Property Tax Welfare and Institutional Exemptions FAQ
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Property Tax Welfare and Institutional Exemptions FAQ
What is the Welfare Exemption?
The Legislature has the authority to exempt property (1) used exclusively for religious, hospital, or charitable purposes, and (2) owned or held in trust by nonprofit organizations operating for those purposes. This exemption is popularly known as the welfare exemption and was first adopted by voters as a constitutional amendment on November 7, 1944. When the Legislature enacted section 214 of the Revenue and Taxation Code to implement the Constitutional provision in 1945, a fourth purpose scientific, was added to the three mentioned in the Constitution.
In general, the welfare exemption from local property tax is available to property of organizations formed and operated exclusively for qualifying purposes (religious, scientific, hospital or charitable), which use their property exclusively for those purposes. Both the organizational and property use requirements must be met for the exemption to be granted.
The Welfare and Veterans’ Organization Exemptions are jointly administered by the Board of Equalization (BOE) and the county assessor. The BOE determines whether the organization is eligible to receive the welfare or veterans’ organization exemption and the county assessor determines whether the use of the property is eligible for the exemption.
If the BOE determines that an organization is eligible, the BOE issues an Organizational Clearance Certificate for the claimant to provide with exemption claim forms filed in any of the 58 counties.
The county assessor reviews claims for the welfare exemption, and the assessor’s determination of whether an organization’s property use satisfies the requirements of section 214 will be made by the county assessor without review by the BOE staff. However, the assessor may not grant a claim unless the organization holds a valid Organizational Clearance Certificate issued by the BOE. The assessor may deny an exemption claim, based on non-qualifying use of the property, notwithstanding the claimant’s organizational clearance certificate granted by the BOE.
What is the Veterans' Organization Exemption?
Personal property of veterans’ organizations is exempt under Revenue and Taxation Code section 215; it is not necessary to file a claim form requesting exemption on personal property.
How does an organization file a claim for the Welfare or Veterans' Organization Exemption?
When must a claim for the Welfare or Veterans' Organization Exemption claim be filed?
The law recognizes mid-year acquisitions of real property by qualified organizations. The property will be eligible for exemption from the supplemental assessment if the organization claiming the exemption is a qualified organization and meets the qualifications for the exemption no later than 180 days after the date of the change in ownership or the completion of new construction. A claim for exemption from supplemental assessment must be made on or before the 30th day following the notice of supplemental assessment sent by the county assessor. If a claim is filed after the 30-day period, a partial exemption is available.
What documents do I file with the assessor to request a Welfare or Veterans' Organization exemption from property taxes?
BOE-267: Claim for Welfare Exemption (First Filing), (claim form for initial request of welfare exemption for a specific property when the claimant is a new filing in the county or requesting exemption for a new location in the county)
BOE-267-A: Claim for Welfare Exemption (Annual Filing), (claim form filed on an annual basis after initial “been met” finding. May be filed on properties that were granted exemption in the prior year)
BOE-269-AH: Claim for Veterans’ Organization Exemption, (claim form filed for request for Veterans’ Organization Exemption)
Supplemental affidavits are also required for certain property types:
BOE-267-H: Welfare Exemption Supplemental Affidavit, Housing-Elderly or Handicapped Families, (claim form filed for properties used for housing for elderly or handicapped families)
BOE-267-L: Welfare Exemption Supplemental Affidavit, Housing-Lower-Income Households, (claim form filed for properties used for low income households)
BOE-267-L1: Welfare Exemption Supplemental Affidavit, Low-Income Housing Property of (Limited Partnership), (claim form filed for properties used for low income households owned by limited partnerships)
BOE-267-R: Welfare Exemption Supplemental Affidavit, Rehabilitation-Living Quarters, (claim form filed for properties used for rehabilitation and associated living quarters)
Can my organization claim the Welfare Exemption for prior years? Is it too late to file now?
What documents do I file with the BOE to request an Organizational Clearance Certificate?
Additional information that should be included with the claim (as indicated on the claim form) include the following organizational documents:
Articles of incorporation and amendments (or equivalent formative document)
Tax exemption letter
Financial statements of organization
Documentation supporting/describing the activities of the organization
Other information (as requested from Board staff)
Why must my nonprofit organization amend its Articles of Incorporation to qualify for the Organizational Clearance Certificate, which is a prerequisite to qualifying for the Welfare Exemption? The Internal Revenue Service found the wording in our articles acceptable for purposes of income tax exemption.
The following language would satisfy California property tax law requirements for domestic (incorporated in California) corporations:
“The property of this [legal entity] is irrevocably dedicated to [religious/charitable/scientific/hospital purposes or charitable and educational purposes meeting the requirements for exemption provided by section 214 of the Revenue and Taxation Code] and no part of the net income or assets of this organization shall inure to the benefit of any private persons. Upon the dissolution or winding up of the [legal entity] its assets remaining after payment, or provision for payment, of all debts and liabilities of this [legal entity], shall be distributed to a nonprofit fund, foundation, or corporation which is organized and operated exclusively for [religious/ charitable/scientific/hospital purposes or charitable and educational purposes meeting the requirements for exemption provided by section 214 of the Revenue and Taxation Code] and which has established its tax exempt status under section 501(c)(3) of the Internal Revenue Code.”
After my organization receives an Organizational Clearance Certificate, do I need to file a form annually to retain the certificate?
According to the Internal Revenue Service, my nonprofit organization is a section 501(c)(3) organization and, therefore, exempt from income taxation. Why must we file separately for a Welfare Exemption. Aren't we automatically exempt from property taxation?
Mere ownership of property by a nonprofit corporation does not satisfy the requirements for property tax exemption. The property must also be used exclusively for an exempt (religious, scientific, hospital, or charitable) purpose and activity. Certain uses of property will not qualify for exemption even though conducted by the nonprofit owner:
Allowing other unqualified individuals or organizations to use the property for private benefit
What are the conditions that an organization must meet in order to be considered a charitable organization for purposes of qualifying for the Organizational Clearance Certificate?
Although an organization’s receipt of donations is an important criteria by which its charitable purpose can be demonstrated, the absence of donations, by itself, will not result in a determination that a charitable purpose does not exist if it can be shown that the organization is providing a benefit or gift to the community. (Stockton Civic Theatre v. Board of Supervisors (1967) 66 Cal.2d. 20)
In addition, the organization must meet ALL of the following criteria:
It must not be organized or operated for profit.
No part of the net earnings of the organization may benefit any private person.
The organization’s property (1) must be irrevocably dedicated to religious, hospital, scientific, or charitable purposes, and (2) may not benefit any private person upon liquidation, or abandonment except a fund, foundation, or corporation organized and operated for religious, hospital, scientific, or charitable purposes.
The organization must qualify as an exempt organization for state or federal income tax purposes.
The charitable activities must be found to primarily benefit persons within the geographical boundaries of the State of California.
The assessor determined that the property was not eligible for the welfare or veterans' organization exemption. What is my recourse if I do not agree?
If you disagree with the assessor’s determination of ineligibility for the welfare or veterans’ organization exemption, you may seek a refund of property taxes paid by filing a claim for refund with the county board of supervisors. If the refund claim is denied, you may file a refund action in superior court.