Posted: March 28, 2017

Property Taxes on Some Nonprofits under Consideration in the Oregon Legislature

Property taxes are one part of the solutions being discussed in Salem for the estimated $1.6 billion deficit in Oregon’s next biennial budget (2018-2019). Legislators believe that property tax reform can benefit local government budgets and correct a skewed property tax valuation system set up by the passage of Measure 5 and Measure 50 back in the 1990s. For a quick primer on Measure 5 and 50 read this article in the Portland Tribune.

The League of Oregon Cities is the main proponent for a change in property tax laws in Oregon. In their work to clarify property tax policy, the Legislature is looking into a number of exemptions, including the property taxes placed on nonprofits. The Oregon Association of County Tax Assessors have called on the legislature to create “bright lines” on how nonprofit property is exempted.

Several charitable benefit organizations who were determined by a county tax assessor to not meet the requirements of exemption, even though they had in previous years, filed court cases in the last year. Right now, the weight of the Oregon Legislature’s work is centering on clarifying the exemption status of Oregon nonprofit hospitals and health clinics through HB2115 which specifies requirements for property of nonprofit hospitals and nonprofit health systems to be exempt from taxation. Currently, HB2115 is being debated and there are no other bills proposed that create “bright lines” needed to clarify statute and help nonprofits and tax assessors know what is “in” and what is “out” in determining nonprofit property tax exemptions.

A new annual reporting requirement is proposed through SB181 which requires certain institutions seeking property tax exemptions to file information returns that state the basis for exemption claim in terms derived from Oregon case law. Currently, a nonprofit files their property tax exemption request once. If SB181 is successful, nonprofits that file a 990 would be required to file an exemption request annually.

NAO opposes this bill for three main reasons:

  1. The information proposed for inclusion in the new form is already available to the government through the annual 990 and CT-12 filings by nonprofits;
  2. The bill is an attempt to burden nonprofits with repeated filings to “defend” their exemption status with the likely outcome that more nonprofits will be “interpreted” by the county assessors as no longer eligible for tax exemption.
  3. Rather than create new reporting requirements, NAO believes that state and local laws on property tax exemptions should be simplified where possible to ensure a wide range of nonprofits are eligible and can satisfy reporting requirements without undue burdens. NAO believes the Oregon Legislature should clarity existing statute and create those bright lines.

TAKE ACTION: Despite our opposition, this bill has already passed the Senate and is now in the House Committee on Revenue for hearings. If you agree with NAO that SB181 is the wrong approach and creates burdens on your nonprofits for reporting, please contact your representative and send a letter to the House Revenue Committee. A list of members and email addresses can be found here. It is not too late!