The tea party governor of Maine, in a wide-ranging proposal to "reform" that state's tax code and eliminate certain taxes, proposes to tax non-profits entities such as hospitals, private schools and museums. Let's hope the proposal is defeated and no other states come up with such a hare-brained plan. Discuss.......

http://www.freepressonline.com/main.asp ... ID=467&S=1

It occurs to me that if your accountant and his handling of your funds is crafty enough, there will be no "profit" to tax, and it will all be completely legal.

Now, if he's talking about assigning property taxes, business license fees, etc. to nonprofits, that's a different matter.

It's also a case that some so-called "nonprofits" have been run in such a way as to practically invite such scrutiny and taxation. Don't run a non-profit as a tax dodge or a way to enrich someone, and that shouldn't be a problem.

At the local level in PA this is becoming more of a concern. Our own county is involved in a highly-unpopular attempt to levy full-value property tax assessment on both the local hospital, a county-owned nursing home facility, and the YMCA, based upon the PA court interpretation (not the IRS) of what noprofit status actually was - and in PA it is significantly stricter than the IRS position.

The irony on this one is that the County is actually suing themselves, as they own the nursing home. That detail hasn't evaded the analysis of either the local press or the voters as the legal costs on both sides are being paid out of the County budget. One commissioner has already reversed his position, and a second just announced he will no longer run for reelection. Yard sign wars are currently underway.

http://www.timesobserver.com/page/conte ... 85020.html

At least within PA, this has now elevated the battle to a possible amendment to the state constitution:
http://triblive.com/news/adminpage/3473 ... z3PehU5UnB

Property taxes on railroad and/or museum property are highly variable by locality and state, but having nothing to do with taxable income, and for many organizations would be far more devastating than some kind of 'income' tax.

Beware the Gross Receipts Tax, imposed on taxpayors who lose money.

The state of North Carolina has passed a law requiring sales tax collections on museum admissions and on tickets to events that include or are considered entertainment. There are many exemptions in place to try and help non-profits however very little in the law translates well to a railroad museum or tourist railroad type of operation. As our industry comes up with new and creative ways present our historic artifacts to the public, the line between entertainment and education becomes more blurry.

It took us several weeks reviewing each of our offerings directly with the Department of Revenue to determine when we needed to collect tax and when we do not. We then had to alter our online ticketing system and make changes to our ticket booth procedures to handle the new rules as they do not apply equally to all our offerings. The law is going to be reviewed again by the legislature this year in order to “clarify” the law, so we are expecting further changes for 2016.

If you have a look through the FAQ document prepared by the NC Center for Nonprofits, you will get a feel for the complexity of the law especially when you attempt to apply it to the taxation of train rides and museum events.

http://www.ncnonprofits.org/sales-tax-admission-charges

Regardless of the intent of the law, it has drastically added to the amount of volunteer work necessary for compliance. Preaching to the choir here; any additional volunteer time needed for administration is less volunteer time available for furtherance of the mission.

Mike MacLean
New Hope Valley Railway
http://www.triangletrain.com

Before anyone panics and jumps to any conclusions, they should look at the source documentation for this article, not a newspaper writer's commentary on it.

I couldn't find anywhere where the article explicitly said that admissions to museums or rides on trains would be subject to tax (and I did find an exception for rides on boats).

Also, how many museums in Maine have property appraised at more than $500,000 that would subject to tax under the provision which according to the article says

"the LePage plan would allow municipalities to tax 50 percent of the valuation on the property of nonprofit organizations with assessments over $500,000, with the exception of houses of worship"

Any bets that the non profit hospitals and Universities in Maine will lobby against this provision and keep it from passing?

Bob H

They might do that. Then again, they might also make a deal that excludes them from the bill but leaves everyone else to hang.

Not to get political, but I thought the Tea Party's slogan was "Taxed Enough Already"... why are they wanting to raise taxes?

Not sure, but Seashore Trolley Museum has enough land and buildings that they might be over $500K. Narrow gauge museum in Portland, now moving to Gray, Maine probably doesn't rise to that number. Also not sure about the Wiscasset, Waterville & Farmington two-foot museum. They do have some real estate.

Thanks!

How much is your locomotive just out of a 1.5 million restoration worth?

dave

For purposes of this exercise, it probably doesn't matter because it's "equipment", just like machines in a factory are -- most communities think of "property" as land and buildings.

Bob H

no no, "personal property" is a thing in many jurisdictions. The thing is, under some of the accounting rules I've seen in practice, the recipient of that $1.5 million restoration is still worth the $100 the railroad sold it to you for. Another is that you're required to account for the wild ups and downs of the stock market as it impacts your endowment, but you're barred from accounting for the wild ups and downs of steel value as it impacts your railroad.

Anyway that's "dingbat accounting" as I like to call it. And so we all have to "just know" the secret decoder ring tricks to actually make it make sense. So your fixed-assets column doesn't nearly reflect your borrowing power. Your endowment (which goes in the third column, "permanently restricted funds"), well its earnings/losses go in the column, "unrestricted monies") with that number bouncing up and down like flubber and making it impossible to know what of that is spendable.

Of course when I ask, I'm told all this conforms to "Generally Accepted Accounting Practices" or GAAP, but the appalled reaction I get from other accountants suggests to me maybe not. What upsets me is how this makes it difficult for my Board to govern. And we are, after all, the customer!


Of course the press and voters think it's all about them. I'd call it more about law. Suing yourself is the perfect situation if you want to cast a precedent to deter others from suing. The court will tend to go with what the last court decided unless you can show that fight was rigged. If it wasn't in the newspaper and thus searchable, how would you even know defendant owns plaintiff?

And yes, Michigan also more narrowly defines "nonprofit" for property tax purposes. It is not enough for the land to be owned by a charity. The land must be applied to a use which is charitable. Going through the Southern Michigan Railroad's financial records from the 80s to the mid-90s, I was shocked to see just how long they were paying property taxes for property definitely in charitable use. The county had financial incentive to be sluggish. It came in as a splattering of bills, and this was the age before Quickbooks, so I couldn't get an easy sense of totals, but it looked like $2000-5000 a year for a 13 mile railroad. It wasn't crippling for an organization operating in low-subsistence mode.


Well, that lays bare the odd position of our own not-for-dividend (501c3) tax statuses. It's a mighty thin line between a rail museum and a tourist railway, especially as so many of us backseat the true Museum function to pursue revenue for revenue's sake, engage utterly commercial products like Thomas and Polar Express, and for economic reasons use the same passenger equipment and motive power (while cutting up the most historic examples of same). And so many tourist railways get "historicey" in very authentic ways (e.g. Strasburg, Age of Steam etc.)

I'm using the British term "not for dividend" because the American term is too confusing. Some people think the charity is not supposed to make a profit (yes you are, you definitely are!!!)


I get "museum entry, but not train rides proper, and in 2015 not anything at all-volunteer events."

Raise prices and incorporate the tax into the admission. Internally apportion how much is train ride and how much is museum admission, just make it not unreasonable. That way you only have to reconcile it at tax time, rather than at point of sale.

I also question the principle of exerting unlimited volunteer hours to avoid at all costs giving the state a few extra dollars to fix roads. Some people just have a mad-dog visceral reaction to the thought of paying taxes, and they quite wrongly burden the charity with what's actually their personal axe to grind. That's a "dividend" and that's not allowed.


One word. Potholes.

A few more words: One lefty liberal's "tea party member" is likely a libertarian/Limbaugh fan's "just-right-of-center Republican."

Recent office-winners that are actually politically astute and savvy are going to have to compromise between the "jingoism" of political campaigns and the political realities of what really happens in state and Federal legislatures. In a couple states, Republican governors are just now discovering that their predecessors left them a much bigger, well-hidden mess than their citizens were told, and these governors and their states' legislatures are now having to figure out the best way to deal with it--in almost all cases with some politically unpopular actions such as the one that started this thread.

The WW&F Railway Museum has an interesting situation with regard to land tenure which may protect it somewhat in this case.

The majority of the ROW it operates on is actually owned by the Wiscasset & Quebec Railroad Company, predecessor of the historical WW&F Railway -- yes, the original corporation chartered in 1854 still exists, and it still owns the ROW. The W&Q is for-profit and so pays taxes on the land it owns. The WW&F Railway Museum leases the ROW from the W&Q and reimburses it for taxes as a requirement of the lease, so property taxes are already built into the museum's business model with respect to this land. (This peculiar arrangement was set up intentionally by WW&F Museum founder Harry Percival as a kind of insurance policy against the museum's possible failure, something which thankfully has never been needed. Harry had previously purchased the W&Q and other railroad assets from the trust set up in the 1930s by the historical WW&F's last owner Frank Winter, so he controlled both parties in the lease agreement. Genius!)

That said, most of the WW&F museum campus and buildings at Sheepscot are on land the museum owns itself rather than leases from the W&Q. I would imagine these structures and improvements represent a big part of the assessed value of the total property the museum occupies, but I don't now the actual numbers so I can't say if it's over $500,000.

-Philip Marshall
(WW&F Railway Museum Life Member and W&Q stockholder)

Apparently the first poster, in an attempt to indulge a political bias as preservation was so "hare-brained" that he didn't read this:

Exempt activities include - Admission to a licensed agricultural fair or participation in any events or activities organized by a school or incorporated nonprofit organization occurring at such a fair if all the proceeds from the event or activity are used for the charitable purposes of the school or incorporated nonprofit organization; scenic and sightseeing excursions on federal navigable waters; and participation in or entry to casinos, lotteries and pari-mutual betting

-Lower right hand corner of linked article.

(Even though I despise the tern "non-profit" as commonly understood, because there is no such thing.)