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Nonprofits, Beware of the Property Tax Audit

Few things are scarier to a nonprofit organization than an audit. Not even the most well-run and tax-compliant nonprofits want government agents taking a microscope to their corporate and financial records. And while most worry about an IRS audit, nonprofits should also beware of a different kind of audit that may be coming to a city near you—the property tax audit.

Last month, the Mayor of Pittsburgh issued an executive order instructing the City’s Finance and Law Departments to audit the property tax exemptions enjoyed by the City’s public charities. According to the Mayor’s office, 34% of the property within Pittsburgh is exempt from property taxation. That is a problem for a City seeking to add money to its coffers. To address the problem, the City is not only moving quickly to audit tax-exempt properties but is also encouraging residents to report nonprofits which they believe are not “acting as an institution of purely public charity.” Pittsburgh nonprofits, beware.

Nonprofits in other cities and states should beware as well. Pittsburgh is not alone in its desire to increase its property tax base. Cities all across the country are in bad financial shape and looking to increase tax revenues. If Pittsburgh is able to significantly reduce the amount of tax-exempt property within its jurisdiction, other cities will certainly follow suit.

If your nonprofit has questions or concerns about its property tax exemption and wants to do what it can to avoid losing it, please contact the attorneys at Dalton & Tomich.

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