At What Point Does Tax - Exempt Status Become and Abuse?

[manualman]

First off, let me clarify that I think it is a GOOD thing that the government recognizes the contribution made by churches and church related ministries by granting them tax exempt status for both income and property taxes.

But does it get abused sometimes?

I know of an ordered community that owns a large property that once was a novitiate. It is their intention to develop it into a luxurious senior retirement center (adding many new buildings to the grounds) and to charge fairly hefty rents to the patrons. They will offers services such as assisted living, alzheimer’s care and nursing home services such that residents really never need fear needing to uproot from their community to get the services they need.

It’s a really nice idea, but it bothers me that what makes it all work financially is the tax-exempt status of the land. Folks in this price range can afford to pay taxes, why give them the tax exemption? Meanwhile here I am down the way on my own proprty paying thousands per year in property tax for the government services those folks get for free.

 

[ChadS]

I’m sure the rents seem hefty and completely out of line, but we should also remember that the sort of care you are describing for elderly and those with various forms of dementia is not cheap. After all many of those patients will require round the clock care and the order will most likely have to hire many qualified and trained non-religious nurses and others to provide this care. In a competitive market place these salaries will not be of no little concern. Once you start to add in the costs of maintaining and upgrading the facilities and their grounds the hefty rents are soon whittled down considerably. I suspect that their rents are not out of line with other units that provide comparable levels of service and comfort. Sure, it seems like they are getting something for free, but if that land was taxed or they lost their tax-exempt status then a project like this wouldn’t even be possible.

ChadS

 

[Godfollower]

The IRS (and local governments, too) already thought of this. If a non-profit 501(c)(3) organization owns a separate for-profit entity, then the for-profit entity is taxed, and contributions given to it are not tax-deductible. In effect, the non-profit is investing its funds in something that gives it a return on investment, which is no different than buying stocks or mutual funds.

Of course, if the nursing home or whatever doesn’t have any profits (on purpose, I mean ), then it’s a non-profit in its own right.