Potential for Passage of Yale Bill in Connecticut Cloudy

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Martha W. Kessler

April 28 — The outlook is unclear for a measure that would make Connecticut the first state to tax the academic property of nonprofit colleges and universities by revoking the tax-exempt status of certain parcels of land owned by Yale University.

Consideration of the controversial measure may be set aside as Connecticut lawmakers turn their attention to passing a budget package that makes significant cuts and structural readjustments and struggles to cover a projected deficit of over $900 million.

Democratic lawmakers said during a press briefing April 28 that they intend to have a balanced-budget bill pass before the General Assembly adjourns May 4.

It is unclear whether lawmakers will have time to consider passage of the so-called Yale bill while attempting to finalize a budget and move forward a number of other pending measures before that mandated adjournment date.

Regarding the outlook for the Yale measure, Finance Committee Co-Chair Rep. Jeffrey Berger (D) told Bloomberg BNA April 28 that the legislation “is quite contentious” and noted it would have to proceed through both chambers and could be expected to “consume a considerable amount of time” during a period when lawmakers will be focused on other issues.

Berger also said “it is not a mechanism for tax that I agree with,” as he opposes singling out Yale through a special action to tax property that wasn't previously taxed.

Pair of Proposals

A pair of proposals that would have taxed Yale's endowment and revoked the tax-exempt parcels of land at the New Haven university were introduced earlier in the legislative session. However, only the bill that would revoke the tax-exempt status of certain property was reported out by the Joint Committee on Finance before a legislative deadline (2016 Weekly State Tax Report 27, 4/22/16).

A fiscal note on the bill projected that the revenue generated for the municipalities where the property is located could be “significant.”

Yale Blasts Measure

At a press conference in New Haven April 27, officials from Yale as well as statewide business and community representatives spoke out against the measure, which they said would stifle economic development by imposing tax burdens on Yale unlike those faced by any other university in the nation.

The university said the bill would tax the academic property in which basic scientific research occurs if any companies beyond campus are later formed based on that research.

Yale has expressed disappointment that the measure was reported out of committee. The university noted in an April 21 e-mail to Bloomberg BNA that it already makes a voluntary payment to New Haven of more than $8.2 million, as well as contributions to other communities. And, the school said, it already pays property taxes on its commercial properties, and it paid $4.5 million in property taxes on commercial space in 2015.

The school also said its academic property isn't taxable, as set out in Yale's charter, a legally binding contract between the state and Yale.

A university spokesman told the finance panel that the measure is unconstitutional and if it were enacted, Yale would be forced to “defend its constitutional right of non-taxation.”

To contact the reporter on this story: Martha Kessler in Boston at mkessler@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

For More Information

The text of the bill is at http://src.bna.com/ewb.