Nonprofits that lost tax exemption continue to get breaks

PHILADELPHIANS have groaned about their property taxes rising for the past three years. At the same time, some nonprofits have gotten tax breaks that they may not deserve.

The city is exempting at least six nonprofits from property taxes, even though their tax-exempt status has been revoked. Two fraternities that also lost their status are leasing tax-exempt properties from the University of Pennsylvania.

The nonprofits were penalized because they failed to file tax returns with the IRS for three years in a row.

If the properties in question were taxed, they would generate more than $20,300 in 2013, and likely much more once the city's reassessment is done. Some of them are extremely undervalued.

City officials didn't know that the nonprofits had lost their status until we told them.

Nicholas Cafardi, a charity-law expert at Duquesne University, said the city should take another look at those exemptions.

"It certainly to me is a red flag," Cafardi said. "If they're not filing with IRS, what are they doing to maintain their public-charity status in Pennsylvania?"

In fact, it's unclear whether one of the flagged nonprofits, known as Consultation and Counseling Services, still exists. It's gotten a pass on property taxes since 1995.

Consultation and Counseling Services once transformed a former crack house into a home for recovering drug addicts. But now its phone number is out of service. When a reporter visited, a man who answered the door said it wasn't a drug-recovery house. He refused to provide information about himself or the owner.

"Come back later and maybe you see the person," he said.

There might be an explanation for Philadelphia missing these red flags. The city doesn't regularly audit every tax-exempt property. In fact, the city has neglected to check on the tax-exempt status of some groups for more than a decade.

Cafardi said that's a mistake.

"They're asking the taxpayers of Philadelphia to subsidize them. Because they're not paying taxes, you're paying more," he said. "We're willing to do that if they, in fact, are a public charity. But that's not a given. You have to establish that you are."

Michael Piper, deputy administrator of the city's Office of Property Assessment, said nonprofits are thoroughly screened when they first apply for an exemption. The city also inspects their property top to bottom.

He admitted that the city could do more after that initial step, though. He'd like to audit tax-exempt properties more regularly. But that's easier said than done. It would take more resources, he said.

Piper also acknowledged that the city should audit nonprofits flagged by the IRS. However, he emphasized that if an organization loses its standing with the IRS, that doesn't automatically disqualify it from a city exemption.

"The city of Philadelphia doesn't have a direct communication with the IRS in terms of them letting us know when an exemption has been removed," he said. "That in itself is something that we can, going forward, hope to have."

The nonprofits that lost their tax-exempt status range from fraternities to church-related organizations. Only a few groups responded to requests for comment.

Sigma Phi Epsilon's president referred us to the University of Pennsylvania.

Jeffrey Cooper, Penn's vice president of government and community affairs, said that both frat houses deserve the exemption because they're being used for student residences.

Leaders from both the Baptist Women's Center and the African American United Fund said they are trying to get their tax-exempt status back.

The Rev. Rob Burns of the community nonprofit ReaLife Ministries Inc. said it no longer exists. He said the nonprofit plans to transfer ownership of its property to an exempt church of the same name.

The remaining four nonprofits didn't provide comment.

Critics argue that the city could be losing much-needed tax dollars by not keeping a closer watch on exemptions.

A 2006 study found that nonprofits in Philadelphia own a larger percentage of tax-exempt property, by value, than do nonprofits in any other big American city.

A whopping $21.5 billion of property value is not taxable because it is exempt or abated, according to a recent reassessment.

Mayor Nutter is eyeing a 1.3 percent property-tax rate for next year, meaning those exempt and abated properties could generate nearly $280 million in taxes. If they didn't get a pass, that is.

STILL NOT TAXED

*Sigma Phi Epsilon Fraternity Inc. @ 4000 block of Walnut Street
*Alpha Psi Fraternity @ 4000 block of Pine Street
Independent Community Assistance Network @ 6000 block of Vine Street
Consultation and Counseling Services Inc. @ 1800 block of W. Berks Street
Baptist Women's Center @ 1400 block of Poplar Street
Minority Arts Resource Council, Inc. @ 1400 block of W Girard Avenue
African American United Fund @ 2200 block of N. Broad St.
Realife Ministries Inc. @ 4600 block of Richmond St.

*Owned by the University of Pennsylvania