Do California Nonprofits Have to Pay Property Tax?

Despite being exempt from federal income tax under Section 501(c)(3), nonprofits are not automatically exempt from property taxes in California. However, the state does provide three exemptions for nonprofit organizations that own or lease property: the Church exemption, Religious exemption, and the Welfare exemption. In order to qualify for any of these property tax exemptions, the nonprofit must satisfy a number of requirements, including that it is a community chest, fund, foundation, corporation, or eligible limited liability company; its formation documents contain a statement that the organization’s properties are irrevocably dedicated to one or more qualifying purposes; and that in the event of its dissolution, the property will be transferred to another fund, foundation, or corporation organized and operated for similar purposes.

How to Apply for Tax-exempt Status in California?

Many people equate “nonprofit” with “tax exempt.” While this is true in terms of income taxes, it is not necessarily so in terms of other state and local taxes, including property and sales-and-use taxes. According to the New York Times, this is a growing problem in California due to state budget issues.

Nonprofits must apply for tax-exempt status by filing Form 1023 with the state Franchise Tax Board (FTB). In addition, nonprofits can also file a simplified form called Form 1023-EZ that is available to smaller organizations with gross receipts of less than $50,000. This form has its own set of requirements and fee.

Nonprofits must have directors and a registered agent who is available during business hours to receive legal documents and court summons. The directors are the governing body or cabinet of the nonprofit, and they determine how the organization will operate. The registered agent is responsible for the maintenance of the nonprofit’s records. In addition, the directors must meet the state’s requirements for corporate bylaws. Bylaws must clearly define the rights of members and govern how the nonprofit will be run.

Are Churches Exempt From Property Taxes in California?

In California, there are three types of property tax exemptions for charitable nonprofit organizations. These include the Church Exemption, Religious Exemption, and Welfare Exemption. Each one has different rules and requirements, but all require that the organization use its property exclusively for charitable purposes. The Church Exemption is available to real property owned or leased by a religious organization for church purposes, including worship services, fellowship, religious counseling, offices, and parking. This exemption is not available to churches that operate schools that are less than college-level.

Churches that have this exemption can still be subject to special assessments, direct levies, and weed and hazard abatement charges. They are also still required to pay general district taxes on real and personal property.

If a church wants to become tax-exempt, it must first register with the state as an incorporated religious organization. Then, it must fill out IRS Form 1023 to be fully registered as a 501(c)(3) organization. This form requires detailed information about the church’s current and planned activities. It’s important that the church understand how these forms work so that it can properly take advantage of them.