Should a Non-Profit pay taxes on their property?
In Michigan, there’s a property tax exemption for charitable institutions that own and use property exclusively for their charitable purposes. However, some assessors wrongly denied this exemption to charities that charged fees for their services, arguing that they were operating like businesses.
In 2006, the Michigan Supreme Court clarified the rules regarding this exemption. They emphasized that charities can indeed charge for their services, and there’s no set minimum amount of charity work they must do. The key is that the overall nature of the institution should be charitable.
MI Supreme Court’s Ruling on Non-Profit Property Exemptions
The Court provided six guidelines to determine if an entity qualifies as a charity. The third guideline stated that charities should not discriminate among the people they aim to help. Some assessors and the tax tribunal interpreted this as meaning that charities couldn’t turn away individuals based on their ability to pay. Essentially, it implied that if a charity charged for its services, it had to offer free or subsidized services to those who couldn’t afford it, on a first-come, first-served basis.
However, in the case of Baruch SLS, Inc. v Tittawabassee Township, the Michigan Supreme Court clarified the third guideline. They adopted a more flexible approach, stating that charities have substantial leeway in setting criteria for who they serve. The important point here is that the third guideline doesn’t force charities to offer free services to those who can’t pay. It allows them to charge for services and make their own rules for service eligibility.
Michigan law exempts property owned by charitable institutions from property tax
To sum up the Nerd Talk, Michigan law exempts property owned by charitable institutions from property tax. The Court established six guidelines for determining charitable status, and the third guideline does not require charities to offer services without considering the ability to pay. The Baruch case reaffirmed this, providing greater flexibility for charities that charge fees for their services.
Note: We added a picture of a non-profit organization volunteer holding a picture of a baby wallaby. Why? Because they are so damn cute and can help your mood when thinking about taxes. We can do the same for you (have you seen our crew – many cute ones in here as well!) Photo Credit: Pexels – IFAW