Tax proposals raise concerns for arts groups

May. 16, 2013 @ 08:41 PM

Several tax reform proposals now being discussed in the N.C. Senate would have a “decimating” effect on their ability to provide services, leaders of local arts nonprofit organizations say.

Nothing has been set in stone yet, but a tax reform package that state Sen. Phil Berger, president pro tem, and other tax writers are discussing would cut individual and corporate tax rates, but extend sales taxes to more goods and services, according to news reports. Arts North Carolina, a nonprofit arts advocacy organization, stated in a recent newsletter that the proposals “would have negative consequences for nonprofit organizations.”

This week, Arts North Carolina issued a call to action, urging leaders of arts nonprofits to call their legislators to oppose the measures, said Karen Wells, the organization’s executive director.

Sherry DeVries, executive director of the Durham Arts Council, quickly followed up with a call to action on that organization’s website.

Arts North Carolina, in partnership with the N.C. Center for Nonprofits, has raised red flags about three major proposals. Refunds on sales taxes that nonprofit groups pay would be phased out. That proposal “would be a real hit for the sector” and have “a real impact on arts organizations to be able to do what they currently do,” said David Heinen, director of public policy and advocacy at N.C. Center for Nonprofits.

The proposal also would require nonprofit groups to collect sales taxes on performances, classes, camps and other paid services, and possibly remove the charitable tax deduction for individuals.

Republicans in the General Assembly say these and other reform measures would be fairer and more consumption-based, and would lower taxes for most North Carolinians.

Nonprofit leaders vigorously disagree.

“We’re hopeful that this doesn’t come into effect,” said Jodee Nimerichter, executive director of the American Dance Festival (and board member of Arts North Carolina). With the reduction in grant sources, the ADF cannot take on another burden that would take away revenue, she said.

“For us, [taxing] ticket sales would be the most hurtful thing of all,” Nimerichter said.

Placing a tax on concerts and classes “would have a net effect of around $48,000 per year that would have to be addressed with budget cuts and higher fees to the people who participate in classes and events at The ArtsCenter,” said Art Menius, ArtsCenter executive director, in an email.

If the Durham Arts Council has to raise fees to accommodate taxes, the organization will reach a point where it will “lose customer base,” DeVries said.

“I know budget planning is a process … but these are some of the scariest proposals we have ever heard and are going to have a decimating impact on the nonprofit sector if they make it through,” DeVries said.

Suzanne Rousso, artistic director of Mallarmé Chamber Players (and Arts North Carolina board member) said she had already contacted members of Durham’s legislative delegation. She is most concerned about the impact of the loss of charitable deductions on her organization. Without the incentive of the deduction, “I think were going to see those contributions go way down,” Rousso said.

Menius and DeVries also raised concerns about further budget cuts to the North Carolina Arts Council, the state agency that funnels grants to the counties. The state Arts Council has seen a 43 percent decrease in grant funding since 2005, DeVries said. If the Senate plan moves forward, she said, arts councils and other groups will likely see “debilitating cuts to the grant programs of the North Carolina Arts Council.”  

The taxes would further cut into services nonprofit groups provide, opponents say.

“The concern there is … nonprofits typically are pitching [their programs] as being affordable,” and the tax would mean fewer people could attend or enroll in programs, Heinen said.

Taxes on entertainment and services “would move us further away from serving our citizens most in need,” Menius said in an email.

“People need to make serious noise at this point,” DeVries said.