The Property Tax Exemption for Nonprofits and Revenue Implications for Cities

Summary:
A 2011 Urban Institute study found that while nonprofit institutions provide valuable services and economic benefits to communities, their property-tax-exempt status can significantly strain local government finances—especially in cities with large nonprofit footprints or strong reliance on property taxes. The report estimated that tax exemptions for charitable nonprofits cost local governments between $17 billion and $32 billion in lost property tax revenue nationally in 2009, representing roughly 4–8% of total property tax collections. Municipalities must still provide essential services such as police, fire protection, roads, and infrastructure maintenance for these exempt properties, which can force remaining taxpayers to shoulder a greater burden or lead to reduced public services. Many cities have responded by considering user fees, special assessments, and voluntary payments in lieu of taxes (PILOTs), though these efforts typically recoup only a small portion of the lost revenue.

Full Text:
https://www.urban.org/sites/default/files/publication/26756/412460-The-Property-Tax-Exemption-for-Nonprofits-and-Revenue-Implications-for-Cities.PDF