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April 14, 2011 Page 3
Solution developed
t'o exempt churches
I spent last week in church.
Baptist, Evangelical, Presbyterian
... I guess I had better explain.
Conference committees are in full
swing, and I was assigned to HB
1246 which was an attempt to
increase the amount of property
churches have"that is exempt from
property taxes.
Currently churches are exempt
from property taxes up to two
acres. Last summer a tax assessor
informed several of the larger
churches that they would be taxed
on any acreages over two acres, and
that decision caused a flurry of bills
to be introduced to discuss what
would be proper taxation. The
House decided to increase the
amount to 20 acres, but the Senate
thought 5 acres would be suffi-
cient. The discussion went in the
direction of trying to define "reli-
gious purpose" when it was pointed
out that several of these churches
have youth ministries on the edges
of their properties with empty lots
in between. Finally our committee
chairman suggested that we tour
some of these churches to try and
identify what some of the issues
were and if we could come up with
a common sense solution.
Our efforts paid off and we came
up.with a solution to exempt the
church "footprint" leaving out any
acreage requirement. If the parson-
age is not adjacent to the church
that would be limited to two acres.
The idea seemed to work for
everybody...the churches, the tax
assessor, and the senators.
Whenever we leave the capital
Capitol Report
By Shirley Meyer
State Representative,
District 36
The discussion
went in the direc-
tion of trying to
define "religious
purpose" when it
was pointed out •
that several of
these churches
have youth min-
istries on the edges
of their properties
with empty lots in
between.
N.D. Matters
By Lloyd Omdahl
building we are supposed to tell our
secretary where we are going and
when we will be back. The second
day I told her I was going to church
she just looked up at me and said,
"Yeah. right". Oh ye of little faith.
Another conference committee I
have been assigned to is HB 1144
which deals with crew housing
facilities otherwise known as "man
camps". With our booming oil
activity and housing shortage, our
communities are scrambling to find
solutions. When a man camp
moves into a city or county it's dif-
ficult coming up with a solution on
how to tax them, because they
aren't identified in code. The city
or county services such as water,
sewer, and electricity are used plus
the increased social and regulatory
requirements are putting a drain on
local finances without any compen-
sation. We don't have any solu-
tions yet, but it is a work in
progress.
With all of the new permits
being issued in the Dickinson area,
I'm sure we will be dealing with the
mzan-camp issue before the next
biennium.
The House passed SB 2108 last
Thursday in an effort to stabilize
the Public Employees Retirement
System (PERS). The bill contains
an unprecedented proposal: Raising
contribution rates of both employ-
ees and employers. Since PERS
was established in the 70"s, the
rates have not been raised.
However, lawmakers and PERS
officials agreed that something
needed to be done to shore up the
fund which has seen financial
struggles since the 2008 market
downturn. The bill asks employees
and employers to each contribute 1
percent more for the next biennium,
increasing total contributions by 4
points from 8 percent to 12 per-
cent. Originally, the bill called for
increases of 2 percent per year, but
amendments lowered the increas-
es. The bill pa;sed the House unan-
imously and will now be sent to the
governor for final approval.
I can be reached at sjmey-
er@nd.gov or by phone at 1-888-
635-3447.
=roperty tax initiative is questionable
As the 62nd legislature grinds
to a Sine Die, which can be no
later than May 2nd, we have
many issues that are being set-
tled. One that affects the counties
along the Missouri River is the
Federal Flood Payments that the
counties, schools and townships
receive for land that the federal
government purchased that lies
under the dam.
The agreement with the affect-
ed counties is that any income
that the federal government
• received would be shared with the
subdivisions that lost property
taxes related to the buyout of the
land. The agreement goes back to
when the dam was originally built
in the 1950's. For the first 50
some years there was very little to
share but when the oil develop-
ment started that all changed. An
example would be Mountrail
County recei,)ed about $29 mil-
lion in -08-09 years and $22 mil-
lion the last two years.
When the dollars were distrib-
uted by the current formula one
township with about 6 miles of
road received several million dol-
lars. Many felt that the dollars
needed to be redistributed by a
per need basis and the question is
if the state land department
should run the grant program or if
the counties should include the
funds in the existing impact grant
formula they administer. The
flood dollars come from oil leases
and royalties on land under the
lake.
An issue that will be •looming
over our heads for some time is
the recently filed initiative to
eliminate property taxes and
require the state to supply the dol-
lars that property tax currently
Speaker' s Desk
By David Drovdal
The petition
states that the
property tax would
be made up from
oil, tobacco and/or
financial institution
taxes.
Other Views
By David Callahan
collects.
The state would have to pony
up an additional $700 million dol-
lars on top of the $1.2 billion the
state allocating to local political
subdivision annually. To make
up the property tax deficit with
sales tax revenue we would have
to double the tax rate from 5% to
10%. To make up the difference
with personal income tax we
would have to triple the current
rate before this year's tax reduc-
tion. But the petition itself man-
dates that we can't use these
sources as revenue to replace
property taxes. The petition
states that the property tax would
be made up from oil, tobacco
and/or financial institution taxes.
Only oil taxes are remotely large
enough to start to make a differ-
ence. North Dakota already has
one of the highest taxes on oil in
the nation. Would we be killing
the golden goose by raising the
tax more? The petition goes into
effective on January 1, 2012 and
the next session wouldn't start
until January of 2013. The peti-
tion, if passed, would cut funding
for local government. Then
require the state to pay .the bill but
it doesn't restrict local govern-
ment from spending. If the peti-
tion passes 1 would predict a spe-
cial session would be called, tax
increases would be passed, a
referral would be circulated and if
that passed the North Dakota gov-
ernment would shut down. North
Dakota maybe better off than all
the other states but we don't have
that kind of money.
It would be dangerous to rely
on oil and gas revenue to make up
the difference so other taxes
would have to be increased to
make up the difference. Why
eliminate one tax (property) only
to have to raise other taxes to
make up the difference?
As the 62nd legislative session
starts to wind down to its final
days we as individuals get caught
up in the moment of the debate
and sometime lose sight of the
overall picture. We have one of
the best state governments in the
nation and in the world. There is
always something that could be
improved but we are more open,
have more of a citizen's legisla-
ture and are more accessible than
just about any state government.
We might have some silly bills
but everyone's idea gets a hearing
and a vote. In North Dakota no
legislator can pocket a bill. It's
an honor and privilege to be part
of this system and have the trust
of my district.
If you have any comments on
the bills left before us I can be
reached at ddrovdal@nd.gov and
Rep. Kempenich at kkem-
penich@nd.gov. Senator
Bowman is bbowman@nd.gov
and we would appreciate hearing
from you.
Property tax repeal will fail at polls
A constitutional amendmefit is
being proposed by a citizen petition
to abolish the North Dakota proper-
ty tax. The measure will appear on
the June 2012 election ballot for a
vote of the people. It i, a pipedream
and will lose at the ballot box for
several reasons.
1. The development of alterna-
tive funding sources and returning
money back to the local govern-
ments is too complicated for a sud-
den elimination of the tax. Having
been in the middle of the effort to
replace the personal property tax, I
can report from experience that it
took the whole decade of the 1960s
to iron out the conflicts and replace-
ment revenue.
Repeal of the personal property
tax was simple when compared to
this proposal to eliminate $775 mil-
lion in local government revenue
without a plan for replacement. To
replace that kind of money would
require doubling the state sales tax
or tripling the income tax, some-
thing sales tax payers and' income
tax payers would not welcome.
Higher energy taxes are out, with
some folks already thinking that the
oil and coal industries ought to have
tax cuts to foster economic growth.
2. Abolition of the real estate tax
and replacement with other taxes
would shift the tax burden from
present payers to a different group
of payers. Obviously, that's what the
sponsors of the proposal want to see
happen. This assumes that the pres-
ent payers are victims of an
inequitable tax system and shifting
would make the tax system fairer.
Because farmers are major pay-
ers of the real estate taxes, they
.€
would be major beneficiaries of a
repeal. So the question is: are farm-
ers unfairly treated by present real
estate taxes? At present, farm homes
and buildings are exempt from the
property tax. Farmland is assessed
on the basis of a productivity formu-
la that ends up with a tax that is 50
percent of what other taxpayers pay
on their property. Finally, farmers
benefit from the services provided
by local governments •funded by
their real estate taxes.
Acknowledging these benefits,
farmers are not likely to come over
the hills with pitchforks to support
this proposal.
3. Replacement of a locally-con-
trolled tax with state-controlled
taxes will diminish the authority of
local governments. With the fund-
ing mechanism left to the
Legislature, replacement revenue
would be determined by the state,
and local governments would have
less say about financing their servic-
es.
4. The state government has
already reduced the property tax
burden by providing income tax
credits and feeding new money into
school funding.
5. The real estate tax serves a
number of legitimate purposes in
our tax system. It serves as an
income tax on the appreciation of
land, a gain in wealth that cannot be
recovered under the liberal provi-
sions of estate taxes. It forces own-
ers to keep property in its most pro-
ductive use - no cornfields assessed
as farmland while owners hold the
land for speculation. It is a stable
form of revenue that protects
schools, townships, counties and
cities from the vagaries of the econ-
omy.
Even though a majority of us dis-
like the property tax, this proposal
will be defeated because, in the final
analysis, voters will recognize the
pitfalls involved in such a radical
change.
Charity' reform needed at IRS
The billionaire industrialist
brothers Charles and David Koch
have drawn sharp criticism for their
extensive giving to libertarian caus-
es. Though some of their organiza-
tional ties are public, many are
unknown, thanks to a provision in
the tax code that allows the Koch
brothers and other donors, on both
the left and the right, to conceal the
recipients of their largess, even as
they get to write it off on their taxes.
Fortunately, there is a solution to
this problem: require all nonprofit
organizations that engage in politi-
cal advocacy to reveal their donors.
True, individuals must disclose
on their tax returns the details of
large gifts to charitable organiza-
tions, known as 501(c)3 groups from
the section of the tax code governing
them. But this information is kept
private by the Internal Revenue
Service. While gifts given directly
through foundations must be made
public, the wealthy can give without
leaving fingerprints by routing
money through "donor-advised
funds" sponsored by 501(c)3 groups
-- which don't have to publicly
name their donors.
And, thanks to the Supreme
Court decision in the Citizens
United case, things are getting even
worse. That decision now allows
organizations that can engage in
overt partisan work, called 501(c)4
groups, to take unlimited corporate
money -- again, without revealing
their donors.
In many cases, organizations
have both 501(c)3 and a 501(c)4
arms that work closely together in
the same building 'o shape govern-
ment policy. One such group is
FreedomWorks, which has received
significant amounts of money from
the Koch brothers and is a force
behind both the Tea Party political
movement and the conservative lib-
ertarian policy agenda it espouses.
Beyond requiring more trans-
parency, the law also needs to make
finer distinctions among nonprofits.
The Koch brothers rightly note that
their activist giving is just a small
part of their overall philanthropy;
David Koch, for example, has given
extensively to the New York City
Ballet. But the tax rules treat the
brothers' giving to medical research
or modern art museums exactly the
same as their gifts to ideologically
driven organizations like the Cato
Institute. All are classified as "chari-
ty."
This is an unfair use of public tax
subsidies. The Internal Revenue
Service doesn't allow tax tilers to
write off their donations to politi-
cians or parties, because that would
mean Republicans would be subsi-
dizing Democratic political efforts,
and vice versa. So why should gifts
that often seek the same outcomes
through nonprofit organizations be
treated differently?
In response, the Internal Revenue
Service should create a new catego-
ry for nonprofits engaged in policy
advocacy. Such groups would have
to disclose all their donors, while
traditional 501(c)3's -- museums
and universities, for example --
could continue to receive anony-
mous gifts.
The I.R.S. shoulct also set a ceil-
ing on the deductibility of such gifts
to limit the extent to which all tax-
payers subsidize de facto political
giving by the wealthy. The treatment
of small gifts would remain
unchanged to encourage ordinary
Americans to engage in civic life.
The United States is known for
its vibrant nonprofit sector. Today,
though, this sector has become yet
one more avenue for the wealthy to
try to dominate civic life. If we care
at all about political equality, we
must regulate the growing flood of
money into this arena.
(Callahan is a senior fellow at
Demos and the author of "Fortunes
of Change: The Rise of the Liberal
Rich and the Remaking of
America.")
Please
support your
local
merchants