The Connecticut Supreme Court will hear arguments Friday about whether a nonprofit group home should pay property taxes or whether its activities are exempt. The case has implications for nonprofits and municipal tax revenue.
Rainbow Housing in Cromwell provides a community based support program for individuals who suffer from severe mental illness. The town decided it should pay property taxes in 2018 when it filed for an exemption, but the trial court agreed with the nonprofit and ordered the town to reinstate the exemption.
The town of Cromwell is appealing that decision.
In court documents the town argues that it was unclear from the application “what is happening at this property,” and as a result Tax Assessor Shawna Baron denied the exemption.
According to court documents, the nonprofit told the assessor that individuals with mental illness are there “temporarily until they are stable enough to live independently.”
But in order to qualify for the exemption Rainbow Housing, according to Cromwell, would have to prove it does not provide housing subsidized in part by the state government and that they are only using it for “temporary housing.”
The home receives funding from the state Department of Mental Health and Addiction Services. However, the trial court found that “There is nothing in the stipulated facts to support the defendant’s argument that DMHAS is subsidizing Gilead rather than assisting Gilead in its goal to provide a program for the benefit of men with mental health disabilities.”
The town argues that even if the housing was not subsidized, it was not temporary enough to qualify for the exemption.
The trial court determined that “there is nothing in the stipulated facts to conclude that the treatment provided is anything but temporary. There is no merit to the defendant’s claim that the use of 461 Main Street is not temporary.”
The length of stay depends on the treatment progress of the individual, according to Dan Osborne, president and CEO of Gilead Community Services, which runs Rainbow Housing.
Back in 2018, Baron told CTNewsJunkie that some of the nonprofit organizations “don’t know why they are exempt.”
She said the law is clear that it needs to be used exclusively for the stated nonprofit purpose in order to continue to receive the exemption.
Baron said some of the exemptions — like the one for group homes — are a little “gray” and it would be nice if it were clearer, but “assessors don’t generate legislation.”
Since that time, the General Assembly has failed to pass legislation to help draw a bright line.
Several nonprofit organizations submitted briefs to the high court in support of Rainbow Housing.
The Connecticut Community Nonprofit Alliance, Inc. said the case is a matter of public importance that extends beyond the parties in this particular case.
“The Alliance believes that there are critical issues of public importance in the present appeal because acceptance of the defendant-appellant’s argument that 461 Main does not qualify for an ad valorem tax exemption could have deleterious effects for similarly situated facilities, such as those who are members of the Alliance,” Elliott Pollack of Pullman & Comley wrote in a brief. “Indeed, loss of the tax exemption for these facilities would impose significant unbudgeted present and future costs on these Alliance members, which in this era of constrained spending on, and diminished resources available for, social services for the mentally disabled, is of very serious concern.”
Kathy Flaherty, executive director of the Connecticut Legal Rights Project, said the assessors “reading of the tax statute is strained. The actions of the town officials demonstrated the town’s antipathy towards people with psychiatric disabilities.”
The town of Manchester submitted a court brief too in support of Cromwell’s appeal.
Manchester’s Assessor John Rainaldi estimated that there are 89 properties in Manchester that can be characterized as “group homes.” Of these 89 properties, 38 have received statutory property tax exemptions.
“However the granting of a tax exemption for a property necessarily results in a corresponding reduction of municipal tax revenues. The loss of tax revenue resulting from the granting of a property tax exemption means the loss must be offset by either shifting the financial burden to the non-exempt taxpayers in the municipality or by reducing or even eliminating certain municipal services,” Manchester Assistant Town Attorney John Sullivan wrote.
“Manchester takes the position that it is for the Legislature rather than the courts to supply the statutory language that would support the interpretations made by the Trial Court; interpretations that impinge on the balancing act created by the Legislature and which interpretations are the Legislature’s prerogative to make,” Sullivan added.
In 2019, the General Assembly failed to pass legislation that would have clarified the issue of temporary housing and subsidization.
The Supreme Court will hear arguments in the case 9:30 a.m. Friday, Dec. 11.