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Close the nonprofit tax loophole

Tribune Staff • Mar 15, 2019 at 1:00 PM

If you’re a nonprofit business in Michigan, here’s some good news.

You can rake in profits and pay next to nothing in taxes. All you have to do is provide a small amount of “charitable services.”

Health Pointe in Grand Haven Township recently applied for a 95 percent tax refund for the past three years, amounting to about $1.3 million. Since opening in 2018, the facility says it has provided $18,000 in charitable services.

Those numbers just don’t add up.

Township officials anticipate the revenue loss for Ottawa County in 2019 would approach $729,000. The township denied the tax exemption as they investigate Health Pointe to ensure the facility’s lease arrangements.

Local officials are hoping to shed light on a vague Michigan law, but they say it’s up to lawmakers in Lansing to take up the mantel.

With millions of dollars in tax revenue at stake, we tend to agree with our local governmental units. With tax hikes likely on the horizon for Michigan residents, we need to close this loophole and hold businesses at least to the standard of individual taxpayers.

Township Manager Bill Cargo told the Grand Haven Tribune about several tax tribunal cases in Michigan that have sided consistently with nonprofits over taxing authorities, with the courts granting large tax exemptions to nonprofits for providing marginal charitable services. One case in Grand Rapids also involved Spectrum Health, which Cargo called “anything but a charity.”

Ottawa County Administrator Al Vandenberg said the county opposes the expansion of tax exemptions to nonprofits. A bill in 2015 attempted to extend exemptions to gun clubs, he said, but was defeated in the Legislature.

Vandenberg called property taxes the “one-legged stool” that local governments have to fund essential services. All levels of government in the state are losing out on major tax revenues, he said.

With crumbling infrastructure to fix and environmental contamination to clean up, it’s time to close what we will call the “nonprofit tax loophole.” Lansing needs to establish a clear and enforceable threshold for charitable services before handing out tax breaks. Nonprofits are supposed to provide charity — not receive it.

We can’t expect businesses to turn the other way when massive profits are easy pickings. But we should expect nonprofits earning tax credits for “charitable services” to actually provide those services. And we should expect our elected officials to hold nonprofits accountable.

Our Views reflects the majority opinion of the members of the Grand Haven Tribune editorial board: Kevin Hook, Matt DeYoung, Mark Brooky, Duncan MacLean and Alexander Sinn. What do you think? E-mail us a letter to the editor to [email protected] or log-in to our website and leave a comment below.

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