Lab makes millions on mouse sales so why is it tax-exempt?

ELLSWORTH — As the second phase of development of The Jackson Laboratory’s roughly $225-million mouse production facility on the former Lowe’s property gets underway, some residents have wondered how a nonprofit can run a commercial operation  and retain its nonprofit status.

Nonprofits are allowed to engage in commercial ventures, said former University of Maine Law School Dean Peter Pitegoff, “as long as that activity is related to the tax-exempt purpose.”

Pitegoff said he wasn’t intimately familiar with the lab in particular but has long taught courses on the legal aspects of nonprofits.

“The sale of mice is in furtherance, or at least arguably is in furtherance, of its exempt purpose, so it’s permitted.”

The lab’s 501(c)(3) status, which exempts it from federal income tax, is an IRS designation. The lab is designated as a research institution for federal purposes. In Maine, exemption from property taxes is granted at the local level, meaning organizations must be approved by the city.

The lab paid its last full tax bill (a little more than $140,000) on the Ellsworth property in 2018. It applied to the city for tax-exempt status this year and will be exempt from taxes going forward.

The city granted the lab tax-exempt status on the Ellsworth space, said Assessor Larry Gardner, because the mice that are being produced there are used to further the lab’s mission as a nonprofit. That’s the case even though research won’t be conducted there and the mice will be sold to other institutions, sometimes at a cost of hundreds or thousands of dollars each.

“As part of our mission, we conduct and share our biomedical research, provide training and education and promote scientific discovery through the provision of mouse models and other models of human disease to the global scientific and medical communities,” said Catherine Longley, the lab’s executive vice president and chief operating officer.

“Our revenues are devoted to our mission and any income generated from the sale of our models or services is invested back into research, education or new product development for the benefit of science and human health. Our work in Ellsworth is an integral extension of our mission.”

Pitegoff said the lab seems to be within its legal rights, but “It’s clearly a commercial venture. They depend on the sales of mice for a large part of their revenue base. I think the analysis is about the corporation as a whole.”

He continued: “What’s complicated is that they took over this space from Lowe’s, a for-profit enterprise that was paying property tax. So it lays bare the difference to the city; suddenly the property tax that was being paid is no longer being paid.”

City officials have been enthusiastic about welcoming the lab to Ellsworth.

“Because of what Jackson Lab does and their reputation, other tech companies and scientists will be looking,” Micki Sumpter, former economic development director, previously told The American.

Officials have also been excited about the number of jobs the lab will bring to the city, with the development expected to employ 350 workers at full build out.

Municipalities can, in theory, deny a tax-exempt organization status, said Pitegoff, but “I think it would be a tough argument for Ellsworth to make — and at the very least a very expensive one.”

It’s not uncommon for nonprofit organizations to engage in activity that’s on the more commercial side of things: the MDI Bio Lab in Salisbury Cove has hosted several start-up companies on its campus, including Coagulation Sciences and RockStep Solutions, a company that makes Climb, a software system used by biomedical research labs, including The Jackson Laboratory.

And commercial ventures at a nonprofit aren’t necessarily a negative, Pitegoff said.

“Some analysts would say that this is a good thing. It’s an efficiency step that maximizes the ability of Jackson Lab to meet its exempt purposes overall, even though it’s concentrating one of its activities that happens to have a commercial hue in the city of Ellsworth.”

Kate Cough

Kate Cough

Digital Media Strategist
Kate is the paper's Digital Media Strategist, responsible for all things social, and the occasional story too! She's a former reporter for the paper and can be reached at: [email protected]

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