Filing the proper paperwork and making a clear case for tax-exempt status were among the topics discussed Friday, Jan. 11, at the West Tisbury library as the Martha’s Vineyard Nonprofit Collaborative (MVNC) held a forum for the Island’s charitable organizations.
This follows high-profile cases in Tisbury and Aquinnah where nonprofits suddenly found themselves facing property taxes after years of being exempt from them. The M.V. Playhouse has been tax-exempt for 25 years, and just recently started being taxed. The Gay Head Community Baptist Church parsonage was also recently assessed.
Assessors said the reason the properties needed to be taxed was because they were not being used strictly for their intended benevolent purposes.
Michael A. Kehoe from Partridge Snow & Hahn LLP, in New Bedford, highlighted the importance of timeliness when submitting state filings.
“Always have your annual report filed with the commonwealth of Massachusetts secretary of state’s office on time, due on the first of November,” he said.
One reason several nonprofits had their exempt status revoked was because they did not file proper documentation in a timely manner.
Others, assessors say, were not being used for literary, benevolent, charitable, scientific, or temperance purposes, therefore were not in compliance.
One particular form Kehoe stressed the importance of was the 3ABC, which involves real estate and personal property. The 3ABC is due on March 1, along with the Form PC, as required by law of all nonprofit charitable organizations. The 3ABC must be filed annually by any nonprofit that owns real estate in order to receive a local tax exemption. Kehoe said the 3ABC provides the organization a chance to describe to the state how they are achieving their charitable purpose with that property.
For nonprofits who have already received tax-exempt status, Kehoe said, “you’re not out of the woods. You still have to file annually with the 3ABC.”
Kehoe said nonprofits should try to “beef up” their forms: “Just copying your 3ABC year by year is not the way to go.”
Kehoe gave credit to tax assessors for a job he said “is a very difficult one.”
“In many communities it is physically impossible to actually go out and appraise every single piece of real estate every year,” Kehoe said.
For this reason, former Tisbury tax assessor David Dandridge said, assessors use what’s called Computer Assisted Mass Appraisal (CAMA) to assess a large number of properties. He said the program “isn’t perfect,” which is why it’s important to communicate with assessors and ask questions if anything is unclear.
“Be proactive in dealing with boards of assessors; try to introduce yourself, and establish a positive relationship,” Dandridge said.
Despite rising tensions between assessors, town officials, and Island nonprofits, Dandridge said, any distrust toward Island assessors is misguided. He insisted that assessors are not charged with raising revenue, and certainly don’t have ulterior motives. “They are there to impartially comply with the laws of the commonwealth.”
“It’s the impartiality that’s the most important thing.”
Dandridge gave an overview of the role of assessors that he said is more complicated than most people understand. “One goal is attempting to arrive at an equalized evaluation across the whole state,” Dandridge said. “The purpose of that is so the state has a reasonable basis on which to divide all the assets they return to the community.”
Once a piece of real estate or real property is exempted, Dandridge said, that property isn’t taken off the tax rolls, but instead has to be “spread across the rest of us.”
Derrill Bazzy referred to the Gay Head Community Baptist Church parsonage, which has been used as affordable housing for years and only recently lost its tax-exempt status. He asked whether a parsonage that is subsidized and committed to affordable housing would still be considered tax-exempt.
Kehoe said if a parcel of land is no longer being occupied by a minister or religious leader, you still may be able to have it exempt, but will have to submit a 3ABC describing the new nature and mission of that land.
Elizabeth Manchester of Partridge Snow & Hahn LLP spoke on the topics of fundraising goals and financial policies.
She talked about excess private benefit, and gave an example of an executive director staying in a building owned by the nonprofit organization: “You need to have policies in place to determine what is a reasonable amount of benefit going to executives.”
She mentioned executive directors with excessively high salaries, and whether that level of compensation is justified: “I suggest having an executive compensation policy; it’s very important.”
Manchester also highlighted the importance of being able to say no to property donors if long-term upkeep of the property is unrealistic. “A lot of the time, organizations take on assets or restricted gifts where a gift is endowed and must be maintained consistently, and they simply don’t have the funds to do that,” she said.
Gerald Jones, president of the MVNC, told The Times he has heard nothing but good feedback from those who attended the talk.
“The primary reason we organized this was to bring information, learning, and tools to better equip nonprofits,” Jones said. “A large part of it is following the law, and knowing best practices.”
Jones said keeping filings up to date and communicating openly with assessors are essential goals for all nonprofits to strive for.
For those who don’t understand the law, Jones said, it makes sense for them to question the process through which assessors make their determinations.
He said regular meetings with assessors and developing “upstream communication” will benefit everyone involved.