The District government has caused a furor among local nonprofit institutions with a proposed change in its tax regulations.

Many of the groups fear it would end property-tax exemptions for hospitals, private schools and universities, group homes, private libraries, and some church property.

Many nonprofit groups were caught off guard when the Department of Finance and Revenue published the proposed rule changes in the D.C. Register last Friday without warning. Yesterday, representatives of those groups complained to city officials that they have been given only 10 days in which to comment on the potentially far-reaching rules, which are scheduled to take effect Feb. 1.

"It was eminently unfair to give just 10 days to respond," said Solon Candage, headmaster of the Sheridan School and president of the D.C. chapter of the Council for American Private Education.

Matthew Watson, a lawyer representing about 400 local nonprofit groups, said a strict interpretation of the proposed rules could result in the wholesale elimination of tax exemptions -- a view that city officials dispute.

"I think the plain language says it would revoke the tax-exempt status for every private school, every hospital, many social service providers, group homes, halfway houses and potentially some churches," said Watson, a former D.C. auditor.

"I don't think all of this was their intent," he added. "I just think they went hogwild and went overboard."

Melvin W. Jones, director of the finance department, said after a meeting with Watson that he will recommend a 30-day extension of the period for public comment. Jones insisted the city is not trying to wipe out tax exemptions but merely is attempting to clarify the existing law and better define which organizations are entitled to the benefits.

"First of all, these rules basically seek to clarify what's already in the statute," he said. "The whole purpose of these rules was not to take away tax-exemption status from any of those groups."

Under the proposed rules, hospitals, private and parochial schools and universities would be required to offer their services "gratuitously" or "at a nominal charge" to maintain tax-exempt status.

The rules also in effect set minimum academic standards for schools and universities to qualify for a tax exemption -- a measure that school officials contend is an unwarranted intrusion.

The proposed rules would eliminate exemptions for group homes and other nonprofit groups that assist transient clientele or that receive a large portion of their operating funds from the D.C. government.

Local charitable organizations would have to provide at least 75 percent of their services within the District to continue to qualify for the exemption.

And churches that do not use at least 60 percent of the floor space of their buildings for religious services for better than 30 percent of the time the church is open might lose their exemptions under the proposed rules.

The Rev. Ernest Gibson, executive director of the Greater Washington Council of Churches, said yesterday he was not aware the city had proposed a change in the tax rules. "I'd better look into it," he said.

D.C. City Council member John A. Wilson (D-Ward 2), chairman of the Finance and Revenue Committee, said that nonprofit groups were justified in their concerns about the potentially adverse impact of the proposed regulations.

"What they the finance department are really doing is legislating more than they are regulating," Wilson said. "With all the other pressures and budget cuts on these nonprofit agencies that serve poor and other people, I don't think this is the time to come down heavy on them."

Wilson sent Mayor Marion Barry a letter yesterday urging him to postpone implementing the new rules for a month.

"While I fully appreciate the need to augment the District's tax base, the proposed regulations to implement D.C. law to define real property exempt from taxation . . . substantially terminate composition nullify legislative intent in order to achieve that end," Wilson said in the letter.

For years, D.C. officials have complained that the city is losing too much in tax revenues because more than half of its land mass is owned by the federal government, nonprofit organizations and churches exempt from property taxes.

About 9,000 separate groups and agencies currently enjoy tax-exempt status, according to District figures.

The city estimates that it loses about $88 million a year in tax revenue just on property owned by nongovernment organizations that qualify for tax exemptions.

On Dec. 12, Barry ordered the finance department to draft new regulations governing tax-exempt property.

Watson and other critics complained yesterday that the department went ahead with the project without bothering to consult outside experts or organizations that would be affected by the changes.

The D.C. Hospital Association contacted the finance department yesterday, saying that it would be virtually impossible for city hospitals to provide costly services for a "nominal" fee.

Department officials replied that "it was not our intent" to include local hospitals under that requirement, according to a spokeswoman for the hospital association.