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Is it Time to Make Colleges Pay Property Tax?

Is it Time to Make Colleges Pay Property Tax?

“such institutions don’t deserve their special treatment”

Lots of people are starting to think that colleges should have more skin in the game.

Walt Gardner writes at the James G. Martin Center:

It’s Time to Make Colleges Pay Property Tax

Although the Ivies and other elite colleges and universities in the U.S. are financial titans, they are registered with the Internal Revenue Service as 501(c)(3) charitable nonprofit organizations. As a result, their vast property holdings are exempt from taxation in all 50 states. The rationale for this status is that higher education is an inherent public good. At least that has been the assumption under which this country has long operated.

But this argument has increasingly been called into question by events over the last few years, culminating in the headline-making responses by university presidents to a recent congressional panel. It’s clear by now that what transpires on many campuses is more indoctrination than education. As Wall Street Journal columnist Peggy Noonan put it last month (quoting CNN’s Fareed Zakaria), colleges “have gone from being centers of excellence to institutions pushing political agendas.” Since that is the case, such institutions don’t deserve their special treatment. They have not held up their end of the bargain.

This state of affairs may explain in part what New York State lawmakers hope to accomplish where higher-ed tax policy is concerned. A bill introduced last month by Queens Assemblyman Zohran Mamdani would eliminate enormous property-tax breaks for Columbia University and N.Y.U., both of which have expanded to become among New York City’s top-10 largest property owners. Yet, whatever their motives, lawmakers are sending a not-so-subtle message that these institutions can’t have it both ways. They can’t continue to avoid most taxes while failing so spectacularly to serve the public interest.

Sadly, New York State is an outlier. In 2018, the Tempe City Council approved an Omni Hotel and Conference Center project that would pay no property taxes because it is located on land owned by the Arizona Board of Regents, which oversees Arizona State University. Other states have made similar bargains. In many parts of the country, the best that can be hoped for at present is that officials pressure private universities to make voluntary “payments in lieu of taxes” (PILOT) or similar annual donations.


Donations tax deductible
to the full extent allowed by law.


That’s not realistic. It would bankrupt colleges that often sit on hundreds of acres in irreplaceable location. There really is no way to put a value on it, except when the college totally fails and the entire site goes up for sale, like recently happened Holy Names Univ. in oakland.

    John M in reply to smooth. | February 5, 2024 at 9:27 pm

    I think you’re right here — a lot of struggling small private liberal arts colleges, especially those with a sincere religious background, would have to shut their doors and sell off their campuses. I worked at such a place for about 20 years. Gorgeous campus — it would make a fine office park or golf course. The rate of just the land tax for the place would have been its death, as it was financially very much always on the edge.

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    The Gentle Grizzly in reply to Jacques. | February 5, 2024 at 10:31 am

    Copy and paste much?

    Danny in reply to Jacques. | February 6, 2024 at 8:00 am

    What if they want to be a doctor? Or an oceanologist? Or a lawyer? Or one of the endless major career opportunities that do not exist without college, our society actually does need and that would be much better for our society and culture if it wasn’t dominated by leftist ideologues?

    The number of Americans who could speak a second language who aren’t Hispanic is not particularly great (and even with Hispanics don’t expect the next generation to be good in Spanish, how many Italian Americans today are fluent in Italian?), which means no Europe is not an alternative to our using government and other tools at our disposal to fix our dam education system.

As to the payment of property tax, that’s certainly one issue, which lies mainly between an organization and its LOCAL government. But talking about removing the 501(c)(3) classification for educational organizations would have unfortunate consequences.

As a former (volunteer) officer of a national hobby nonprofit holding a 501(c)(3) as “scientific and educational,” you’d be harming a lot of small, innocent bystanders. Our exempt status helped us serve tens of thousands of youngsters in hands-on science competitions. The most valuable benefit was being able to accept donations that were not only untaxed, but qualified as deductible to the donors.

    The small private I worked at for awhile didn’t pay property taxes but it did recompense local government for services. We had to, as stupid students in the dorms kept on tripping fire alarms by smoking where they shouldn’t have.

The purpose of taxation should be to raise money for universal services provided by the state pursuant to legislation. Do colleges not use the fire department? The DWP? Everyone should pay property tax. Period.

This archaic notion that those in power can “exempt” the preferred few from taxation is nonsense.

    Many universities *do* have their own fire and police departments, and maintain their own roads. But perhaps a reasonable compromise would be to exempt unimproved land from taxation but subject improvements (buildings) to property tax. Certainly, housing (dorms) and commercial spaces (stores, hotels, commercial offices) could be subjected to property tax.

    Stanford is an interesting case study. Stanford Research Park (apparently) pays property taxes. But faculty housing on Stanford’s campus, despite being owned by the faculty, is assessed at the purchase price rather than the value determined by “comparables”. The excuse is that Stanford leases the land to faculty, so the faculty don’t own it. Of course, that does nothing to help the city of Palo Alto pay for services for those homeowners. There has been litigation on this recently…

      smooth in reply to csprof. | February 5, 2024 at 12:41 pm

      Stanford Research Park is interesting case study. Some of those properties were built by private sector developers, and later acquired by the university, who then leases the building to private sector tenants who pay premium rent. If the university isn’t using the property for education use, good argument could be made to tax it like private sector. Its just an alternative investment to the university in that case, to diversify away from the stock market.

I would absolutely require private educational institutions to pay property taxes, and public educational institutions to have a state subsidy to local government as a PILOT. Income taxes are one thing, but paying for their local services—which is the bedrock of being a good local citizen—is absolutely a requirement. Given how much they already leech off the local citizenry with the inevitable noise, student crime, etc. (see: Oberlin)—make these educational institutions pay their keep locally.

destroycommunism | February 5, 2024 at 5:09 pm

is it time??

there should be no none zero exceptions to the tax code

churches groups etc etc

not governments business to give out favoritism