This article is a joint publication of the Shoestring and Holyoke Media

Disclosure: A current Holyoke Media employee serves on the Holyoke Public Library Board of Directors. Due to this conflict of interest, we enlisted another local nonprofit news organization, the Shoestring, to report this story. Holyoke Media did not assert any editorial control over the finished product other than ensuring compliance with the Society for Professional Journalists Ethics Code.

By: Dusty Christensen

HOLYOKE — The federal government has stripped the Holyoke Public Library of its tax-exempt status after the organization failed to submit required tax filings for three years in a row.

In a decision that will have impacts on the library’s fundraising and more, the Internal Revenue Service notified the Holyoke Public Library in March that it had revoked its tax-exempt status. María Pagán, the library’s director, said in an email that the IRS’s decision was “due to lapses in compliance obligations, particularly during the challenging COVID-19 pandemic.” Effective Nov. 15, 2023, the organization can’t claim tax deductions on certain purchases for library operations and can’t fundraise or solicit donations until it gets its tax-exempt status reinstated.

“Operation has not been affected,” Pagán said. “We continue to offer full library services, resources, and programs. Despite this temporary setback, our commitment to our mission remains unwavering.”

Like many other libraries in the state, the Holyoke Public Library functions as both a city-funded department and as a private nonprofit corporation. In a statement, Mayor Joshua Garcia said that the city runs the library while the nonprofit owns the building. A 13-member board of directors governs the nonprofit corporation, with seven “member directors” elected at an annual meeting of the members and six “city directors” chosen by the mayor and approved by the Holyoke City Council.

George Mettey, the president of the library board, returned a request for comment after publication.

“We are optimistic about having our tax-exempt status reinstated before the end of the year,” he said, citing discussions with a CPA firm aiding the library’s reapplication for tax-exempt status. “However, we understand that the reinstatement process requires time and diligence.”

Pagán said that city funding accounted for 41% of the organization’s finances in 2022, with the rest coming from state aid and private funds to the nonprofit, like grants and donations from supporters. (When Easthampton’s public library was dealing with a funding crunch in 2023, advocates said that their research showed the state average for municipal support to libraries was 86.3% of their budgets in 2021.)

Holyoke’s funding of its library is indeed low compared to other cities, according to Eric Poulin, a library and information science professor at Simmons University who has served as president of the Massachusetts Library Association, Western Massachusetts Regional Library System and the Western Massachusetts Library Advocates.

In a phone interview Wednesday, Poulin said that the state’s Board of Library Commissioners has a minimum appropriation requirement for libraries to meet in order to be certified. Communities like Holyoke and Easthampton have traditionally funded their libraries around that minimum and relied on their endowments to fill in the gaps, he said.

Library workers have shouldered the impacts of low city funding in the past. In 2021, Pagán urged the Holyoke City Council to raise the pay of staffers, some of whom were making $2 per hour lower than the state’s minimum wage, which had increased earlier that year. She said library workers were the only city employees paid less than $20 per hour and that they had been fighting for better pay since 1999.

“It is getting more and more frustrating with every meeting I attend,” she said at the time, according to The Republican.

In 2019, the last year the Holyoke Public Library organization submitted its tax filing to the IRS, documents show that the nonprofit wing of the library pulled in $517,554 in revenue, $321,519 of which was from investment income and $168,870 of which was from contributions and grants. This fiscal year, the city allocated $739,996 to the library, up from $720,230 the previous fiscal year.

“The nonprofit entity’s status with the IRS has no bearing on the City’s budget allocation to the entity that is a City-funded department,” Garcia said in a statement to The Shoestring.

Poulin said that he imagines the loss of the library’s tax-exempt status, if not quickly reinstated, could have serious impacts on the library’s ability to deliver basic services to the community. And city leaders should see those services as essential, he said.

“A situation such as this proves how essential it is for cities and towns to properly fund their public libraries,” he said. “The Minimum Municipal Appropriation established by the state shouldn’t be viewed as the benchmark for our communities to settle for. A healthy, literate population should be a priority for every community, and proper library funding is a way to achieve this.”

During Easthampton’s recent library funding challenges, Poulin said he often thought about how small the library’s budget was compared to the city’s police department. In Easthampton, Mayor Nicole LaChapelle has requested $268,620 in library funding for the upcoming fiscal year and $3.8 million for policing. Garcia has requested $820,456 for the library in fiscal year 2025 and $14.3 million for the police department.

Pagán said the Holyoke Public Library is working on reinstating its tax-exempt status with a tax-and-audit preparation firm, which is helping the library prepare its past-due 990 forms — the tax documents all nonprofit organizations must file with the IRS. She said the library has also retained an attorney “from a prominent law firm to help us with the IRS reinstatement application.”

“By making these submissions, we intend, in good faith, to resolve our delinquent tax compliance obligations; submit all required informational returns and regain our historical status of strong compliance and tax-exempt status,” Pagán said.

Meeting minutes from December show that the library’s directors set aside $150,000 from the organization’s endowment “for audit preparation.” Tax filings show that at the end of 2019, the library’s endowment had a balance of $6.3 million.

Minutes from the Board of Directors’ meeting in March say that the library is making “significant progress” in submitting its nonprofit tax filings from 2021, 2022, and 2023, as well as amending a mistake in the 2020 filing.

In the meantime, the library has offered to refund donations to anybody who gave money to the library after Nov. 15, 2023. The library has also removed tax-deductibility language from its communications, according to its website.

Established in 1870, the Holyoke Library Corporation, like most other libraries, was initially not public; users had to pay $1 a year to borrow books. That changed in 1886, when the city began allocating funding to the organization. In 1967, it received its nonprofit 501(c)(3) status, according to Pagán.