In this Issue:
- Land Trust Wins Property Tax Exemption Case
- New Streamlined 1023-EZ Application Form For Small Nonprofits
- E-Bulletin Information
Land Trust Wins Property Tax Exemption Case
In early August, the Maine Supreme Judicial Court issued a landmark property tax exemption decision in Francis Small Heritage Trust, Inc. v. Town of Limington, 2014 ME 102 (Me. 2014). The opinion puts to rest several arguments that municipalities have raised over the years in denying property tax exemption applications by land trusts. Although the bulk of the opinion addresses issues particular to land conservation and similar environmental organizations, one key issue has widespread applicability to all Maine nonprofits seeking property tax exemption. I was pleased to play a role in this process by co-authoring a joint Land Trust Alliance – Maine Coast Heritage Trust amici brief in support of FSHT.
First and foremost, the Law Court held that land conservation is indeed a charitable purpose within the meaning of 36 M.R.S. § 652(1)(a) and that the typical land trust preserve is eligible for property tax exemption. The Court quoted extensively from three Maine statutes (the Natural Resources Protection Act, the Land For Maine’s Future enabling act, and the Growth Management Act) in declaring that “the Legislature has enunciated a strong public policy in favor of the protection and conservation of the natural resources and scenic beauty of Maine.” Because FSHT assists the state in achieving these conservation goals, its land conservation activities are charitable. This analysis follows the traditional “lessen the burdens of government” prong for demonstrating that an activity is charitable. Significantly, the Law Court distinguished the typical Maine land trust preserve, where public access is permitted and encouraged, from the facts of a troublesome older case, Holbrook Island Sanctuary v. Inhabitants of the Town of Brooksville, 161 Me. 476 (Me. 1965), involving a wildlife sanctuary where public access was heavily restricted and discouraged.
In a part of the opinion that has widespread applicability to Maine nonprofits, the Law Court dispensed with the Town’s contention that a section of FSHT’s Articles of Incorporation reflected a non-charitable purpose. The key disputed phrase was that FSHT’ purposes included “protect[ing] appropriate uses such as logging, farming and other compatible commercial activities.” Because there was no evidence that FSHT engaged in any purely commercial activities, the Law Court did not find this language disqualifying. In a key footnote, the court noted that even if an organization engages in incidental non-commercial activities, language in the Articles that authorizes these activities will not defeat an otherwise legitimate exemption request. This holding should be very helpful in preventing municipalities from denying exemptions based on minor drafting ambiguities.
The process of applying for property tax exemption, and disputing a negative decision by a town assessor, can be very confusing for Maine nonprofit organizations. Many organizations give up in the face of resistance by towns, when in fact if they persisted they would likely prevail in obtaining exemption. The Maine Association of Nonprofits has recently posted a white paper that I wrote that offers information on this process. Click HERE for the paper, entitled A Primer on Property Tax Exemption Procedural Choices. In addition, MANP has also posted a shorter piece on whether an organization is eligible for property tax exemption.
New Streamlined 1023-EZ Application Form For Small Nonprofits
In July, the IRS issued the new Form 1023-EZ, a streamlined application for small nonprofits to obtain a 501(c)(3) determination letter. The Form 1023-EZ is just over two pages, and is much simpler than the full Form 1023. For example, an organization using the 1023-EZ no longer has to provide a narrative description of the organization’s activities or any financial information. And the filing fee for the 1023-EZ is $400 (as compared to $850 for the full Form 1023). Anecdotal reports suggest that 1023-EZ applications are being processed and approved by the IRS in a matter of 2-4 weeks, a much faster turnaround than the full Form 1023.
To be eligible for the Form 1023-EZ, an organization must:
Have gross receipts of $50,000 or less and total assets of $250,000 or less
- Be a corporation, trust, or association (no LLCs)
- Be organized and operated in the United States (no foreign organizations, including those with foreign mailing addresses)
- Not be a private operating foundation, church, school, hospital, supporting organization, and testing for public safety organization.
For more information and links to the form and instructions, see http://www.irs.gov/uac/Newsroom/New-1023-EZ-Form-Makes-Applying-for-501c3Tax-Exempt-Status-Easier-Most-Charities-Qualify.
I send the Maine Nonprofit Law E-Bulletin 3 or 4 times per year to provide updates and analysis on legal and policy matters respecting Maine nonprofit organizations. I do my best to keep the messages brief, timely, and useful to nonprofit staff, board members, volunteers, advisors, and donors. At the same time, no one may rely on these E-Bulletins as legal advice, and I encourage you to consult a qualified attorney for advice on any particular situation.
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CIRCULAR 230 DISCLOSURE: Any federal tax advice contained in this communication or attachment is not to be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending any transaction or matter addressed in this communication.