Business Privilege Taxes?

[Jeff Ream]

1 hour ago, Fred Windish said:

Everything is speculative at this point, but if such a tax went into effect, the school district would pay a tax to the City of Allentown for their impervious acres, including all structures, playgrounds, and parking lots.  I don’t think anyone has yet to determine how much this would cost the school district budget. But, whatever the amount (even if just several thousand dollars) would more than likely be made up  by facility rental increases first, rather than school property tax per household.

I don’t believe Dorney Park is within city limits, so no. That’s South Whitehall Township, I think.

People are leaving New York and New Jersey in record numbers for the Lehigh Valley in Pennsylvania to escape taxes. It’s only a matter of time before people begin to flee the Allentown Area for the same reason.

when it comes to taxes, you can run, but you can't hide.

[MikeD]

4 hours ago, Jeff Ream said:

I had heard YEA was looking outside of the city for various reasons. Would the nonpervious surfaces tax also affect Dorney? Obviously anything run at J Birney, which includes DCI and 2 band circuits...and a lot of PIAA stuff...which begs a question...the schools that use JBC as their home field are the Allentown School District...so would they have to pay themselves this tax?

I wonder if the tax would only apply to businesses. Gov Phil "never saw a tax I don't like" Murphy here in NJ is proposing the same at the state level.

[garfield]

23 hours ago, Stu said:

"The board determined that the Parkettes does not advance a charitable purpose because it primarily serves people who can afford to pay for its services."

The bold in the quote is what Cadets need to be very aware of!

If this is the benchmark determination of whether or not drum corps are fulfilling their "charitable mission", I'm convinced they'll avoid being in the target.  I'm not addressing the Parkette's level of charitable contribution to their members' experience.  But, in drum corps, it's widely accepted that MM's get a terrific value for their dollar, and I'm among those who make the claim.  But, simple math shows clearly that that contention is well-justified.

In World Class, it's common for even below-top-12-placement corps to spend $1million or more producing a show and putting it on the road.  Average tuition is approximately $3,750 per season among all corps.  $3,750 times 150 members is only a little over $562,000 so, approximately, 44% of the "member's experience" is paid for by charitable contributions, in-kind gifting, and public support.

Heck of a value, indeed.

When taken to its extreme, it appears that corps who field shows built only from member dues are, arguably, less charitable that those who are spending a million or more to be competitive.

 

 

[HockeyDad]

28 minutes ago, garfield said:

If this is the benchmark determination of whether or not drum corps are fulfilling their "charitable mission", I'm convinced they'll avoid being in the target.  I'm not addressing the Parkette's level of charitable contribution to their members' experience.  But, in drum corps, it's widely accepted that MM's get a terrific value for their dollar, and I'm among those who make the claim.  But, simple math shows clearly that that contention is well-justified.

In World Class, it's common for even below-top-12-placement corps to spend $1million or more producing a show and putting it on the road.  Average tuition is approximately $3,750 per season among all corps.  $3,750 times 150 members is only a little over $562,000 so, approximately, 44% of the "member's experience" is paid for by charitable contributions, in-kind gifting, and public support.

Heck of a value, indeed.

When taken to its extreme, it appears that corps who field shows built only from member dues are, arguably, less charitable that those who are spending a million or more to be competitive.

 

 

I missed you. Don’t leave me like this again. 

[garfield]

On 3/5/2019 at 10:10 AM, cixelsyd said:

Well, just look at that photo in the article.  They have a whole building with their name on it.  They look like a bigger target than other non-profits who just rent a little space here and there.

Maybe one of our Guidestar users can elaborate.

Some things from the 990:

Seemingly most important:  The Parkettes claim tax exempt status because they are a school.

$2.6mm revenue in 2017

Owns the building, worth about $1.7mm

Has about $600m in investments in publicly-trades securities

Four family members essentially run the org.  CORRECTION: $12,500 approx. $225,000 salaries paid to the husband & wife co-directors

Additional payments totalling less than $100m was paid to the family members for misc services/employment

Income is almost exclusively from "Program Service Revenue" consisting of member dues and performance awards

Approximately $180,000 raised from charitable sources

Notably, the Parkettes spent approx $825m in 2017 on expenses that were not related to their mission (non-Program-Service revenue).  Approx 65% of their expenses were spent directly on their program service.  In drum corps, a MUCH higher percentage of expenses are spent directly on the program of the orgs.

 

Maybe not surprisingly, the mission statement of the Parkettes could largely substituted for most drum corps' mission statements:

"Mission

PARKETTES ARE ORGANIZED FOR THE PURPOSE OF PROVIDING ALL BOYS AND GIRLS, REGARDLESS OF AGE, FINANCIAL, MENTAL, OR PHYSICAL ABILITY, THE OPPORTUNITY TO EXPERIENCE THE JOY AND BENEFITS OF GYMNASTICS WHILE BECOMING PART OF OUR FAMILY OF ATHLETES. TOWARD THAT END, THE OFFICERS, DIRECTORS, STAFF, AND VOLUNTEERS ARE COMMITTED TO: PROGRAMS THAT COVER THE ENTIRE RANGE OF YOUTH AND THEIR DEVELOPMENT, BEGINNING WITH PRE-SCHOOL CLASSES, WITH THE OPPORTUNITY FOR ADVANCEMENT TO TEAM PROGRAMS THROUGH WHICH YOUNG ATHLETES MAY ULTIMATELY GAIN NATIONAL, INTERNATIONAL, AND OLYMPIC RECOGNITION. PROGRAMS FOR CHILDREN WHO HAVE SPECIAL PHYSICAL, MENTAL OR EMOTIONAL NEEDS SO THEY MAY GAIN PHYSICAL BENEFITS AND INNER CONFIDENCE THROUGH THE SPORT OF GYMNASTICS. AN ENVIRONMENT TO EXPERIENCE THE IMPORTANCE OF PHYSICAL FITNESS, INCLUDING STRENGTH, BALANCE, FLEXIBILITY, AND COORDINATION, AND THE VALUE OF A DISCIPLE.INED TRAINING REGIMENT THAT ENHANCES ANY ATHLETIC ENDEAVOR. A LEARNING EXPERIENCE WITH EMPHASIS ON T.. <snip>"

Edited March 6, 2019 by garfield

[Stu]

16 hours ago, cixelsyd said:

Yes, they need to be aware. 

That said... Cadets marchers do not pay for their services.  Their payments probably only cover 25%-30% of the cost.  At that level, we cannot even speculate as to whether marchers could "afford to pay" the full cost of those services.

If this nebulous "afford to pay" standard were to become valid legal precedent, colleges would have to pay tax on their donations.  Hospitals too - after all, they primarily serve people who can afford to pay (copayments) for their services.

This is just an attempted end run around the non-profit designation by a municipality that cannot balance their own budget.

 

4 hours ago, garfield said:

If this is the benchmark determination of whether or not drum corps are fulfilling their "charitable mission", I'm convinced they'll avoid being in the target.  I'm not addressing the Parkette's level of charitable contribution to their members' experience.  But, in drum corps, it's widely accepted that MM's get a terrific value for their dollar, and I'm among those who make the claim.  But, simple math shows clearly that that contention is well-justified.

In World Class, it's common for even below-top-12-placement corps to spend $1million or more producing a show and putting it on the road.  Average tuition is approximately $3,750 per season among all corps.  $3,750 times 150 members is only a little over $562,000 so, approximately, 44% of the "member's experience" is paid for by charitable contributions, in-kind gifting, and public support.

Heck of a value, indeed.

When taken to its extreme, it appears that corps who field shows built only from member dues are, arguably, less charitable that those who are spending a million or more to be competitive.

 

 

Howdy Gar!!!

I personally think it is this simple. It is not what their $3,750 dues per year are covering, it is whether or not the Cadets are catering mainly to those who can afford the dues. Here is the main question: How many of the 150 can afford the $3,750 in dues per year compared to how many are indigent and dues are paid by scholarship or altruistic people? If the ratio leans extremely heavy toward the former the city could hit them with fines; if there are enough in the latter they will avoid the issue. Because that ratio is how the City, not the State or Federal, but the 'City' is defining charity. Again, I think it is that simple.

Note on Hospitals and Schools: By U.S. law no hospital can turn away an indigent in an emergency situation. And as for schools, they have a multitude of ways to help under-privileged with scholarships, loans, work programs, ect. So it would be more difficult for the city to jusify going after them as opposed to non-profit competitive or arts activities.

Edited March 6, 2019 by Stu

[skevinp]

From the article:

Nonprofits are typically tax-exempt because of their charitable work, but Allentown officials have argued that the organizations should be taxed on the portions of their operations that Allentown officials believe to be profit-generating.

What would constitute such profit-generating portions, where Cadets are concerned?

[Stu]

I have spent a considerable amount of time doing some research. There were a plethora of sites I read through, too many to link; so if y'all want to check my findings go ahead and do your own searches. However, here is what I found in a nutshell:

A Business Privalige Tax, BPT, is basically a recurring fee placed on any corporation within a particular jurisdiction for the 'privalige' to operate within that jurisdiction. All corporations, including 501c3 non-profits, within that jurisdiction must file a BPT form each year. A 501c3 is typically exempt from the fee as long as they file the form and the jurisdiction determines it is mainly functioning as a charitable organization. It is the word 'charitable' which is the issue....... And in the case of the Parkettes the city apparently determined that since the revenue, including the performer dues, mainly provide services (for just the performers who can afford the dues) it thus does not qualify as a 100% true charity by mainly helping those who cannot afford the services; again that is according to the city not the IRS. Therefore it appears the city is assessing a privalige fee and making it retroactive. And the Parkettes are suing the city because of that assesment.

So to me, how this plays out, and how the city views YEA on whether or not it serves as a charity or serves mainly those who can afford to pay, will determine the fate of YEA and the Cadets.

Edited March 6, 2019 by Stu

[cixelsyd]

10 hours ago, Stu said:

I personally think it is this simple. It is not what their $3,750 dues per year are covering, it is whether or not the Cadets are catering mainly to those who can afford the dues. Here is the main question: How many of the 150 can afford the $3,750 in dues per year compared to how many are indigent and dues are paid by scholarship or altruistic people? If the ratio leans extremely heavy toward the former the city could hit them with fines; if there are enough in the latter they will avoid the issue. Because that ratio is how the City, not the State or Federal, but the 'City' is defining charity. Again, I think it is that simple.

Note on Hospitals and Schools: By U.S. law no hospital can turn away an indigent in an emergency situation. And as for schools, they have a multitude of ways to help under-privileged with scholarships, loans, work programs, ect. So it would be more difficult for the city to jusify going after them as opposed to non-profit competitive or arts activities.

As the article points out, Allentown is already going after a hospital for this "business privilege tax".  And the Parkettes claim to be a school.  So no, it is not as simple as you say.

I suspect it is even more simple.  Find the non-profits with the biggest pockets, and go after them.

[cixelsyd]

11 hours ago, garfield said:

Income is almost exclusively from "Program Service Revenue" consisting of member dues and performance awards

But was it always?  The article cites "items sold by the Parkettes and revenue from an auction as well as from candy, yearbook, candle and flower sales". 

It is not completely clear, but the inference is that the fundraisers, not member dues or performance awards, are what is being taxed.  Evidently, dues/tuition are not "profit-generating".  Prize money is somehow exempt as well.

Now, exactly how vulnerable is YEA! to this "business privilege tax" concept?  Consider that much of what might be deemed "profit-generating" takes place outside of Allentown.  Cadets occasionally host a show in Allentown, but the majority of their drum corps events are staged in other towns.  Nearly all USBands events are out of town.  All but one or two appearance fees for Cadets each year are earned in other towns.  Some portion of merchandise sales would be at issue, but sales generated out-of-town from the traveling souvenir booth might not be.  Thoughts, anyone?

Really curious as to who the third biggest pocketed Allentown non-profit is...