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BMW, Mercedes owned by nonprofits among cars on tax-free list in Providence

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PROVIDENCE, R.I. (WPRI) – The city of Providence has forgiven millions of dollars in taxes in recent years for vehicles – including luxury cars like BMWs, a Mercedes-Benz and a Cadillac – owned by private colleges, other nonprofits and even some for-profit businesses, according to a Target 12 review of city tax records.

For the fiscal year that began July 1, the city projects it will lose out on $476,000 in taxes for 996 vehicles registered to various nonprofit organizations, including colleges, hospitals and churches. Another 3,500 vehicles owned by the city or other state agencies – like RIPTA – are also off the tax roll. All told, the city forgoes $3.8 million in tax revenue from all exempt cars each year.

While nonprofits have not been required to pay property taxes for many years, city leaders are questioning whether some organizations are following the spirit of their tax status when they allow their employees to drive high-end vehicles.

At Johnson & Wales University, that includes a 2016 BMW that is operated by President Mim L. Runey as well as a 2013 BMW that is used when officials from the school’s branch campuses are in town, according to spokesperson Lisa Pelosi. The university has recently gotten rid of an additional BMW as well as a Lexus, Pelosi said.

At Providence College, a 2017 Lincoln MKX and a 2016 Mazda are assigned to the school’s vice president and a member of the chaplain’s office “for travel associated with the duties of their respective jobs and for personal use,” a spokesperson said.

In total, those institutions, as well as Brown University and the Rhode Island School of Design, combine to own more than 400 cars, most of which are considered utility vehicles. The city will forgive $232,000 in taxes from those vehicles this year.

Councilman John Igliozzi, who chairs the Finance Committee, said he was surprised to learn that so many vehicles are considered tax-exempt in Providence. He said he understands why some cars – like trucks or buses – might be off the tax roll, but suggested organizations that allow employees to operate the cars for personal use should consider changing their policies.

“I think the way for all the hospitals and colleges to handle this, they should probably, instead of claiming it is a tax-exempt property, give a stipend to that employee and that employee then can buy a vehicle, rent a vehicle, or lease a vehicle,” Igliozzi told Target 12. “It goes on the tax rolls.”

Daniel Egan, the president of the Rhode Island chapter of the Association of Independent Colleges and Universities, said the schools are planning to review their procedures as a result of Target 12’s findings.

Egan said the reason some of the cars are tax-free is likely a result of “historical administrative issues that have occurred over time.”

“I don’t believe the intent over time was to escape taxes,” Egan said.

The colleges aren’t the only organizations that pay no taxes on luxury vehicles. 

The Diocese of Providence owns a 2016 Chrysler 300 that is driven by Bishop Robert Evans, according to a spokesperson. A Cadillac XTS is owned by the Elmwood Avenue Church of God and the Door of Refuge Pentecostal Church owns a Mercedes C-Class, according to tax records.

A 2015 Audi A3 is owned by the The Groden Center, a nonprofit that specializes in assisting individuals with developmental disabilities. A spokesperson for the organization said the car is assigned to the center’s CEO, but is in the process of being sold. The organization doesn’t plan to replace it.

There are 81 cars off the tax roll owned by the city’s various hospitals, although none of them are high-end models. Most of them also appear to be utility vehicles. If full taxes were paid, the city would receive more than $33,000 this year.

Large bus companies – like Bonanza/Peter Pan – benefit from a 2012 state law that exempts them from local property taxes if their vehicles are used 80% or more of the time in interstate commerce. They are required to execute an affidavit swearing that their tax-exempt vehicles are mostly used for interstate commerce.

But Target 12 found a 2010 Infiniti EX3 – a smaller SUV – owned by Bonanza/Peter Pan was also listed as tax-exempt. Frank Doherty, the company’s vice president of operations, said it was a company car that should be on the tax roll. He said the company pays taxes on other cars registered in Rhode Island and Massachusetts.

“We don’t know how it happened, but if we owe taxes, we will be glad to pay it,” Doherty said. “We are good corporate citizens. We probably have 50-like vehicles in the company and we pay on all of them. This one seems to have fallen through the cracks.”

The apparent mistake in the tax status has prompted the Elorza administration to begin a full review of all tax-exempt vehicles to ensure they are eligible to benefit from the perk. 

“We hope that those who can obtain tax-exemption status on vehicles do so with prudent consideration,” Victor Morente, a spokesperson for the city, told Target 12.

Providence currently collects about $32 million a year in car taxes by charging residents $50 per $1,000 of assessed value for their vehicles. The first $2,000 of value is exempt. Rhode Island lawmakers are currently in year two of House Speaker Nicholas Mattiello’s plan to phase out the car tax altogether and reimburse cities and towns for the money they’re expected to lose.

City leaders are projecting a surplus for the third consecutive fiscal year, but Igliozzi noted that Providence is always facing a budget crunch. With unfunded retiree pension and health-care liabilities approaching $2 billion, he said the city will take all the help from nonprofits it can get.

“The city could always use the tax dollars,” he said. “As you know, with the city’s finances, we’re always battling on a daily basis to maintain a balanced budget and paying the obligations.”

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Dan McGowan (dmcgowan@wpri.com) covers politics and the city of Providence for WPRI.com. Follow him on Twitter: @danmcgowan

Tim White (twhite@wpri.com) is the Target 12 investigative reporter and host of Newsmakers for WPRI 12 and Fox Providence. Follow him on Twitter and on Facebook

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