🔒Cromwell in center of fight over nonprofits’ tax-exempt status

Alyssa Goduti, president and CEO of Cromwell-based Adelbrook Behavioral and Developmental Services Inc., was surprised when the town sent her nonprofit a property tax bill about two years ago.

Before that, Cromwell hadn’t charged Adelbrook, which provides services for children and young adults with developmental and behavioral issues, taxes on any properties it owns in town since it was founded there 120 years ago.

But in 2018, that changed. Adelbrook says it was informed by the town that taxes would be assessed on one of the properties it owns on Hicksville Road, where it provides a “therapeutic group home,” according to court records.

The town hadn’t assessed taxes on that property, which Cromwell’s assessor values at about $232,000, any previous year since Adelbrook bought it in 2013.

The total annual property tax bill for Adelbrook, which reported about $29 million in revenue in 2018, was $5,336.20, according to the nonprofit’s assistant CFO Ryan Jason.

“I think it’s a concerning, slippery slope of potentially getting assessed on this property, and possibly leading us to be assessed on other properties,” said Goduti.

After a failed appeal, Adelbrook sued the town over the tax bill, asserting its nonprofit status has always and continues to exempt it from property taxes. And it’s not the only nonprofit currently in litigation with Cromwell over similar issues.

Middletown-based MARC Community Resources Inc., which also provides services for those with intellectual and developmental disabilities, filed suit against Cromwell in 2018 over a property tax bill, and Middletown’s Gilead Community Services won a Connecticut Superior Court judgement against Cromwell for a similar complaint last year. The town appealed the decision.

Cromwell Town Manager Anthony Salvatore said he couldn’t comment on pending litigation, but his municipality isn’t alone in challenging nonprofits’ tax-exempt status.

A 2018 survey conducted by the Connecticut Community Nonprofit Alliance found that 41 Connecticut towns had denied tax exemptions.

For example, Adelbrook has also sued the cities of Middletown and Bristol over similar issues. The Middletown case was withdrawn, and the Bristol case is still in litigation, court records show.

“There have been an increasing number of towns that have been incorrectly assessing property taxes on community nonprofits that are by law property tax exempt,” said Gian-Carl Casa, president and CEO of the Connecticut Community Nonprofit Alliance, which represents hundreds of nonprofits statewide. “It’s a cynical play, and it’s one that violates something that for hundreds of years has been the case in Connecticut.”

The issue has heated up in recent years as both municipalities and nonprofits face significant financial headwinds from flat or less state government funding, and other pressures.

In addition, some cities and towns have seen an increasing number of properties coming off tax rolls because they’ve been bought by nonprofit organizations, said Kevin Maloney, a spokesman for the Connecticut Conference of Municipalities.

Maloney pointed out that some nonprofits in Connecticut aren’t tax exempt, and that it’s possible for towns to charge them property taxes. Additionally, some other nonprofit institutions have agreed to pay some taxes to the municipality where they are located, Maloney said.

“Towns have negotiated voluntary payments by nonprofits, such as Yale University contributing to New Haven and Quinnipiac University contributing to Hamden,” Maloney said in an email.

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It’s not clear exactly why Cromwell has begun assessing property taxes on some properties owned by nonprofit organizations.

Gilead CEO Dan Osborne said while he understands that municipalities, like nonprofits, are dealing with budgetary issues and vying for money needed for worthy causes, the statutes and precedents surrounding 501(c)(3) entities and property taxes appear to be pretty clear.

Under protest, Gilead has paid some of the taxes Cromwell levied on its property at 461 Main St., Osborne said. Gilead is poised to continue fighting against new taxation from municipalities, he added, but judgements landing on cities’ and towns’ side could present an existential crisis for nonprofits in the state.

“If this were to become a statewide standard … [it would] threaten the ability for nonprofits like Gilead to exist, not to mention thrive.”