Ask the legal expert: How can we fight removal of tax exempt status?

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Attorney John Durso, Ungaretti & Harris LLP
Attorney John Durso, Ungaretti & Harris LLP
Q: Some local governmental bodies are trying to remove our charitable property-tax exemption. What should we do?

A: Exemption from taxes is not a right. What the government gives, the government can take away. If the government moves to revoke your tax-exempt status, you will have to contest the action under the procedures the governmental body has in place, and you will have to prove that your organization uses the property for charitable purposes.

It is extremely important for tax-exempt entities to document all of their charitable and community-benefit activities as evidence of their charitable use of the property. In addition, they must have written policies implementing their charitable activities, which they should review and update.

The concept of charitable use of property goes back hundreds of years to the English Statute of Charitable Uses, which set aside property for relief of the aged and the poor, maintenance of the sick, scholars in universities, and education of orphans. In Illinois, almost anything that tends to promote the well-doing and well-being of society can be considered charity. Thus, the provision of such care to seniors, regardless of their socio-economic status, is charity. 

Federal, state, and local government agencies grant property-tax exemptions to not-for-profit organizations based on various standards. There are several different standards, but, generally, the organization can have no shareholders, its enterprise cannot profit any individual, and it must reinvest any profits into the organization to enhance or expand its benefits and services. In order for an organization to be exempt from federal income taxation, it must be a religious, charitable, educational or scientific endeavor.

Please send your legal questions to John Durso at ltcnews@mcknights.com.

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