When it comes to Sunflower Diversified Services’s facility at 5523 10th St. in Great Bend, there is a difference of opinion.

The nonprofit agency desires to have it exempt from property tax rolls since they see it as training ground for their special needs clients. 

However, Barton County officials question the exemption for the structure, which houses the UPS Store they see as for-profit, fearing a chiseling away at the tax base and the setting of dangerous precedent and a flood of similar requests.

Since such decisions can’t be made at the county level, Sunflower applied for the exempt status through the Kansas Board of Tax Appeals (BOTA) in March. At the request of the county, a hearing was held a week ago Monday in Topeka, and both Sunflower and county were represented.

No ruling has been made, but one will likely be handed down within 30 days.

In addition to the UPS Store, the building houses Sunflower’s Westside Market and Beautiful Minds Art Studio, both of which are not-for-profit.

For its part, Sunflower believes there is a misunderstanding, SDS Executive Director Jon Prescott said. 

Prescott said UPS stores are franchises, most of which are for-profit. But, Sunflower applied as a 501(c)3 not-for-profit charitable organization.

“This is one of only three not-for-profit UPS stores in North America,” he said. The other two are in Toronto, Canada, and Little Rock, Ark.

“We have no intention of this being a for-profit business,” Prescott said. “The whole intent is to provide jobs for people with disabilities.”

Sunflower serves infants, toddlers and adults with special needs in Barton, Pawnee, Rice, Rush and Stafford counties.

Now, he said, four or five of their clients work in the store.

“I appreciate what Sunflower does not only for its clients but for the county,” District 5 Commissioner Jennifer Schartz said. “They are a valuable asset.”

The commissioners just want to see that things are equitable for all county businesses, she said.

“Barton County is questioning whether it really is (tax-exempt),” Schartz said.

“Where this really falls is in the erosion of the tax base,” Schartz said. “It has to be made up somewhere else and that is with the other taxpayers. We just want to make sure everyone pays their fair share.”

The building sits on a 87,120 square foot parcel that covers two acres. The property stretches from 10th Street on the north to Ninth Street on the south.

According to the Appraiser’s Office, the 2021 value is $284,850 – $106,830 for the land and $178,020 for the building. The assessed value is $71,213 and the 2021 property taxes owned are $13,113.16.

Schartz said she has heard from other constituents who have also expressed concerns about this.

“This is a very slippery slope,” she said. The fear is that this exemption, should it be approved, might lead to more, which could make a serious dent in the tax base.

It’s frustrating, Schartz said, that such matters are out of county hands. Now, it rests with the BOTA.

“We have done what we can,” she said. “It’s not on the county to decide these things.”

There is some apprehension, she said. Recent BOTA decisions have not been favorable for counties.

The county’s concern

Sunflower bought the building in 2012 and was granted tax-exempt status, Barton County Appraiser Wendy Proseer said. However, the agency built a 13 x 20-foot addition to the original 60 x 53-foot structure (built in 1953) in 2019-2020.

That addition required the structure to go back on the tax roll for 2020, she said. 

So, on March 21, Sunflower filed an application with the BOTA to resume the tax-exempt status. County appraisers don’t have the authority to make this sort of determination.

This is when the county sought the hearing at which Prosser, County Counselor Patrick Hoffman and District 2 Commissioner Barb Esfeld represented the county. “The County asked for the matter to be heard before BOTA in order to ensure that BOTA can make a full and accurate decision on whether the property does indeed still meet the qualifications to be considered exempt,” Prosser said.

Present for Sunflower were Prescott and the agency’s attorney. 

“Now we just have to wait for that decision from the Board of Tax Appeals,” she said.

The county is not sure the building “expressly and completely” qualifies to be tax exempt, Prosser said. That is why they left it up to the BOTA.

Prior to the remodeling, the non-profit Sunflower utilized the facility for its recycling program. That served as training and employment for their special needs clients.

But, with the addition, it houses the new UPS Store, which the county believes to be a for-profit businesses.

“We just want to make sure everything there is humanitarian and still qualifies for exempt status,” Prosser said.

“Property tax exemptions must be administered properly in order to ensure there is a uniform and fair basis of property taxation,” she said. “When property is exempted from the tax rolls, the burden of taxation increases onto other properties. The cost to provide local services such as public roads and bridges, fire and police protection is still there. If a property is exempted from the real estate property tax, that tax is then passed on and shifted to the other local taxpayers.”

Prescott said UPS stores are franchises, most of which are for-profit, and that, Sunflower applied as a 501(c)3 not-for-profit charitable organization. The Great Bend Tribune reached out to UPS for more information. The questions had not been answered as of presstime.

Not just black and white

When it comes to property tax exemptions, not all properties are the same, Prosser said. Kansas statutes create a wide variety of exemption classifications.

For background, commercial properties in Kansas are taxed at a 25% assessment rate. However, real property owned and operated by certain Internal Revenue Code (IRC) 501(c) organizations are assessed at a 12% assessment rate. So, organizations like the Eagles Lodge and Knights of Columbus are not-for-profit, but are taxed at 12%, Prosser said.  

A property actually and regularly used by a not-for-profit community service organization for the predominant purpose of providing humanitarian services may make application to BOTA and request a 100% tax exemption under the ninth classification in state statute KSA -201, and this is what Sunflower has done. 

What is the BOTA?

The Kansas State Board of Tax Appeals is a specialized board within the executive branch of state government. It was established on July 1, 2014, replacing the Kansas Court of Tax Appeals.

The BOTA is the highest administrative tribunal to hear cases involving ad valorem (property), income, sales, compensating use, and inheritance taxes, along with other matters involving taxation by state and local authorities. The board is an independent tax tribunal, meaning that it is not affiliated with the Kansas Department of Revenue or any other taxing authority. 

The Board of Tax Appeals is a neutral decision-making body.