The Haines Borough Assembly at its June 28 meeting unanimously voted to extend eligibility for community-purpose property tax exemptions to organizations classified as 501(c)4s in addition to those incorporated as 501(c)3s.

Both 501(c)3s and 501(c)4s are nonprofits, but while 501(c)3s are called “charitable” organizations – and donations to them are tax deductible – 501(c)4s are called “social welfare” organizations. Donations to them are not tax deductible, but unlike 501(c)3s, they can engage in lobbying and other political activity without losing their tax-exempt status.

Prominent national 501(c)4s include the AARP, National Rifle Association and voter advocacy groups like Stand Up America.

Only one local organization, the Uglys of Haines, is currently registered with the IRS as a 501(c)4.

Chuck Mitman, a member of the Uglys since 2000, wrote in an email to the CVN that the group was pleased with the assembly’s ruling and believes it “deserves the same exemption the (c)3s enjoy.”

Mitman, who served as president of the Uglys for 10 years, explained that the Uglys are registered as a 501(c)4 because of their membership screening process. The group enforces a year-long probation period for each new member to determine his fit with the rest of the group. 501(c)3s are required to have open membership, Mitman said.

Mitman wrote that “being a (c)4 limits us a great deal from benefits other (c)3 nonprofits get, but it is important to us to maintain the brotherhood” by exercising control over membership in this way.

The Uglys provide at least $10,000 in scholarships to Haines residents each year. The group also engages in monthly community service projects called “kindness experiences” and runs a yearly “Gifts for Grub” fundraiser dinner in December.

Before the assembly’s June 28 vote, the Uglys had already received a community-purpose exemption for the past two years. Borough manager Annette Kreitzer wrote that the exemption, valued at $371 for 2022, was erroneously awarded since (c)4s were not eligible at the time of its approval.

The assembly’s decision does not guarantee that 501(c)4s receive tax exemption on their properties, but it opens the application process to them.

Although the assembly passed the exemption unanimously, assembly member Debra Schnabel expressed concerns about the exclusive membership of 501(c)4s.

Assembly member Caitie Kirby said she would want to carefully consider the political involvement of 501(c)4 exemption applicants. “I want to make sure that we’re not giving tax exemptions to a lobbyist’s backyard just because he hosts a barbecue once a year,” she said.

These concerns were tabled for now. Assembly member Cheryl Stickler pointed out that the assembly, along with the borough assessor, would still have the authority to approve or deny each individual exemption request – as they already do for all 501(c)3s.

Stickler said when reviewing applications, the assembly should discuss whether each applicant organization confers a “greater benefit for the community than the actual dollar amount of the exemption.”

Mayor Douglas Olerud also drew attention to Haines’ unusual generosity with community-purpose property tax exemptions. A recent report from the borough’s chief financial officer showed that Haines has awarded these exemptions to 2.07% of the borough’s assessed land value. This percentage is the fourth highest in the state, putting Haines behind only Valdez, Sitka and Craig. Nearly all municipalities exempt less than 1% of their assessed land value.

He warned the assembly that the decision to include 501(c)4s could potentially “open (exemptions) to a much larger pool” of organizations.

When asked if he thought more local nonprofits would register as 501(c)4s now that there is a tax benefit to be reaped, Olerud said it was “certainly something to consider.”

In 2021, the borough lost $40,074 of property tax revenue through community-purpose exemptions.