A proposed amendment to the state constitution in Colorado that would strip charities of property tax exemptions is being watched carefully by nonprofits across the country.
Although Colorado public opinion surveys indicate the measure will be defeated, the vote will be closely watched. Some are concerned that if the vote is close, similar measures will be introduced in other states.
John Patrick Michael Murphy, a Colorado Springs attorney and radio talk show host, is leading the campaign to severely limit the conditions under which an organization could qualify for the nonprofit exemption from property taxes.
What could become Amendment 11 to the state's constitution is aimed largely at churches, but its opponents say it could encompass everything from Girl Scouts to water rates to Alcoholics Anonymous.
Supporters of the law say it is a way to make taxation more equitable by not forcing all taxpayers to subsidize all causes. Murphy said he thinks it's only fair. "I say churches should do their duty to the communities they're in," he said.
Murphy claims his legislation would produce a decrease in property taxes for private homeowners but opponents say the measure won't provide the tax relief promised and will simply drive some churches and charities out of existence.
"Some of their tax bills would be larger than their budgets," said Dale Jones of Denver, a spokesman for the Citizen Action for Colorado Nonprofits. "The nonprofits and churches could be devastated."
The measure, if approved by voters, would require nonprofit organizations to pay property tax if they own real estate and do not provide one of a specific list of community services. The measure defines those services as "community corrections facilities, orphanages or housing low-income elderly, disabled, homeless or abused persons."
"They're sucking out of the community and not helping us with" fire and police protection, schools and other government-paid functions, said Murphy.
Murphy estimated that statewide, churches collect approximately $400 million. He estimates the average church will pay approximately $3,000 per year for each $100,000 of assessed value for actual church buildings and another $1,000 per $100,000 on residential property like parsonages.
"That'll help discourage extravagance," in church construction, Murphy said in a telephone interview. Jones said the tax burden would do more than that.
The intent of the proposed legislation is to return money to taxpayers, instead of providing government with extra revenue. The measure requires property tax rates be reduced proportionately to the amount of revenue brought in by the new law. Current Colorado law requires 55 percent of property tax revenue to be collected from commercial real estate and the other 45 percent from residential property.
Jones says tax paid by churches and other nonprofits would go toward the commercial portion and would provide no relief to residential taxpayers. In fact it could have just the opposite effect shifting some of the commercial pool's tax burden onto residential taxpayers
He said an independent study by Holme, Roberts & Owen, a national tax law firm, estimates residential property taxes will increase by as much as $1.7 million statewide if Murphy's law passes.
"The Colorado Legislative Council, a non-partisan arm of the Colorado state government charged with the responsibility of publishing of the Colorado voters' guide, concurs with the (tax firm's) findings and says the fiscal impact of Amendment 11 is unpredictable," Jones said.
Murphy, 51, said he is not inexperienced with the services nonprofit groups provide. He and his wife Mary Kay have three adult children, one of whom is mentally handicapped. But Murphy considers the current tax exemptions long enjoyed by churches and other nonprofit groups to be subsidies of organizations, activities and even beliefs not subscribed to by everyone.
Though he considers most of Scripture untrue, Murphy has found one concept supportive of his cause."What about, 'Render unto Caesar'?" he asked rhetorically, quoting from Matt. 22, Mark 12 and Luke 20 where Jesus responds to questions on whether believers should pay taxes.
He also said the current system of granting tax exemptions - not his proposed initiative - is the greater threat to the U.S. Constitution's First Amendment guarantee of the freedom of religion. "I think there's a threat right now, forcing non religionists to subsidize religion," he said.
"Murphy also says that renters will realize a benefit from the initiative. He said landlords could be expected to lower rental rates when they receive property tax relief.
Jones thinks there's little chance of this happening. "Let's say - strictly for argument's sake - that Murphy's right and the property taxes will go down. Do you really think landlords will pass it on in lower rents?"
Opponents also fear far-reaching side effects if the measure is enacted.
The utility district at Grand Junction is owned by the community. The rural district is one of many in the state originally organized by local property owners as a nonprofit entity simply to provide water for area residents. If the district loses its nonprofit property tax exemption, it could be slapped with a $60,000 annual tax bill, forcing up water rates, Jones said.
Some services to rural areas may entirely disappear if the law passes. Jones cited the case of Carbondale, a community of approximately 3,000 people in west central Colorado. Jones said the Carbondale United Methodist Church provides a place for the local Boy Scouts and Girl Scouts to hold their meetings, as well as the local Alcoholics Anonymous chapter. The church also houses a battered-women's shelter.
"The pastor there says it's unlikely the church would be able to stay afloat if the law passes," Jones said.
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