Non-profit organizations are concerned a recent Minnesota Supreme Court decision could strip them of their non-profit status.
A tax assessor of Mille Lacs county had ruled that a juvenile center was liable to pay property taxes as it was not doing any charity. The day care center appealed.The Minnesota Supreme Court ruled in December 2007 that the center was not eligible for a property tax exemption, mainly because it did not provide services for free or at a discounted rate.
The judgement gives a boost not only to other local authorities across the country, seeking to tax such institutions, but also to members of Congress who feel that the tax exempt status of many so called non- profit institutions is not justified. They may well have a point there, as the activities of many such institutions are in no way different from the activities of other similar institutions which do not enjoy tax exemption. The rationale behind granting tax exemption to charitable institutions is that they perform a social function which the government would otherwise have to do, only they do it more efficiently. But the justification for tax exemption disappears if the non-profits are organized on business lines, and charge the same price for their services as the non exempt institutions. Members of Congress complain that rich universities and hospitals are neither subsidizing needy students nor treating patients for free.
'The extent to which the recipients of the charity are required to pay for the assistance received tests for a value that is fundamental to the concept of charity-that is, whether the organization gives away anything,' Chief Justice Russell A. Anderson wrote in the decision.