Norwich nonprofits weigh court appeals of denials of tax exemptions
Norwich — Several city nonprofit organizations are gearing up to challenge the assessor’s denial of their property tax-exempt status in court if necessary, but a state official said Thursday that local assessors have authority to interpret state statutes on whether an organization qualifies as a public charity.
Assessor Donna Ralston denied tax-exempt status to nearly three dozen nonprofit arts, religious, medical, human services, veterans and educational organizations, more than half of them for failing to failing to file statements required every four years by state law. While those denials were automatic, Ralston also decided to deny exemptions for many other organizations, for some checking a box on the form that states: “property is not being used for statutory exempt purposes.”
David Kalafa, undersecretary for comprehensive planning and intergovernmental policies for the state Office of Policy and Management, said state statute 12-81 lists several types of organizations that can apply for property tax exemptions, including a broad reference to property used for “charitable purposes.” The law requires entities to file statements by Nov. 1 every four years, and gives no provision for agencies that miss the deadline.
“It’s up to the assessor to interpret these statutes and determine what exemption,” Kalafa said. “Just being a not-for-profit does not automatically make you tax exempt.”
Ralston said Wednesday she closely scrutinized the four-year filing paperwork by dozens of nonprofits this year and denied many of the requests for various reasons. Those who missed the filing deadline were denied automatically.
Others, such as Norwich Arts Center and Norwich Community Development Corp., were denied in part because they rent portions of their facilities for income. The state law allows partial exemptions to remove income-generating portions from the exemption, but Ralston said she denied the entire building in NAC’s case.
Ten agencies appealed their denials to the Board of Assessment Appeals, but eight of the 10 were rejected. Board Chairman Democles Angelopoulos said in many cases, the board felt it had no reason to reverse the assessor’s rulings. While he could not recall specifics from the early April hearings, Angelopoulos said some agencies failed to file paperwork on time, and with NAC and NCDC, both were renting portions of their buildings for income.
“As far as we were concerned, we didn’t have the ability to reverse the decisions,” Angelopoulos said.
City Manager John Salomone said the assessor’s office operates independent of other city government departments, and although the assessor reports to him, he does not interfere with her operations.
“There is no directive to adjust tax-exempt properties in any different manner than previously,” Salomone said. “They are periodically up for re-evaluation as far as their status (goes), so the ones that are coming out now is a result of the review of their application to sustain their tax-exempt status."
"There is pretty much a real separation of duties between the assessor and the city government, for good reasons," he said. "You don’t want assessments to be political pawns or somebody’s favorite house. ... Even if I wanted a new philosophy (on nonprofits), I couldn’t do it, nor would I do it.”
Mayor Peter Nystrom said he, too, was not involved in seeking denials of exemptions. Although, Nystrom recalled a situation a few years ago when the Society of the Founders, which runs the Leffingwell House Museum, was assessed taxes on a separate building it rents to generate income. Nystrom recalled cautioning the assessor to make sure the same policy was followed citywide to prevent favoritism.
Nystrom said that, in his two different terms as mayor, he has received many complaints from taxpayers about the operations of the assessor’s office and assessment decisions. He suggested the department conduct a public forum to explain the overall operations so property owners could better understand the process.
Nystrom plans to discuss the tax-exemption controversy with Corporation Counsel Michael Driscoll, especially to question whether those who failed to file on time have an avenue for filing late. State law contains no language for late filing or whether the town could accept a late statement.
“This one is going to be with us for a while until it settles,” Nystrom said of the issue. “If you have income-producing property, and it’s not directly tied to the (nonprofit) use, I can understand the rationale for taxing that.”
The only avenue open now to agencies denied tax-exempt status is to appeal to Superior Court within 60 days of receipt of their denial letter from the assessor’s office.
The denials caught many agencies by surprise, especially Reliance Health, which would be assessed for five buildings for a combined total of $1.1 million. Reliance Health Executive Director Dave Burnett said the agency filed the required paperwork and never received any communication from the assessor’s office saying it was denied.
Burnett said he will meet with the agency’s attorney Tuesday and “we will prevail.”
Years ago, Reliance Health failed to meet the filing deadline, challenged the city’s denial of the agency’s tax-exempt status and, after several months of negotiations, the tax-exempt status was restored “short of going to court,” Burnett said.
“When the state feels financial pressure, which they do, it all trickles down to the municipalities, which it did,” Burnett said. “I would say to the municipality: ‘Don’t try to balance this on the backs of those who serve the community.’ Every dime we get goes to support our mission, and our mission is to serve the people in this community.”
Burnett said Reliance Health, which has about 260 employees mostly working downtown, brings “substantial state dollars” to Norwich and employees support local businesses.
“We are a good employer, and all of our staff hours go into services for people who live in this community,” he said. “And we will prevail, and some of the money used to prevail will go into attorney’s fees instead of for services in the community.”
The NCDC board of directors held its regular meeting Thursday morning and, in an unusual move, officials asked the three city representatives on the board — Salomone, Nystrom and Alderwoman Stacy Gould — to leave the meeting during an executive session discussion of whether to sue the city.
NCDC President Robert Mills said the board will call a special meeting soon to decide whether to file a court appeal. NCDC also plans to contact other local nonprofits denied tax-exempt status, to discuss the issue together. Mills also will contact NCDC’s auditor, who also handles other nonprofit accounts.
Wendy Bury, executive director of the Southeastern Connecticut Cultural Coalition, also is contacting other agencies involved. Bury hopes to organize a meeting of various groups to discuss their cases, similarities and differences prior to filing court appeals.
“We only have two months to make these decisions,” Bury said. “This is a classic nonprofit story, where we are busy doing our work and we get hit with something that will divert our resources. We have to take the time to gather our boards of directors to meet to discuss it.”
At least one Norwich entity doesn’t plan to fight the assessor’s denial. Norwich Free Academy was denied tax-exempt status on four vacant lots on Reynolds Road, Butternut Drive and Old Town Highway behind the main campus. Spokesman Geoff Serra said the lots were donated to NFA decades ago, and there are no current plans to use them for the school.
“If the city sends us a bill, we’ll pay the bill,” Serra said. “There’s no plans other than to pay the bill at the present time.”
At the state level, the Community Nonprofit Alliance is lobbying for passage of a proposed bill that would call for cities and towns to reimburse property owners for “reasonable attorney’s fees” if the court deems that “a tax has been laid on property not taxable in the town or city.”
During a public hearing on the bill, the Connecticut Conference of Municipalities and the Council of Small Towns objected to the bill, but nonprofit agency representatives, including Ben Shaiken, manager of advocacy and public policy for the Community Nonprofit Alliance, urged the legislature to pass the bill.
“Property tax exemptions for nonprofit organizations must be protected if they are to continue their mission-driven work of strengthening communities by providing quality, cost-effective and life-sustaining services for children and families,” Shaiken told the General Assembly’s Planning and Development Committee.
The committee approved the bill, which is awaiting action in the House of Representatives in the remaining two weeks of the legislative session.
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