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March 6, 2026 Article

Maine Municipalities Scrutinizing Nonprofit Property Tax Exemptions

Recent news reports have noted that since early 2025, the City of Portland’s Tax Assessor’s Office has revoked the tax-exempt status of properties belonging to nearly twenty non-profit entities. In Maine, increased scrutiny of tax-exempt entities is not limited to Portland. As a result, many qualified entities are now required to pay property tax bills that may reach into the tens of thousands, and in some cases hundreds of thousands, of dollars. Many of the recent tax exempt-status revocations stem from using exempt property to generate revenue.

Limited Exception

Generally, an otherwise tax-exempt entity may be subject to municipal taxation for property that it does not occupy or use solely for its own tax-exempt purposes. However, a limited exception to this rule exists. In Hebron Academy v. Town of Hebron, the Law Court clarified that an organization may use its tax-exempt property for purposes not directly related to its mission, or allow others to do so, if the use is “incidental” to the organization purpose. Two types of incidental use have been recognized:

  1. Uses related to institutional necessity; and
  2. Uses that are de minimis, and do not interfere with the institution’s major tax-exempt purpose.

Examples of a related, necessary use could include parking lots for place of worship, storage space for medical equipment in a hospital, or rehab center operating a store to provide work therapy for its participants. De minimis uses are more ambiguous, but the Law Court has found renting the following to be de minimis uses which do not forfeit a property’s tax-exempt status: 1) a small residence to the entity’s officers; 2) athletic facilities to the public or summer camps; 3) facilities to hold weddings or other functions.

Status Evaluation

Factors that courts use in evaluating whether a use is “de minimis,” and thus not a basis for revocation of tax exempt status, include:

  1. The percentage of an entity’s income that is generated by the use; and
  2. Whether the use interferes with the entity’s use of the property for its own tax-exempt purposes.

Importantly, if only a limited portion of a property is used for non-incidental, non-de minimis purposes—forfeiting tax exempt status—such use does not necessarily jeopardize the tax-exempt status of the entire property.

While these examples are illustrative of what may, or may not, affect a property’s tax-exempt status, these determinations are incredibly fact-specific and are different in every circumstance. In addition, several statutory exemptions exist that may impact the tax burden of religious, charitable, and non-profit entities. It is also important to note that potentially exempt entities are not automatically exempt from municipal property taxation.  Rather an application to be considered a tax-exempt organization is often required by municipal assessors.

If you have any questions related to an entity’s tax-exempt status, contact a member of our Municipal Law and Finance Team.