Y Execs in Kansas Balk at Bill Imposing Tax on Nonprofits

Executives of YMCA organizations in Topeka, Olathe and Wichita denounced a bill up for debate last week eliminating the property tax exemption held by this type of nonprofit community service organization statewide.

Charlie Lord, chief executive officer of YMCA Topeka, said legislation raising the nonprofit's tax liability would have devastating consequences if signed into law. The unit services 50,000 people annually through three branch facilities and at a 165-acre camp.

"Any additional tax," he said, "and the YMCA of Topeka goes away."

The House Taxation Committee conducted a hearing on House Bill 2498, which withdraws a property tax exemption from organizations providing humanitarian services with more than 40 percent of revenue derived from membership sales. The committee took no action on the bill, which elicited no favorable testimony.

The taxation spotlight is on YMCAs due to the committee's simultaneous consideration of a separate measure, Senate Bill 72, that would deliver a property tax break to the for-profit fitness clubs across Kansas.

Rodney Steven, of Genesis Health Clubs in Wichita and elsewhere, has lobbied in the 2013 and 2014 legislative sessions on behalf of the Senate bill. The bill was passed last year by the Senate, but bypassed in the House. His quest is to gain enough in the House to send the bill to Gov. Sam Brownback

He has invested at least $65,000 in campaign contributions to dozens of state legislators to promote the measure.

Dennis Schoenebeck, chief executive of the Greater Wichita YMCA, said the call by Steven for leveling the field among nonprofit organizations and for-profit companies engaging in fitness programs ignored their diverse missions.

Services provided to low-income children and families by YMCAs won't be met by profit-driven operations, he said.

He said the House bill could cost the Wichita YMCA between $5 million and $6 million annually.

"This is a complex issue," Schoenebeck said. "There's more to it than services lost and more to it than dollars. It's a civic involvement. You're building a community. These are quality-of-life programs. We're much broader than a fitness center."

Statewide tax implications are unclear because Emily Compton, president and chief executive officer of Goodwill Industries of Kansas, expressed apprehension the House bill could capture the Goodwill operation as well.

Republicans and Democrats on the tax committee have taken keen interest in the Wichita YMCA's federal filings, which indicate the organization had $16 million in excess revenue at the end of 2011. The committee requested the comparable 2012 report.

Rep. Julie Menghini, D-Pittsburg, asked if Schoenebeck would be willing to concede sales tax should be charged on YMCA memberships in line with other nonprofits operating membership programs in Kansas. He didn't endorse the sales tax hike.

He also was peppered by committee members with questions about executive salaries, facility expansion, claims of financial support to Wichita and whether volunteers or employees at YMCAs engaged in Christian instruction.

Bob Fry, who represented the Olathe YMCA at the House hearing, said success of the Wichita organization was an anomaly in Kansas. Legislation adding to the financial obstacles of charitable nonprofits should be voted down or tabled until potential consequences can be examined, he said.

"We are hanging on by our fingernails. It's been a tough couple of years for us. If our fees go up because of sales or property tax, our market goes down. We will have to reduce services to low-income folks," Fry said.