Arts groups: Tax exemption is essential for survival

IN TUNE: Local elementary school children play along with the R.I. Philharmonic during one of six 2013 Education Concerts held during April. More than 10,000 students took part in the concert series. / COURTESY R.I. PHILHARMONIC/ RAY LARSON
IN TUNE: Local elementary school children play along with the R.I. Philharmonic during one of six 2013 Education Concerts held during April. More than 10,000 students took part in the concert series. / COURTESY R.I. PHILHARMONIC/ RAY LARSON

A dispute between the Rhode Island Philharmonic Orchestra and Music School and the commission overseeing East Providence’s finances has inspired the submission of legislation that would permanently protect arts and cultural nonprofits’ tax-exempt status, something many of them are worried is in danger as cash-strapped municipalities look to levy property taxes on the organizations.
R.I. Rep. Frank Ferri, D-Warwick, R.I. Sen. Maryellen Goodwin, D-Providence, and others have filed bills to clarify that qualifying 501(c)(3) nonprofit performing and visual arts institutions and museums are exempt from local property tax assessments, regardless of how their property is used.
“We know the arts are an economic driver in Rhode Island,” Ferri said. “We want to emphasize it’s one of our assets.”
The bills were drafted after budget commissions overseeing municipal finances in Woonsocket and East Providence sought to collect taxes on organizations such as the Philharmonic, which is locked in a legal battle with East Providence over a tax bill of just under $160,000 for its 40,000-square-foot headquarters and school building on Waterman Street.
The Philharmonic has challenged the tax assessment; that dispute is heading to Superior Court.
Executive Director David Beauchesne said losing tax-exempt status would threaten the organization’s ability to survive.
“Our business model is based on raising funds, largely through contributions, to provide a public service,” he said. “Every single lesson we give is subsidized, most people who buy a ticket to a concert, that ticket price has been subsidized. It’s not as though we can cut back on programs and reallocate those funds to pay a tax bill. We just don’t have anywhere to pull those funds from.” Discussions with legislative leaders have left Beauchesne optimistic the bill will be passed during the current legislative session – and take effect retroactively to the end of 2011, which would eliminate its East Providence tax bill.
“We generate jobs. We generate tax revenue. We create an improved cultural and educational climate, and that has a tremendous benefit for the quality of life and the reputation of the state,” he said.
R.I. State Council on the Arts Executive Director Randall Rosenbaum said recently that as many as 10,000 artists of all types work in the state, with nonprofit arts and cultural organizations providing 5,165 direct jobs. A 2007 study by Americans for the Arts found the nonprofit arts and culture sector was a $111 million-a-year industry in Providence alone. The New England Foundation for the Arts reported in 2010 that direct and indirect arts spending statewide topped $673 million.
Supporters of the legislation say the true economic impact of the arts may be far greater.
“You can’t even get a hotel room in the city when there’s a WaterFire,” said Libby Slader, president of the board of directors of Rhode Island Citizens for the Arts. “The restaurants benefit, the shops benefit and above all, it’s quality of life. Last summer the city was so vibrant with all that was going on.”
Ferri emphasized that the bill would not prohibit cities from entering into voluntary agreements with organizations to make payments in lieu of taxes – as several tax-exempt higher education institutions do.
“I think there’s concern that given the economic and budget realities, this is going to keep happening in other communities,” he said.
Fewer than 20 arts and cultural nonprofits own property and remain vulnerable to taxation without the legislation, Slader said, but that group includes some of the state’s most popular cultural attractions: The Newport Museum, the Stadium Theater in Woonsocket, Festival Ballet Providence, the Slater Mill in Pawtucket and the Trinity Repertory Company. The Providence Performing Arts Center already has a specific exemption encoded in state law. Festival Ballet Providence board of trustees President Don Wineberg said although his organization uses much of its property as a school – giving it an explicit tax exemption – he supports the legislation for the message it would send about supporting the arts as a business.
“Because nonprofits’ budgets are largely to fund people, supporting the arts is almost the best investment you can make in jobs and growth and economic vitality,” he said.
Rebekah Greenwald Speck, executive director of RiverzEdge Arts Project in Woonsocket, which leases its space, said municipalities should consider the big picture when they make decisions about pursuing taxes from nonprofits.
“The long-term cost benefits of the services nonprofits provide are much greater than the city is losing out on through not receiving taxes,” she said. “Nonprofits bring a lot of opportunities with them.”
In fact, Slader noted that four organizations – including RiverzEdge and Community MusicWorks – have earned trips to the White House in recent years to receive National Arts and Humanities Youth Program Awards.
“We don’t want to go from being nationally recognized for that great work to being known as the only state where municipalities are taxing nonprofit arts groups,” she said. “Our national colleagues in the arts are looking at us closely to see what happens.” •

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