by Don Keelan

At significant personal risk, I ask, can the thousands of Vermont nonprofit organizations be considered a potential source of State revenue?

The Vermont nonprofit sector is one of the largest sectors of the State’s economy, measured by revenue generated and employees. It also has significant influence and is primarily unregulated, except for the healthcare sector.

I noted back in May 2024 that, according to the Secretary of State’s office, there were over 19,000 registered nonprofits, with approximately 8,597 active. In addition, according to the State, there are approximately 2,200 foreign nonprofits, of which about 1,100 are active in Vermont. 

The revenue generated is staggering. In its December 2024 issue, VB VermontBiz listed the most recent annual revenue of 707 domestic nonprofits in a six-page article. The total revenue disclosed was $8,594,065,769. This is only from the 707 listed nonprofits; it does not include the other 7,890 active nonprofits.  

If one assumes that the non-listed ones have an average annual revenue of $500,000, the total to be added to the above would be $3,945,000,000, bringing the total (only domestic nonprofits) to approximately $12.5 billion of revenue. 

With our State desperate for new revenue sources besides its traditional ones—real estate taxes, income taxes, a plethora of fees, and sales taxes—would it make sense to assess an excise tax on the gross revenue of the State’s nonprofits? 

An excise tax of one percent of annual gross revenue would generate $125 million in new revenue ($12.5 billion X 1%). Of course, as with all tax programs, there would be exceptions. 

One such cohort of the nonprofit industry to which an exception or a partial exception could be provided is the healthcare industry. It is not well known that healthcare provider organizations currently pay a tax to the State.

The regional hospital in Bennington must pay the State “a Provider Tax.” In its Fiscal 2023 report, this amounted to approximately $11 million—generally, 6% of net patient revenue—and part of the nearly $200 million the State collects annually.

 Not far from the hospital is the Vermont Veterans Home, a quasi-state/nonprofit institution. According to a senior executive, the Home pays the State $639,539 annually. The Provider Tax is assessed at $4,919.53 times the number of beds the Home has licensed. 

Unlike other taxes the State receives, the tax collected from the healthcare sector is then matched by the federal government to cover the cost of Medicaid. In other words, it is collected for a specific program.

The concept of matching or earmarked could also apply to the proposed excise tax on nonprofits. In this case, the funds collected could be specifically assigned to rebuild the State’s and localities’ defenses against future flood damage.

The state once provided significant funding to mitigate the damage from flooding. Bridges were rebuilt, concrete barriers were installed to channel potential flood waters, and sediment and stones were removed from the State’s rivers and brooks.

Also, before 2008, the State contributed upwards of 30% to local school construction programs. However, the State has had to fund a massive social welfare program that now takes up a significant portion of its funds.

While the State has retail, agricultural, tourist, and manufacturing sectors, none have grown as the nonprofit sector over the years.  While many of the organizations that make up the latter and provide valuable services, many still masquerade as nonprofits and are, in fact, private corporations taking advantage of an almost unregulated industry—answerable only to themselves. 

I cannot say with any degree of certainty that the State’s spending on education, healthcare, or social programs will ever come under fiscal control. But what is out of the State’s power is Mother Nature and how it has created enormous devastation in recent years.

It is time for the State to step up its game and mitigate future damage. This will likely cost billions of dollars, and our Vermont DC delegation can only provide so much funding. Therefore, a new source of funding must be created. 

I know many will scream at me for suggesting such a suggestion. However, they can join the chorus of homeowners, small business owners, and renters who have been screaming for years, “Vermont, get spending under control and do something to control our tax burden.”     

The author is a U.S. Marine (retired), CPA, and columnist living in Arlington, VT.