Due Unto Others

Next month, Colorado voters will decide whether the state's $5 billion worth of tax-exempt properties are all charity cases.

More than $5 billion worth of property in this state is exempt from taxation but still receives the services that every other piece of property does. Since you--the upstanding and law-abiding Colorado taxpayer--are bankrolling police and fire protection for these properties, you deserve to ask a few questions. Such as:

* How many cracked backs equal a tax break?
* If your mother is a saint (no, really), how much of a tax reprieve do you deserve?

* Are Coloradans subsidizing Michael Jordan?
* For tax calculation purposes, what is the definition of the word "earshot"?

* How is it possible to invite business executives to your fancy office building, charge them thousands of dollars to tell them how to be better business executives--and still end up with a property-tax bill of zero?

Colorado is not alone in granting property-tax breaks. Recognizing the benefit of moral and spiritual guidance, most states exempt churches and synagogues from paying property taxes. Nonprofit hospitals and other health-care facilities, along with certain charities, generally don't pay taxes on their property. Neither do veterans' organizations, which are given a break on their tax bill in exchange for their members' service to their country.

Other organizations receive a tax-free ride because they happen to be in Colorado. Amateur athletic groups headquartered in this state--USA Team Handball Federation, USA Field Hockey--don't pay property taxes. Neither do nonprofit community-corrections corporations, which provide counseling services and halfway houses for prison inmates.

Many of these organizations have enjoyed their tax-free ride for a long time. This year, however, they are being challenged. Amendment 11, which voters will see on the November 5 ballot, aims to force many groups that aren't paying property taxes to start. This list includes St. Mary's Catholic Church, Lutheran Hospital and the Boy Scouts of America. The only businesses that would be excluded from the law are those that provide housing for the elderly and homeless, as well as schools and orphanages.

The stakes of such a new law are enormous. For starters, property owners who have been enjoying a tax bill of zero would have to begin writing big checks. In Colorado Springs, the yearly property tax tab for Focus on the Family, the conservative Christian ministry, would zoom from nothing to $600,000. The new expense, some charities say, would force them to cut back on services.

Opponents of the amendment also worry about what its passage could mean for the rest of the country. Amendment 11, which is being pushed by a Colorado Springs lawyer and lapsed Catholic named John Patrick Michael Murphy, is the first proposal to tax religions and charities. If it were to pass here, tax activists in other states might gain enough confidence to try it elsewhere.

Amendment 11's supporters argue that excusing some property owners from taxes makes everyone else's bill unfairly higher. But each year, tax-exempt organizations must reapply to the state Division of Property Taxation and make the case that, in exchange for us covering their tax bill, they are doing something for us.

Once in a while, properties are judged not to have earned their keep; they are returned to the tax rolls and asked to pay like everyone else. More often the opposite occurs, and additional properties are tacked onto the list of tax-free land. (One reason for this is that politicians have been charitable when it comes to creating brand-new tax breaks, which they have done at least three times in recent years.)

The sheer number of organizations that don't pay property taxes--9,200 in Colorado--might give the impression that gaining an exemption is a breeze. But the lucrative breaks are not given up willy-nilly, and the state's property-taxation department attempts to rigorously screen for undeserving people who want to skip their tax bill.

Ginger Chase, Douglas County assessor, recalls that several years back the state denied an exemption to a man who claimed his house was a church. "Basically, he was having some guests over on Sunday mornings," she remembers. "They would look out the window. And he demanded a religious exemption." It was denied.

Yet deciding whether an organization's property deserves tax-free status is not always black and white, and state examiners must make dozens of judgment calls. Many of them turn on the small nuances of big questions and result in razor-thin distinctions that can be worth hundreds of thousands of dollars.

What is charity?
Think that all Colorado charities enjoying a property-tax exemption exist to help the needy? Just how needy is your boss?

The Center for Creative Leadership is located just west of Colorado Springs (on a street called Leader Way). Its three-year-old office building is described by state tax inspectors as "a stylish glass-and-brick structure built halfway up a hillside on sixty-plus acres of land."

"We have a great view!" a receptionist there raves.
The Center for Creative Leadership was founded in North Carolina in 1970; today it operates branches in San Diego, Brussels, Belgium and Colorado Springs. Its leadership programs are aimed at managers and executives, whom it claims to make better managers and executives. The seminars are open to the public (for a fee), or the center will tailor programs for a specific company's needs.

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