Small CT town taxes nonprofit Goodwill for first time; charity suing and here’s why

Goodwill of Western and Northern Connecticut, a nonprofit organization, is suing the town of Avon because its personal property is being taxed for the first time.

Goodwill is claiming that, as a nonprofit under Internal Revenue Code 501(c)(3), it is tax exempt. It has filed an appeal of the Board of Assessment Appeals’ decision in Superior Court in Hartford.

“The Avon assessor has denied Goodwill’s exemption for this personal property that’s located in the town, which means that they’re going to be getting a tax bill, which they shouldn’t be receiving,” said Elliott Pollack of Pullman & Comly in Hartford, which is representing Goodwill.

Avon’s Oct. 1, 2022, grand list assessed Goodwill’s personal property, which includes the clothing and other items it sells to the public in support of its mission, at $99,600. The town assessed a tax on 70% of the fair market value, or $69,720.

Pollack said that’s wrong because Goodwill qualifies for an exemption.

“In Connecticut, in order to obtain a tax exemption, you have to be a charitable organization and you have to have a charitable mission,” he said. “And a significant portion of the mission is training people with disabilities to fend for themselves.”

According to its website, Goodwill, started in 1950, helped 4,830 people gain independence in 2022. It also says that last year it helped 918 Connecticut residents to find a job, as its goal is job training and support services. The organization has about 20 stores across Connecticut, as well as donation centers and career centers. It also sells online.

Avon’s tax rate for 2022-23 is 34.61 mills, or $34.61 for each $100,000 in assessed value. That computes to $2,413 in tax, based on the $69,720 assessment.

But while the amount of tax is small, Pollack said the principle of nonprofits being tax exempt is being violated. 

“The amount of taxes is fairly manageable in and of itself, but the question is, Goodwill has enjoyed the exemption, which it is entitled to for a number of years and it’s challenging the assessor’s decision because it does business and performs services all around the state,” Pollack said.

He said Assessor Harry DerAsadourian has not given him a formal statement giving a reason why Goodwill is being taxed for the first time in memory.

“We’re saying that the exemption was improperly denied and it should be reinstated by the court,” Pollack said.

James Mohs, associate professor of accounting and taxation at the University of New Haven, said he had never seen such a case before. “What the heck are they doing?” he said of the town.

Since Goodwill is a nonprofit organization, “Normally, they’re exempt from income tax, sales tax, things like that, and property tax,” Mohs said. “It looks to me like it’s the town of Avon trying to eliminate their exemption as a nonprofit. And I don’t think they can do that.”

He said the exemption is in the Internal Revenue Code, 501(c)(3), and is not governed by the state or a town.

“Are they trying to set some type of precedent?” Mohs asked. “Or do they not want a Goodwill in their town? … I don’t know what their motivation is because it doesn’t make sense.”

Mohs said before his tenure at UNH he was in public accounting, including working with multinational publicly traded corporations. “I’ve never seen anything like this,” he said. “This is really weird.”

Mohs said the precedent could lead to other nonprofits being taxed. “Let’s say the town of Avon succeeds in this,” he said. “This opens up Pandora’s box for Big Brothers Big Sisters, Salvation Army and all these other ones that are really nonprofits. … I can’t see what kind of benefit they’re going to get out of 2,400 bucks other than setting a precedent.”

“It does not make economic sense to do this,” he said. 

According to an Office of Legislative Research report prepared in 2020, “personal property is all property not classified as real property; it includes machinery, equipment, furniture, fixtures, and motor vehicles.”

“The personal property is owned by the plaintiff and and is used exclusively for carrying out the plaintiff’s charitable purposes,” the lawsuit says.

DerAsadourian did not immediately return a call requesting comment.

Goodwill says the donations of goods and revenue generated from the sales in stores and online “power” its mission, “with more than 90% reinvested into the programs and services” for Connecticut families.

Ed Stannard can be reached at estannard@courant.com.