D.C. Mayor Marion Barry announced yesterday that he has withdrawn a controversial real estate tax proposal that opponents said would strip tax-exempt status from institutions ranging from private schools to halfway houses to some churches.
Barry's decision was made public in a prepared statement released late yesterday afternoon. The mayor could not be reached last night and Annette Samuels, a spokeswoman for Barry, said she would not elaborate.
"Although my administration is committed to efficiently and effectively managing the city by constantly reviewing and revising regulations affecting the governance of the city, this is not the way to do it," Barry said in his statement.
"Melvin W. Jones, my new director for the Department of Finance and Revenue, was appointed with a mission to tighten up the department and to make sure that the city got every tax dollar it was entitled to," Barry's statement continued. "In this instance, he moved too quickly."
Jones could not be reached for comment last night.
Earlier, Jones had insisted that the proposed changes were not drawn to wipe out tax exemptions but were an attempt to clarify existing law and better define which organizations are entitled to the benefits.
Barry said in the statement that he had asked Jones last December to draft proposed regulation changes, but that "following normal procedures, these proposed regulations never came to me for review."
Published in the Jan. 11 edition of the D.C. Register, the proposed regulations initially were to have gone into effect Feb. 1 after only a 10-day public comment period. After officials of religious and charitable organization objected to the lack of public debate over the proposal, the effective date was delayed and public hearings were set for Feb. 21, 25 and 27.
Under the proposal, churches would have had to use 60 percent of their total floor space for religious worship more than 30 percent of the time, and hospitals, private and parochial schools and universities would have been required to offer their services "gratuitously" or "at a nominal charge" to qualify for tax-exempt status.
Barry said in the statement that he will establish a number of working groups, to include leaders of nonprofit organizations, churches and others groups affected by changes in current regulations, that "will fine-tune the proposed regulations so that the needs of government and the nonprofit community will be fully met."
"There is a need for new regulations, but they must reflect the real world," said Matthew Watson, attorney for the Washington Council of Agencies, a coalition of about 400 nonprofit groups that had led the opposition to the proposal.
"I think that together we can work out regulations that meet the needs of the District and at the same time don't impinge on bona fide charitable and religious organizations," Watson said.
Watson said he expected representatives of the Washington Council of Agencies, as well as individual member institutions, would ask to be named to the working groups.
"We need to be divided into focus groups so the department can learn how the organizations function" so new proposals can reflect "real-world" situations, he said.
Watson pointed out that while the proposal withdrawn by Barry provided that only the organization holding title to a church would be eligible for tax-exempt status, most property owned by religious groups isn't held in that manner.
"Some churches are 'owned' by bishops, others by trustees, some by the church itself and others by a higher organization," Watson explained. "We need to be able to discuss reasonably what the real world situation is."
D.C. City Council member John Wilson (R-Ward 2), head of the Finance and Revenue Committee, praised the mayor's decision to withdraw the proposal and cancel the scheduled public hearings.
"I'm very glad he did it," Wilson said, adding that he had written Barry a "letter asking him to withdraw" the proposal, but had not received a reply.
Many religious leaders, including Auxiliary Bishop Eugene A. Marino of the Roman Catholic Archdiocese of Washington, also had written Barry asking that the proposal be withdrawn.
District revenue officials have estimated that the city loses about $88 million in taxes on property owned by nongovernment organizations that qualify for tax exemptions.
Samuels, Barry's spokeswoman, said she did not know how much revenue would have been generated if the proposed regulations had gone into effect. She said she did not know if income estimates included in the city's budget for the 1986 fiscal year, now under consideration, assumed additional revenue would be generated as a result of the tax exemption proposals.
The proposed rules would have set minimum academic standards for schools and universities and would have eliminated exemptions for group homes and other nonprofit groups that assist transient clientele or that receive a large protion of their operating funds from the D.C. government.
Local charitable organizations would have had to provide at least 75 percent of their services within the District to continue to qualify for exemption.
"It is clear that the present rules and regulations are too vague, and there needs to be some refining of them," Barry said in his statement. "The whole concept of tax exemption calls for institutions to offer some benefit to the community."
Barry said the city would be "lost" without such services as day care, counseling, and help for the elderly that are provided by churches.
"We must make certain that nonprofit organizations, our churches in particular, receive the encouragement and support necessary to continue their spiritual and social service activities that are so vital to our community and the well-being of our citizens," Barry's statement said.