A key provision in Gov. Paul LePage’s state budget proposal could result in municipalities taxing conservation lands owned by private land trusts across the state.
Such a change would generate income for cities and towns while adding a new cost to conservation efforts in a state that has historically been a national leader in the preservation of open spaces.
Many of Maine’s nearly 90 nonprofit land trust organizations are reviewing the governor’s proposal, which would eliminate the full property tax exemption for nonprofit organizations that own property in a locality with an assessed value of $500,000 or more. The proposal exempts nonprofits with smaller holdings, so not all conservation land would be affected.
So far, scrutiny of the nonprofit tax proposal has centered mostly on large nonprofits such as hospitals, private colleges and charities that generate revenue while using public services and infrastructure. However, taxation of land trust organizations has the potential to reshape the land preservation work being done by nonprofit entities that are often rich in land assets but generate little or modest revenue.
TRYING TO DETERMINE IMPACT
Land trusts vary from large multimillion-dollar organizations to small agencies that rely primarily on volunteers. Conservation land typically cannot be developed to generate income because of conditions set when the land was sold, donated or bequeathed to a trust. In some instances, smaller land trusts could be forced to hit up donors to help pay property tax levies.
“People are still trying to understand how this works,” said Tim Glidden, president of the Maine Coast Heritage Trust, a nonprofit land trust that owns 11,200 acres. “There could be some unintended consequences where small volunteer land trusts own valuable properties where this proposal could exert a significant cost.”
Wolfe Tone, Maine state director for The Trust for Public Land, a national organization that helps groups negotiate and complete conservation deals, said he was still trying to determine if the governor’s proposal would result in towns and cities sending new tax bills to land trusts. Such a tax, he said, could have “a chilling effect” on future conservation efforts.
STATE: TAX APPLIES TO LAND TRUSTS
LePage’s massive tax overhaul plan is intended to reduce Maine’s income tax rate through a series of changes in the tax code. Part of the plan eliminates state aid to municipalities and attempts to replace those revenues by opening the door to municipal property taxes on nonprofit organizations. The budget language makes specific mention of exempting churches and houses of worship from the tax, but no other nonprofit types are highlighted in documents provided by the administration or in the actual legislation.
Mike Allen, the governor’s tax policy director, has estimated that communities could generate between $60 million and $90 million annually by taxing nonprofits.
Richard Rosen, the governor’s budget chief, said Monday that he believed the nonprofit tax applied to land trusts, but he was not certain. “I’m going to go back and clarify that with Maine Revenue Services,” he said.
Allen said Monday night that land trusts would be affected.
TIGHT BUDGETS, PRIVATE DONORS
Some land trust officials have withheld public criticism of the tax plan until they were certain it applied to the trusts. A Jan. 13 preliminary analysis circulated among members of the Maine Land Trust Network illustrated the mounting concern over a proposal that could have “significant impacts” on the nonprofits.
While the analysis expresses hope that the Legislature will alter the proposal and exempt land trusts from the nonprofit tax, it advised members to review whether enrolling conservation properties into two other state programs – Open Space and Tree Growth – will “minimize this tax burden.”
Glidden, of the Maine Coast Heritage Trust, said land trusts provide valuable services to communities by raising money to protect recreation land from development pressure. He said most operate on tight budgets largely dependent on private donations.
“It’s important to keep in mind that these land trusts are what their name implies,” he said. “They don’t generate revenue by and large. They hold these lands in trusts for the public, hence their nonprofit charitable status. Most of these lands are open to the public for hunting and fishing; there are trails, there are boat launches that the public wants and needs. In many cases these are assets that benefit towns.”
CHILLING EFFECT ON CONSERVATION?
Tone, with The Trust for Public Land, said a tax on land trusts could deter conservation in Maine.
“The reason people come here is because of our natural environment,” said Tone, whose organization has helped negotiate several dozen conservation projects in Maine, including maintaining public access to Scarborough’s Higgins Beach and adding the Katahdin Lake parcel to Baxter State Park.
“I think (losing its tax exemption) could have a very large chilling effect on land trusts. … I think it would make it harder,” Tone said.
A pullback on conservation efforts would mark a reversal in Maine. According to the most recent survey data from the Land Trust Alliance in Washington, D.C., Maine had a total of 1.8 million acres in conservation as of 2010, ranking second in the nation after California and before Colorado and Montana.
According to the same survey, there are 88 land trusts in Maine, including 60 staffed groups and 16 all-volunteer groups. There were 433 paid positions in 2010 that operated with the support of 3,846 volunteers.
TOWNS MAY BE FORCED TO TAX
Alan Stearns, executive director of Royal River Conservation Trust in Yarmouth, said his analysis of the proposal showed the Littlejohn Island Preserve would likely be the trust’s only property subject to the nonprofit tax.
Stearns said he hoped that Yarmouth would not choose to tax the property if the governor’s budget becomes law. However, the budget language removes nonprofits’ exemption, meaning towns may have no choice about whether to tax eligible organizations. And, even if the local taxing authority is discretionary, Stearns said, some towns will have to turn to the land trusts for revenue if they lose funding from the state.
“While Royal River Conservation Trust and Yarmouth may be able to work out a solution,” Stearns said, “it would be extraordinarily difficult to continue conservation in poor towns if the governor’s ideas get traction.”
PAST ATTEMPTS TO TAX LAND TRUSTS
The financial status of Maine land trusts varies widely.
Maine Coast Heritage Trust, which has a staff of 38, according to its website, posted $7.7 million in revenue in 2012, $5.6 million of it in private donations.
Royal River Conservation Trust, which owns about 500 acres and has two staff members, according to Maine Land Trust Network, posted $175,000 in revenue in 2013, nearly $92,000 in private donations.
Attempts to assess property taxes on land trusts are not unheard of.
Local governments hit by increasing costs to provide services such as road maintenance and education have looked to land trusts to ease the burden by challenging whether the nonprofits provide a public benefit worthy of their tax-exempt status.
In August, one such conflict between the town of Limington and the Francis Small Heritage Trust was decided by the Maine Supreme Judicial Court. At the time, the court affirmed the trust’s charitable status.