updated 1/23/2009 2:19:07 PM ET 2009-01-23T19:19:07

Hospitals, nursing homes and other nonprofits should remain exempt from local property taxes, the North Dakota House decided, although some lawmakers said it is fair to ask them to help pay for police and fire protection.

"Shouldn't people pay for what they get?" asked Rep. Eliot Glassheim, D-Grand Forks. "You want the police to protect the hospital. You want the fire department to protect the hospital, even more than to protect my house. Why shouldn't they pay for it?"

Representatives voted 57-36 on Thursday to defeat legislation, offered by Rep. George Keiser, R-Bismarck, that sought to extend to cities and counties the authority to levy property taxes on some nonprofit organizations to pay for police and fire protection and emergency services.

Keiser's legislation would have allowed local governments to tax an assortment of nonprofits, including hospitals, nursing homes, Elks, Moose and Eagles lodges, and North Dakota National Guard armories.

The city of Bismarck's web of tax-exempt land, including two large hospitals and the state Capitol, means roughly half the city's property is taxed to support all of its services, Keiser said Thursday during House debate on the bill.

North Dakotans are pleading for property tax relief, and Gov. John Hoeven's proposed solution is to "throw some money at it," Keiser said, referring to the Republican governor's plan to provide $300 million to local school districts for property tax cuts.

"There will come a day of reckoning if that is your strategy for property tax relief," Keiser said. "You will, in the near future — and it's not that far away — be in the position of all of those states that are in deficit positions ... I want to see the poor legislators that are up for re-election when that day comes."

'It just doesn't make any sense'
Rep. Kari Conrad, D-Minot, said Keiser's measure would require agencies that get significant charitable and taxpayer support to spend resources on property taxes.

"It just doesn't make any sense to me," Conrad said. "I'd hate to have to explain this to a constituent."

Rep. Phillip Mueller, D-Valley City, said he sympathized with Keiser's goals, but said such a far-reaching change should be considered in the context of broader property tax reform.

"Until we have an opportunity to thoroughly examine the whole property tax structure and come up with some solid ideas about how to deal with it, I think maybe this one is a bit premature," Mueller said.

Keiser questioned whether some large nonprofits, including Bismarck's two hospitals and its YMCA, should be eligible for favorable tax treatment.

"Hospitals are large corporations today," Keiser said, and the Bismarck YMCA — which recently completed a $3-million-plus expansion — "has pretty effectively eliminated any competition because of the tax incentives that they get."

"We should not charge property tax for charitable institutions," Keiser said. "But I'm also here to tell you, that if you really look at it, what proportion of the YMCA, what proportion of the National Guard, what proportion of the hospitals is true charity?"

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