Fees to Raise Revenue for Street Maintenance Incorrectly Taxes Nonprofits

The Minnesota Council of Nonprofits is deeply concerned about the use of city fees, for things such as street lights and street maintenance, levied against properties that are exempt from property tax as institutions of purely public charity. MCN is tracking this issue throughout the state and recently submitted the following comments to the city of Duluth, which is considering such a fee for street maintenance. If your community is considering property-based fees that would impact nonprofit organizations that are exempt from property taxes, please contact MCN’s public policy director Susie Brown at 651-757-3060 or sbrown@minnesotanonprofits.org

Submitted Statement:
"The Minnesota Council of Nonprofits is concerned about the potential use of fees to raise revenue for general street maintenance in Duluth. Our concerns are related to the concept of fees versus taxes and the way that nonprofit organizations are affected. Scholarly tax analysis (Cummings, Jasper L., Jr., “User Fees Versus Taxes”) describes the principle differences between taxes and fees, terms which are often used interchangeably despite the fact that case law indicates that there is a clear difference, as: (paraphrased) taxes don’t require that the payer receive a specific benefit and fees provide a benefit to the payer for something direct, usually paid voluntarily. We are concerned about municipal revenue raising through fees, that actually would more appropriately be raised through taxes (providing for general benefit for the public rather than specific benefit to the payer), being applied to nonprofit organizations which are exempt from Minnesota property tax as institutions of purely public charity. Minnesota’s recent update of the state charitable property tax exemption law was carefully crafted to provide a clear set of requirements for the exemption of institutions of purely public charity. We believe that applying a fee to raise revenue for street maintenance would incorrectly tax nonprofit organizations that are constitutionally exempt from property taxes. On behalf of MCN’s members we urge you to reject the fee proposal for street maintenance in Duluth"

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