A Pain in the Assessment

The homes were castles. The idea that they could be free from taxes was too much for the county assessor to believe.

So Pete Corpstein started questioning the tax-exemptness of the nonprofit agencies that installed their clients in such homes--groups like Homeward Bound, which used homes in Scottsdale and Ahwatukee, worth close to $100,000, in their transitional-housing programs.

Corpstein says such programs use homes "built in the last four or five years, modern homes, well-kept--and that's the problem. When you think about the homeless, you think about what's down here on 12th and 13th avenues. These are the homeless. All those people are gainfully employed."

So he set his assessor's eye on Arizona statutes covering charitable institutions and found something that worked in his favor: Institutions had to serve the "indigent" or "afflicted" to receive tax-exempt status. Corpstein decided that "indigent" didn't exactly describe all the people being served by Homeward Bound, and "charitable" didn't describe everything some tax-exempt institutions were doing.

And if the people living inside those nice homes weren't indigent as defined by, say, the Arizona Health Care Cost Containment System (AHCCCS), Corpstein reasoned that the property should be taxable--a conclusion that would earn him much ridicule in an atmosphere that sees nonprofits as hands-off entities.

William Kennedy of the Assessor's Exemptions Office says of such nonprofits, "They're doing good, but the burden is upon you and I to pay for that."

Homeward Bound, Maricopa County's largest provider of transitional housing to homeless and low-income people, was the first to behold the tax man, receiving property-tax bills for $118,000 on about 100 properties.

Then Corpstein announced that he intended to review the tax-exempt status of other nonprofit agencies, and a chill ran through the Valley, because property taxes could kill or maim such programs.

The assessor even targeted institutions such as the American Legion and the Veterans of Foreign Wars, saying the bars and restaurants they operated competed with other businesses, even if proceeds did benefit the groups' charitable activities. He billed Central Arizona Shelter Services $17 for a trailer because the person who rented it did so for profit.

Nothing would be immune from review--not hospitals, not family centers, not Boys and Girls Clubs. For nonprofit agencies, the night of the long knives had arrived.

Corpstein's opponents say he has gone absolutely amok. They punched at his logic. To use the AHCCCS definition of "indigent," they say, ignored the intent of transitional-housing programs to wean their clients off welfare and into productive society.

"The assessor says, 'If they're working, they're not indigent,'" says Theresa Meyette, a case manager for Labor's Community Service Agency in Phoenix, whose transitional-housing activities earned it a $1,250 property-tax bill. "He says 'indigent' means you have to be on welfare. But if that's what you're asking me to be, I'm not doing anything."

"The county assessor has his own interpretation of the Constitution," Marjorie Salinas, president of the United Way's board of directors, says in a huff.

And the irony of it all, says Louisa Stark of Community Housing Partnership, is that Maricopa County is obliged to work with its poor. That's why things like AHCCCS exist. Although Stark's agency gets funding from state and federal sources, it receives nothing from the county.

"From my own agency's perspective," Stark says, "the only help we get from the county is not having to pay property taxes."

Corpstein's tax bills add to the woes of nonprofits, which these days face not only the possibility of property taxes, but the specters of federal budget cuts and block grants that could radically change how funds are doled out. Corpstein can't say how many agencies have received tax bills for property they've never been taxed on before, he says, because his office isn't really keeping a list; it's just applying stricter standards.

And though it might seem that way, Corpstein is not exactly all alone out there. Spurred by shrinking budgets, other cities and counties have been picking at nonprofit pockets.

In Philadelphia, for instance, brotherly love is now provided at a price: Using a five-pronged litmus test to determine whether agencies were purely charitable, the city recently negotiated "voluntary contributions" as high as 40 percent of traditional property taxes. Deals were struck for as long as five years, and groups beating payment deadlines could garner a "discount" rate of 33 percent.

The program has reaped $12.76 million in new revenue for the City of Philadelphia and school-district purses.

Other places such as Boston, Massachusetts; Des Moines, Iowa; and Erie County, Pennsylvania, have instituted similar programs in which nonprofits ante up annual PILOTs, an acronym for "payments in lieu of taxes."

The National Council of Nonprofit Associations labels such efforts "shakedowns." In Maricopa County, it's probably more a matter of momentarily shaking things up.

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Marc Ramirez