Nonprofit no more: Norwich assessor denies tax exemptions to agencies
Norwich — Nearly three dozen nonprofit arts, human services, health, veterans, religious and educational organizations will be taxed this year under sweeping decisions by Assessor Donna Ralston to deny tax-exempt status or rule them ineligible for failing to file required paperwork.
The list includes venerable Norwich institutions, such as Norwich Arts Center, Bethsaida Community Inc., Reliance Health, four lots owned by Norwich Free Academy, two Veterans of Foreign War posts and an American Legion hall. The 15-acre historic Lowthorpe Meadow in Norwichtown will be assessed for $35,700.
United Community and Family Services, which owns five properties for its broad-ranging health and human services operations, would be taxed on a combined assessed value of $4,370,200.
The Southeastern Connecticut Cultural Coalition might have the smallest assessment, totaling $740 for office equipment. The coalition rents a small office at the Foundry 66 shared workspace facility run by Norwich Community Development Corp., which also is set to be taxed for the first time.
The actions angered and frightened leaders of nonprofit entities in Norwich and beyond, and some plan to file court appeals — the only avenue remaining, since the Board of Assessment Appeals has denied eight of the 10 appeals filed by affected agencies.
“I find it troubling at this juncture that this kind of statement is coming from the community,” said Jack Malone, president of the Reliance Health board of directors. “At a time when community-based nonprofits are beleaguered by dwindling state support, it adds insult to injury for the city to say, ‘We are denying you the tax-exempt status you have been enjoying for so long.’ ... Reliance Health was started with the single goal of helping people with mental wellness issues, who were thrust into the community with no place to go. Forty years later, this is what the community of Norwich says to them? After 40 years of work?”
Reliance Health's five combined properties have a total assessed value of $1,129,400.
UCFS CEO Jennifer Granger declined to comment on the tax status.
“For 30 years, Bethsaida Community Inc. has provided outreach, housing and support services to homeless women,” Bethsaida Executive Director Claire Silva said in an email statement. “Each year, we house about 60 women. Clobbering non-profit agencies with taxes (agencies that have already been hit by Connecticut funding cuts) is not how you help the most vulnerable populations.”
At least 18 formerly nonprofit properties, including those owned by UCFS, were summarily rejected for nonprofit status, because the owners failed to file statements of charitable status due by Nov. 1 every four years by state law, Ralston said Wednesday.
Ralston said she has no authority to overturn the state law on filing requirements.
But dozens of other nonprofits — including Norwich Arts Center, NCDC, Habitat for Humanity, Reliance Health — were denied tax-exempt status by Ralston after she ruled they did not meet the criteria. Ralston said she scrutinized all nonprofit applications this year in an effort to boost the city's tax base.
“I’m really not trying to be mean with all this tax-exempt stuff,” Ralston said. “I’m trying to be fair to the people who pay taxes.”
She did not consider whether any entity had a long history of tax-exempt status in the city, nor did she consider their state or federal status.
“They can be considered a tax-exempt use by the state and the feds, and still be a taxable use in the city,” Ralston said.
Wendy Bury, executive director of the Southeastern Connecticut Cultural Coalition, said the assessor’s process was flawed. She first received approval of tax-exempt status, then received a form marked both approved and denied. That was “corrected” to say it was denied, and the group never received notice of its appointment before the Board of Assessment Appeals, so the appeal automatically was denied.
She held up the coalition’s annual state certificate from the Department of Consumer Protection with the words “PUBLIC CHARITY” in all caps and bold at the center. The coalition receives state funding to serve as the nonprofit regional cultural organization, she said.
Norwich Arts Center leaders said it would cripple the all-volunteer theater, gallery and educational organization if it had to pay property taxes on the $342,300 assessed value of the three-story building at 60-64 Broadway, board President Charles Chase said Wednesday.
NAC and the Southeastern Cultural Coalition are planning to join together with other organizations, with the assistance from the Community Nonprofit Alliance, to fight the denials. That’s the only way NAC could afford a court fight, Chase said.
According to its financial statement filed with the city assessor, NAC earned $111,146 last year and had expenses totaling $96,870. Adding a $16,683 tax bill based on this year’s tax rate would be unthinkable, Chase and board member Thom Keaney said.
Gian-Carl Casa, president and CEO of Community Nonprofit Alliance, said Norwich isn’t alone in denying nonprofit status to agencies. He said he has heard from alliance members in a handful of cities and towns in Connecticut about what could be a troublesome trend.
Ralston offered brief explanations for some denials. The NFA lots on Reynolds Road and Butternut Drive behind the campus, she said, were not being used for school purposes, so they will be taxed as vacant land.
On Reliance Health, which owns properties under the name Chelsea Realty Inc., she said: “There are a lot of things I determined were not tax exempt.”
NCDC opened its Foundry 66 shared workspace facility in the leased building at 66 Franklin St. in fall 2016. The nonprofit economic development agency also owns a 6.6-acre vacant landlocked lot on Stott Avenue in the Norwich Business Park that now will be taxed. “They do absolutely nothing with it,” Ralston said of the Stott Avenue land.
Foundry 66 will be taxed on office equipment and furniture, Ralston said: “I did not exempt it, because it’s used by everybody who pays rent over there.”
NCDC President Robert Mills said Wednesday the NCDC board will discuss the tax issue at its meeting Thursday. He said the Stott Avenue land is a rear lot used for drainage for Levine Distributing and Hartford Healthcare’s data center and is not developable.
Ralston said even if Norwich Arts Center wins a reversal, the entire building likely would not be tax exempt, because the center rents two second-floor offices for income.
Norwich Arts Center leaders were both puzzled and angered at the entire decision process. NAC filed its paperwork on time, explained its mission, programs and that the two small rentals generate just $9,600 per year as supplemental income. All staff are volunteers, and ticket fees help cover costs. The Board of Assessment Appeals seemed to agree, Chase said, but a week later, voted unanimously to deny the appeal.
In September, NAC received a $50,000 state Department of Economic and Community Development grant for façade and building structural repairs. Chase said the grant requires the nonprofit facility to operate as an arts center for at least 10 years as a condition.
“Would the city want to take over the building and run it as an arts center?” Keaney said.
Editor's Note: The Norwich Arts Council and the Southeastern Cultural Coalition are being assisted by the Community Nonprofit Alliance.