so-called payments in lieu of taxes to compensate for public services they use. Some currently make those payments, but the arrangements are voluntarily and participation is uneven.
“I anticipate a lot of pushback,” Nangle said, “but the bottom line for me is that nonprofits should be shouldering their share of a city or town’s property taxes.”Sacha Pfeiffer can be reached at email@example.com. Follow her on Twitter @SachaPfeiffer.