WASHINGTON (Aug. 22)
American Jewish communal institutions are becoming concerned that they are being targeted as potential new sources of revenue by federal, state and local governments struggling to relieve their own fiscal problems.
Until now, the vast majority of Jewish institutions have been exempt from taxation because they serve educational, religious or health-related aims.
But increasingly, politicians at all levels of government are coming under pressure to balance budgets and reduce deficits. And in many cases, after painful cuts have been made, the only alternative is to generate additional revenue.
At the same time, politicians are being strongly lobbied by the small business community, which contends that tax-exempt institutions offering similar goods and services have an unfair tax advantage.
All kinds of exempted institutions, and not just Jewish ones, are being affected. But within the Jewish community, YMHAs and Jewish community centers are being singled out for challenge, because for-profit health club facilities view them as direct competition for business.
The Pittsburgh JCC, for instance, is now paying $25,000 a year in property taxes on its health club facilities. In Cleveland, the JCC is paying $13,000, not only on its health club, but on its cafeteria and gift shop, as well.
In both communities, the property taxes were assessed when they built new facilities a few years ago.
Richard Luschin, comptroller for Cleveland’s JCC, said the state has made no attempt to tax the JCC’s older structure. “We have the exact same facilities in the other building,” Luschin said. “They appear to be only going after new construction.”
COLLEGES AND CAMPS, TOO
Jewish institutions of higher learning, like their non-Jewish counterparts, are also being slapped with unexpected fees. In many cases, this takes the form of pressure to make direct contributions in lieu of tax payments.
In Waltham, Mass., this spring, the City Council approved a non-binding resolution that for the first time asked Brandeis University and neighboring Bentley College to make payments of $1 million each to the city. Both schools refused.
Jewish camps have been targeted, as well. In 1988, the town of Fallsburg, N.Y., and surrounding Sullivan County denied a real estate tax exemption to Camp Kahal Bnei Emunim, which is affiliated with a Brooklyn yeshiva run by the Shopron Hasidic movement.
When the camp missed the application deadline for the tax exemption, “they said if you don’t file it on time, you lose it,” Judah Dick, the camp’s attorney, related.
The camp has yet to pay the $5,000 property tax, which Dick said would have a “big impact” on its budget. Instead, it is pursuing the matter in court. The camp has already lost a lower court battle and is now appealing the case to the New York Court of Appeals, the state’s highest court.
In recent years, localities have tried to take away state sales tax exemptions that non-profit-charities, including Jewish community federations, have long enjoyed.
For example, Pennsylvania last year stripped the Jewish Federation of Reading of its state sales tax exemption, contending that the federation only indirectly supports charitable activities by funding constituent organizations.
A state review board later overturned the earlier decision, concluding that the federation serves “legitimate subjects of charity through its disbursement of funds to other charitable organizations.” The ruling saved the federation about $4,000 a year.
TOUGHER REGULATION OF CHARITIES
Jewish organizations are also having to contend with an increasingly dense web of regulations regarding fund-raising activities.
The laws generally require charities either to register their solicitors or to account for funds that they raise, forcing Jewish groups to spend more money on their accounting operations.
Forty states have such regulations on the books, 17 of which have been strengthened since the start of 1989, said Betsy Hills Bush, director of governmental affairs at the American Association of Fund-Raising Counsel.
The laws came largely in response to public demand for regulation of charities in the wake of various fund-raising scandals, including those involving several Christian television evangelists.
“It’s just frustrating,” said Irving Ginsberg, executive director of the Jewish Federation of Palm Springs-Desert Area, Calif. “The requirements that the state puts on you take its toll on the accounting office.”
While most of the “direct hits” Jewish institutions have suffered in recent years have occurred at the state or local levels, there is some concern about potential congressional action at the federal level.
One of the biggest concerns is that Congress will impose various types of unrelated business income taxes, or UBITs, on tax-exempt groups as a way of generating new revenue to reduce the federal budget deficit.
The options, under review for more than two years by the House Ways and Means subcommittee on oversight, include taxing a group’s travel packages; sales of clothing, jewelry, furnishings or common consumer items; or advertising revenue on publications.
JEWISH MUSEUMS HARD HIT
Among Jewish institutions, museums have been hit the hardest in recent years by various congressional tax measures.
As part of the 1986 tax reform act, donations of artwork and securities began to be taxed based on their appreciated value. Previously, they were taxed at their original purchase price.
Seymour Fromer, executive director of the Judah Magnes Museum in Berkeley, Calif., said that as a result, his museum has received substantially fewer donations of paintings and antiques in recent years, while cash gifts have continued at about the same level.
Mark Stern, legal director of the American Jewish Congress, lamented the increasing financial pressure on the not-for-profit sector, observing that charitable institutions are “one of the things that’s kept government in check in this country,” particularly in delivering social services.
“Now the government’s making it very difficult to keep that private sector,” he said.