Philadelphia Nonprofits Nervous Over Tax Proposal
"If the city will work cooperatively with nonprofits, I think rules can be developed that will be fair to both sides," said Wendi L. Kotzen, a partner at Ballard, Spahr, Andrews & Ingersoll L.L.P.
At issue is proposed language for the city's tax regulations that would say the city considered "unrelated business activities" by nonprofit groups as taxable.
The amendment defines "unrelated business activity," in part, as "trade or business . . . not substantially related to the nonprofit purpose of the organization . . . [and] similar to competing nonexempt organizations."
That language is seen by lawyers for nonprofit groups as including activities such as fund-raising dinners and concession sales at theaters.
The amendment also seems to define all rental income as taxable, regardless of whether it was related to the organization's mission or not.
Laura Weinbaum, director of public policy for Project HOME, said that was of particular concern to her organization, which provides affordable housing to people at risk of homelessness.
"Residential real estate is a core activity of what we do at Project HOME," she said. "Without this residential housing, you can't end homelessness."
Stewart M. Weintraub, a Philadelphia lawyer specializing in state and local taxation, saw a number of flaws in the amendments, among them the fact they defined "unrelated business income" in broader terms than the existing federal tax code.
Richardson said he was aware of the federal standards. He said they would be considered in the coming weeks as his office mulled changes to the proposed amendments.
"I know people are nervous about this," Richardson said. "But we are not trying to hit people between the eyes. We are not trying to turn over rocks looking for money. We are just trying to close a loophole."