Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2011
 

Revenue and Taxation Code

Property Taxation

Part 2. Assessment

CHAPTER 1. Taxation Base

Article 1. Taxable and Exempt Property

Section 214

214. Welfare exemption. (a) Property used exclusively for religious, hospital, scientific, or charitable purposes owned and operated by community chests, funds, foundations, limited liability companies, or corporations organized and operated for religious, hospital, scientific, or charitable purposes is exempt from taxation, including ad valorem taxes to pay the interest and redemption charges on any indebtedness approved by the voters prior to July 1, 1978, or any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition, if:

(1) The owner is not organized or operated for profit. However, in the case of hospitals, the organization shall not be deemed to be organized or operated for profit if, during the immediately preceding fiscal year, operating revenues, exclusive of gifts, endowments and grants-in-aid, did not exceed operating expenses by an amount equivalent to 10 percent of those operating expenses. As used herein, operating expenses include depreciation based on cost of replacement and amortization of, and interest on, indebtedness.

(2) No part of the net earnings of the owner inures to the benefit of any private shareholder or individual.

(3) The property is used for the actual operation of the exempt activity, and does not exceed an amount of property reasonably necessary to the accomplishment of the exempt purpose.

(A) For the purposes of determining whether the property is used for the actual operation of the exempt activity, consideration shall not be given to use of the property for either or both of the following described activities if that use is occasional:

(i) The owner conducts fundraising activities on the property and the proceeds derived from those activities are not unrelated business taxable income, as defined in Section 512 of the Internal Revenue Code, of the owner and are used to further the exempt activity of the owner.

(ii) The owner permits any other organization that meets all of the requirements of this subdivision, other than ownership of the property, to conduct fundraising activities on the property and the proceeds derived from those activities are not unrelated business taxable income, as defined in Section 512 of the Internal Revenue Code, of the organization, are not subject to the tax on unrelated business taxable income that is imposed by Section 511 of the Internal Revenue Code, and are used to further the exempt activity of the organization.

(B) For purposes of subparagraph (A):

(i) "Occasional use" means use of the property on an irregular or intermittent basis by the qualifying owner or any other qualifying organization described in clause (ii) of subparagraph (A) that is incidental to the primary activities of the owner or the other organization.

(ii) "Fundraising activities" means both activities involving the direct solicitation of money or other property and the anticipated exchange of goods or services for money between the soliciting organization and the organization or person solicited.

(C) Subparagraph (A) shall have no application in determining whether paragraph (3) has been satisfied unless the owner of the property and any other organization using the property as provided in subparagraph (A) have filed with the assessor a valid organizational clearance certificate issued pursuant to Section 254.6.

(D) For the purposes of determining whether the property is used for the actual operation of the exempt activity, consideration shall not be given to the use of the property for meetings conducted by any other organization if the meetings are incidental to the other organization's primary activities, are not fundraising meetings or activities as defined in subparagraph (B), are held no more than once per week, and the other organization and its use of the property meet all other requirements of paragraphs (1) to (5), inclusive, of this subdivision. The owner or the other organization also shall file with the assessor a copy of a valid, unrevoked letter or ruling from the Internal Revenue Service or the Franchise Tax Board stating that the other organization, or the national organization of which it is a local chapter or affiliate, qualifies as an exempt organization under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code or Section 23701d, 23701f, or 23701w.

(E) Nothing in subparagraph (A), (B), (C), or (D) shall be construed to either enlarge or restrict the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section.

(4) The property is not used or operated by the owner or by any other person so as to benefit any officer, trustee, director, shareholder, member, employee, contributor, or bondholder of the owner or operator, or any other person, through the distribution of profits, payment of excessive charges or compensations, or the more advantageous pursuit of their business or profession.

(5) The property is not used by the owner or members thereof for fraternal or lodge purposes, or for social club purposes except where that use is clearly incidental to a primary religious, hospital, scientific, or charitable purpose.

(6) The property is irrevocably dedicated to religious, charitable, scientific, or hospital purposes and upon the liquidation, dissolution, or abandonment of the owner will not inure to the benefit of any private person except a fund, foundation, or corporation organized and operated for religious, hospital, scientific, or charitable purposes.

(7) The property, if used exclusively for scientific purposes, is used by a foundation or institution that, in addition to complying with the foregoing requirements for the exemption of charitable organizations in general, has been chartered by the Congress of the United States (except that this requirement shall not apply when the scientific purposes are medical research), and whose objects are the encouragement or conduct of scientific investigation, research, and discovery for the benefit of the community at large.

The exemption provided for herein shall be known as the "welfare exemption." This exemption shall be in addition to any other exemption now provided by law, and the existence of the exemption provision in paragraph (2) of subdivision (a) of Section 202 shall not preclude the exemption under this section for museum or library property. Except as provided in subdivision (e), this section shall not be construed to enlarge the college exemption.

(b) Property used exclusively for school purposes of less than collegiate grade and owned and operated by religious, hospital, or charitable funds, foundations, limited liability companies, or corporations, which property and funds, foundations, limited liability companies, or corporations meet all of the requirements of subdivision (a), shall be deemed to be within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section.

(c) Property used exclusively for nursery school purposes and owned and operated by religious, hospital, or charitable funds, foundations, limited liability companies, or corporations, which property and funds, foundations, limited liability companies, or corporations meet all the requirements of subdivision (a), shall be deemed to be within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section.

(d) Property used exclusively for a noncommercial educational FM broadcast station or an educational television station, and owned and operated by religious, hospital, scientific, or charitable funds, foundations, limited liability companies, or corporations meeting all of the requirements of subdivision (a), shall be deemed to be within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section.

(e) Property used exclusively for religious, charitable, scientific, or hospital purposes and owned and operated by religious, hospital, scientific, or charitable funds, foundations, limited liability companies, or corporations or educational institutions of collegiate grade, as defined in Section 203, which property and funds, foundations, limited liability companies, corporations, or educational institutions meet all of the requirements of subdivision (a), shall be deemed to be within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section. As to educational institutions of collegiate grade, as defined in Section 203, the requirements of paragraph (6) of subdivision (a) shall be deemed to be met if both of the following are met:

(1) The property of the educational institution is irrevocably dedicated in its articles of incorporation to charitable and educational purposes, to religious and educational purposes, or to educational purposes.

(2) The articles of incorporation of the educational institution provide for distribution of its property upon its liquidation, dissolution, or abandonment to a fund, foundation, or corporation organized and operated for religious, hospital, scientific, charitable, or educational purposes meeting the requirements for exemption provided by Section 203 or this section.

(f) Property used exclusively for housing and related facilities for elderly or handicapped families and financed by, including, but not limited to, the federal government pursuant to Section 202 of Public Law 86-372 (12 U.S.C. Sec. 1701q), as amended, Section 231 of Public Law 73-479 (12 U.S.C. Sec. 1715v), Section 236 of Public Law 90-448 (12 U.S.C. Sec. 1715z), or Section 811 of Public Law 101-625 (42 U.S.C. Sec. 8013), and owned and operated by religious, hospital, scientific, or charitable funds, foundations, limited liability companies, or corporations meeting all of the requirements of this section shall be deemed to be within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section.

The amendment of this paragraph made by Chapter 1102 of the Statutes of 1984 does not constitute a change in, but is declaratory of, existing law. However, no refund of property taxes shall be required as a result of this amendment for any fiscal year prior to the fiscal year in which the amendment takes effect.

Property used exclusively for housing and related facilities for elderly or handicapped families at which supplemental care or services designed to meet the special needs of elderly or handicapped residents are not provided, or that is not financed by the federal government pursuant to Section 202 of Public Law 86-372 (12 U.S.C. Sec. 1701q), as amended, Section 231 of Public Law 73-479 (12 U.S.C. Sec. 1715v), Section 236 of Public Law 90-448 (12 U.S.C. Sec. 1715z), or Section 811 of Public Law 101-625 (42 U.S.C. Sec. 8013), shall not be entitled to exemption pursuant to this subdivision unless the property is used for housing and related facilities for low- and moderate-income elderly or handicapped families. Property that would otherwise be exempt pursuant to this subdivision, except that it includes some housing and related facilities for other than low- or moderate-income elderly or handicapped families, shall be entitled to a partial exemption. The partial exemption shall be equal to that percentage of the value of the property that is equal to the percentage that the number of low- and moderate-income elderly and handicapped families occupying the property represents of the total number of families occupying the property.

As used in this subdivision, "low and moderate income" has the same meaning as the term "persons and families of low or moderate income" as defined by Section 50093 of the Health and Safety Code.

(g) (1) Property used exclusively for rental housing and related facilities and owned and operated by religious, hospital, scientific, or charitable funds, foundations, limited liability companies, or corporations, including limited partnerships in which the managing general partner is an eligible nonprofit corporation or eligible limited liability company, meeting all of the requirements of this section, or by veterans' organizations, as described in Section 215.1, meeting all the requirements of paragraphs (1) to (7), inclusive, of subdivision (a), shall be deemed to be within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section and shall be entitled to a partial exemption equal to that percentage of the value of the property that the portion of the property serving lower income households represents of the total property in any year in which any of the following criteria applies:

(A) The acquisition, rehabilitation, development, or operation of the property, or any combination of these factors, is financed with tax-exempt mortgage revenue bonds or general obligation bonds, or is financed by local, state, or federal loans or grants and the rents of the occupants who are lower income households do not exceed those prescribed by deed restrictions or regulatory agreements pursuant to the terms of the financing or financial assistance.

(B) The owner of the property is eligible for and receives low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code of 1986, as added by Public Law 99-514.

(C) In the case of a claim, other than a claim with respect to property owned by a limited partnership in which the managing general partner is an eligible nonprofit corporation, that is filed for the 2000-01 fiscal year or any fiscal year thereafter, 90 percent or more of the occupants of the property are lower income households whose rent does not exceed the rent prescribed by Section 50053 of the Health and Safety Code. The total exemption amount allowed under this subdivision to a taxpayer, with respect to a single property or multiple properties for any fiscal year on the sole basis of the application of this subparagraph, may not exceed twenty thousand dollars ($20,000) of tax.

(D) (i) The property was previously purchased and owned by the Department of Transportation pursuant to a consent decree requiring housing mitigation measures relating to the construction of a freeway and is now solely owned by an organization that qualifies as an exempt organization under Section 501(c)(3) of the Internal Revenue Code.

(ii) This subparagraph shall not apply to property owned by a limited partnership in which the managing partner is an eligible nonprofit corporation.

(2) In order to be eligible for the exemption provided by this subdivision, the owner of the property shall do both of the following:

(A) (i) For any claim filed for the 2000-01 fiscal year or any fiscal year thereafter, certify and ensure, subject to the limitation in clause (ii), that there is an enforceable and verifiable agreement with a public agency, a recorded deed restriction, or other legal document that restricts the project's usage and that provides that the units designated for use by lower income households are continuously available to or occupied by lower income households at rents that do not exceed those prescribed by Section 50053 of the Health and Safety Code, or, to the extent that the terms of federal, state, or local financing or financial assistance conflicts with Section 50053, rents that do not exceed those prescribed by the terms of the financing or financial assistance.

(ii) In the case of a limited partnership in which the managing general partner is an eligible nonprofit corporation, the restriction and provision specified in clause (i) shall be contained in an enforceable and verifiable agreement with a public agency, or in a recorded deed restriction to which the limited partnership certifies.

(B) Certify that the funds that would have been necessary to pay property taxes are used to maintain the affordability of, or reduce rents otherwise necessary for, the units occupied by lower income households.

(3) As used in this subdivision, "lower income households" has the same meaning as the term "lower income households" as defined by Section 50079.5 of the Health and Safety Code.

(h) Property used exclusively for an emergency or temporary shelter and related facilities for homeless persons and families and owned and operated by religious, hospital, scientific, or charitable funds, foundations, limited liability companies, or corporations meeting all of the requirements of this section shall be deemed to be within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section. Property that otherwise would be exempt pursuant to this subdivision, except that it includes housing and related facilities for other than an emergency or temporary shelter, shall be entitled to a partial exemption.

As used in this subdivision, "emergency or temporary shelter" means a facility that would be eligible for funding pursuant to Chapter 11 (commencing with Section 50800) of Part 2 of Division 31 of the Health and Safety Code.

(i) Property used exclusively for housing and related facilities for employees of religious, charitable, scientific, or hospital organizations that meet all the requirements of subdivision (a) and owned and operated by funds, foundations, limited liability companies, or corporations that meet all the requirements of subdivision (a) shall be deemed to be within the exemption provided for in subdivision (b) of Section 4 and Section 5 of Article XIII of the California Constitution and this section to the extent the residential use of the property is institutionally necessary for the operation of the organization.

(j) For purposes of this section, charitable purposes include educational purposes. For purposes of this subdivision, "educational purposes" means those educational purposes and activities for the benefit of the community as a whole or an unascertainable and indefinite portion thereof, and do not include those educational purposes and activities that are primarily for the benefit of an organization's shareholders. Educational activities include the study of relevant information, the dissemination of that information to interested members of the general public, and the participation of interested members of the general public.

(k) In the case of property used exclusively for the exempt purposes specified in this section, owned and operated by limited liability companies that are organized and operated for those purposes, the State Board of Equalization shall adopt regulations to specify the ownership, organizational, and operational requirements for those companies to qualify for the exemption provided by this section.

(l) The amendments made by Chapter 354 of the Statutes of 2004 shall apply with respect to lien dates occurring on and after January 1, 2005.

History.—Added by Stats. 1945, p. 706, in effect September 15, 1945. Stats. 1949, p. 1150, in effect October 1, 1949, added (7). Stats. 1951, p. 502, in effect December 27, 1952, after approval by the voters upon a referendum petition, deleted "or to extend an exemption to property held by or used as an educational institution of less than collegiate grade" at end of third sentence of last paragraph and added last sentence. Stats. 1953, p. 1994, in effect May 18, 1953, specifically declared the express intention of the Legislature to be that the amendment be effective as of January 1, 1953, and as to all taxes levied or to be levied on or after said date, added portion of (1) following first semicolon; substituted present provisions of (3) for former provisions reading "The property is not used or operated by the owner or by any other person for profit regardless of the purposes to which the profit is devoted." Stats. 1955, p. 2034, in effect September 7, 1965, added provision in parentheses in (7). Stats. 1965, p. 2471, in effect September 17, 1965, added the third paragraph. Stats. 1966, p. 605 (First Extra Session), in effect October 6, 1966, added the fourth paragraph. Stats. 1968, p. 1327, in effect November 13, 1968, added the language following "exempt activity" in (3) and the fifth paragraph. Stats. 1969, p. 3168, in effect November 10, 1969, added "or Section 236 of Public Law 90-448 (12 U.S.C. 1715z)" to the fifth paragraph relating to housing for the elderly and handicapped. Stats. 1974, Ch. 311, p. 594, in effect January 1, 1975, substituted "subdivision (b) of Section 4 and Section 5" for "Section 1c" in the last sentence of the second paragraph, and in the first sentences of the third, fourth and fifth paragraphs; and added the sixth paragraph. Stats. 1978, Ch. 1112, in effect January 1, 1979, deleted the sixth paragraph of the section which provided "property used exclusively for sheltering more than 20 orphan or half-orphan children receiving state aid meeting all the requirements of this section shall be deemed to be within the exemption provided for in this subdivision (b) of Section 4 and Section 5 of Article XIII of the Constitution and this section." Stats. 1979, Ch. 1188, in effect September 30, 1979, added "and the existence of the exemption provision in paragraph (2) of subdivision (a) of Section 202 shall not preclude the exemption under this section for museum or library property" after "law" in the second sentence of the second paragraph. Stats. 1984, Ch. 1102, in effect January 1, 1985, added "low- and moderate-income" after "for" and ", including but not limited to," after "financed by" in the first sentence, and added the second and third sentences to the fifth paragraph; and added the sixth and seventh paragraphs. Stats. 1985, Ch. 542, effective January 1, 1986, lettered the former first paragraph as (a), substituted a period for a semicolon after "indebtedness" in subsection (1), after "individual" in subsection (2), after "purpose" in subsection (3), after "profession" in subsection (4), after "purpose" in subsection (5), and after "purposes" in subsection (6) thereof, and substituted "Except as provided in subdivision (e), this" for "This" before "section" in the third sentence of the second paragraph thereof; lettered the former fourth sentence of the former second paragraph as (b), and substituted "subdivision (a)" for "this section" after "requirements of" therein; lettered the former third paragraph as (c), and substituted "subdivision (a)" for "this section" therein; lettered the former fourth paragraph as (d), and substituted "subdivision (a)" for "this section" therein; added subdivision (e); lettered the former fifth paragraph as (f), deleted "low- and moderate-income" after "related facilities for", added "Sec." before "1701q", added "Section 231 of Public Law 73-479 (12 U.S.C. Sec. 1715v)," after "as amended," deleted "z" after "1715", and added "Sec." before "1715" therein; added the first sentence to the former sixth paragraph, now the second paragraph of subdivision (f), and substituted "this subdivision" for "the preceding paragraph" after "pursuant to" in the second sentence thereof; and substituted "subdivision" for "section" after "this" in the former seventh paragraph, now the third paragraph of subdivision (f). Stats. 1986, Ch. 29, effective March 21, 1986, added the second sentence of the first paragraph to subdivision (e) and added subsections (e)(1) and (e)(2). Stats. 1987, Ch. 1469, in effect January 1, 1988, added commas in subdivisions (b), (c) and (f) after "foundations", added commas in subdivisions (b) and (c) after "hospital", added comma in subdivision (d) after "scientific", added a hyphen after "low" in first sentence of second paragraph of subdivision (f), and added subdivision (g). Stats. 1988, Ch. 77, in effect April 14, 1988, added subdivision (h). Stats. 1988, Ch. 1591, in effect January 1, 1989, added subparagraphs (A), (B), and (C) to subdivision (a)(3); added subdivision (i). Stats. 1989, Ch. 1292, in effect January 1, 1990, replaced semi-colon with a period and deleted "provided, that" in the first sentence, added "However," before "in the case", and substituted "the" for "such" before "organization", "has not" for "shall not have" after "over operating expenses", and "those" for "such" after "10 percent of" in the second sentence, of subdivision (a)(1); substituted "that" for "such" in subdivision (a)(5); added "California" before "Constitution" and deleted "of the State of California" after "Constitution" throughout the section; and added subdivision (j). Stats. 1990, Ch. 161, in effect January 1, 1991, added subparagraph (D) to subdivision (a)(3); deleted "or" after "(B)" and added ", or (D)" after "(C)" in the second paragraph of subdivision (a)(3); added a comma after "1715v)" in the first sentence of the first paragraph of subdivision (f); deleted "the" after "Section 236 of" in the second paragraph of subdivision (f); deleted a hyphen between "lower" and "income" in the first paragraph and in subparagraphs (1), (2) and (3) of subdivision (g); and inserted a hyphen between "tax" and "exempt" in subparagraph (2) of subdivision (g). Stats. 1992, Ch. 1180, in effect January 1, 1993, added "or the Franchise Tax Board" after "Service" and added "or Section 23701d . . . code" after "Revenue Code" in the second sentence of subparagraph (D) of subdivision (a)(3); substituted "organizations" for "organization" after "charitable" in the first paragraph of subdivision (a)(7); added "(1)" after "(g)" and added ", or by veterans' . . . subdivision (a)," after "this section" in the newly created subdivision (g)(1); relettered former paragraphs (1), (2), and (3) of subdivision (g) as subparagraphs (A), (B), and (C), respectively, of newly created subdivision (g)(1); added "(2)" before "In order", creating a new paragraph from the former second paragraph of subdivision (g); substituted "that" for "which" after "document" and after "usage and" in subparagraph (A) of the newly created subdivision (g)(2); and added "(3)" before "As used", creating a new paragraph from the former third paragraph of subdivision (g). Stats. 1995, Ch. 497, in effect January 1, 1996, added ", including ad valorem . . . on the proposition," after "from taxation" in the first paragraph, substituted "immediately" for "immediate" after "during the" in paragraph (1), and substituted ", 23707f, or 23701w" for "or 23701f" after "Section 23701d" in paragraph (3)(D) of subdivision (a), and substituted "1715z" for "1715" after "(12 U.S.C. Sec." in the first sentence of the second paragraph of subdivision (f). Stats. 1996, Ch. 124, in effect January 1, 1997, substituted "if," for ", if" after "operated for profit", deleted ", the excess of" after "preceding fiscal year", and substituted ",did not exceed operating expenses by an amount" for "over operating expenses has not exceeded by a sum" after "grants-in-aid" in the second sentence and substituted "expenses include" for "expenses shall include" after "as used herein" in the third sentence of paragraph (1) of subdivision (a); substituted "Internal Revenue Code" for "Internal Revenue Code of 1986" three times in clauses (i) and (ii) of subparagraph (A) and subparagraph (D); substituted "also shall" for "shall also" in subparagraph (C), and deleted "of this code" after "23701w" in subparagraph (D) of paragraph (3), added a comma after "charges or compensations" in paragraph (4) of subdivision (a); added a comma after "educational television station" in subdivision (d); substituted "by Chapter 1102 of the Statutes of 1984" for "at the 1983–84 Regular Session of the Legislature" in the second sentence of the first paragraph, and substituted "the property represents" for "the property is" in the third sentence of the second paragraph of subdivision (f); substituted "represents" for "is" after "lower income households" in the first sentence of paragraph (1) of subdivision (g);substituted "rents that do" for "rents do" after "Section 50053," in subparagraph (A) of paragraph (2) of subdivision (g); substituted "Property that otherwise would" for "Property which would otherwise" in the second sentence of the first paragraph of subdivision (h); substituted " "educational purposes" " for "educational purposes", substituted "activities that are primarily" for "activities primarily" in the first sentence, and deleted "shall" after "Educational activities" in the second sentence of subdivision (j); and substituted "that" for "which" throughout text. Stats. 1998, Ch. 695 (SB 2235), in effect January 1, 1999, deleted "or" after "Sec. 1715v)" and added "or Section 811 . . . Sec 8013)," after "Sec. 1715z)," twice, in the first sentence of the first paragraph and the first sentence of the second paragraph of subdivision (f). Stats. 1999, Ch. 927 (AB 1559), in effect October 10, 1999, operative January 1, 2000, added a comma after "fiscal year" in the first sentence of paragraph (1), deleted a comma after "Revenue Code" in the second sentence of subparagraph (D) of paragraph (3), added a comma after "foundation" in the first sentence of paragraph (6), added a comma after "investigation, research" in the first sentence of the first paragraph and added a comma after "law" in the second sentence of the second paragraph of paragraph (7) of subdivision (a); substituted "either of the following criteria applies" for "any of the following criteria are applicable" after "year in which" in the first sentence, deleted former subparagraph (A), which provided that a property would qualify on the basis that twenty percent or more of the occupants of the property are lower income households whose rent does not exceed that prescribed by Section 50053 of the Health and Safety Code, and relettered former subparagraph (B) and (C) as subparagraph (A) and (B), respectively, in paragraph (1), and added "an enforceable and verifiable agreement with a public agency or," after "there is", substituted "a recorded" for "a" before "deed restriction," and deleted "agreement, or other legal document" after "deed restriction," in the first sentence of subparagraph (A) of paragraph (2) of subdivision (g). Stats. 2000, Ch. 601 (AB 659), in effect September 24, 2000, added subparagraph (C) to paragraph (1); designated former subparagraph (A) of paragraph (2) as clause (i), substituted "For any claim filed for the 2000-01 fiscal year or any fiscal year thereafter, certify and ensure, subject to the limitation of clause (ii)," for "Certify and ensure" before "that there", and added "or other legal document," after "deed restriction," in the first sentence therein; and added clause (ii) to subparagraph (A) of paragraph (2) of subdivision (g). Stats. 2001, Ch. 159 (SB 662) in effect January 1, 2002, added a comma after "year" in the first sentence of paragraph (1), substituted "of" for "or" after "owner" and deleted a comma after "Code" in the second sentence of subparagraph (D) of paragraph (3), added a comma after "foundation" in paragraph (6) of subdivision (a); deleted "or" after "agency" and deleted a comma after "document" in the first sentence of clause (i) of subparagraph (A) of paragraph (2) of subdivision (g). Stats. 2003, Ch. 471 (SB 1062), in effect January 1, 2004, substituted "a valid organizational clearance certificate issued pursuant to Section 254.6" for "duplicate copies of valid unrevoked letters or rulings from the Internal Revenue Service that state that the owner and the other organization qualify as exempt organizations under Section 501(c)(3) of the Internal Revenue Code. The owner of the property and any other organization using the property as provided in subparagraph (A) also shall file duplicate copies of their most recently filed federal income tax returns." after "with the assessor" in subparagraph (C) of paragraph (3); deleted ", of subdivision (a)" after "(1) and (5), inclusive," and substituted "a valid organizational clearance certificate issued pursuant to Section 254.6" for "duplicate copies of valid, unrevoked letters or rulings from the Internal Revenue Service or the Franchise Tax Board stating that the other organization, or the national organization of which it is a local chapter or affiliate, qualifies as an exempt organization under Section 501(c)(3) or Section 501(c)(4) of the Internal Revenue Code or Section 23701d, 23701f, or 23701w, together with duplicate copies of that organization's most recently filed federal income tax return, if the organization is required by federal law to file a return." after "with the assessor" in subparagraph (D) of paragraph (3); and designated the last sentence of paragraph (3) as subparagraph (E) therein. Stats. 2004, Ch. 354 (AB 3073), in effect August 30, 2004, added "limited liability companies," after "foundations," throughout text; added "or eligible limited liability company," after "managing general partner" in the first sentence of paragraph (1) of subdivision (g); substituted "do" for "shall" after "thereof, and" in the first sentence of subdivision (j); and added subdivision (k) and (l). Stats. 2005, Ch. 22 (SB 1108), in effect January 1, 2006, deleted "the" after "is declaratory of," in the first sentence of the second paragraph of subdivision (f), substituted "Section 4 and Section 5" for "Sections 4 and 5" after "subdivision (b) of" in the first sentence of subdivision (i), and substituted "Chapter 354 of the Statutes of 2004" for "the act adding this subdivision" after "amendments made by" in the first sentence of subdivision (l). Stats. 2006, Ch. 224 (SB 1607), in effect January 1, 2007, deleted ". The owner of" and added ", of this subdivision. The owner or" after "(1) to (5), inclusive" in the first sentence of subparagraph (D), substituted "copy of a valid, unrevoked letter or ruling . . . Section 23701d, 23701f, or 23701w." for "valid organizational clearance certificate issued pursuant to Section 254.6." after "the assessor a" in the second sentence of subparagraph (D); added "limited liability companies," after "charitable funds, foundation," in the first sentence of subdivision (f); and added "is an eligible nonprofit corporation" after "managing general partner" and deleted "is an eligible nonprofit corporation," after "eligible limited liability company," in the first sentence of paragraph (1) of subdivision (g). Stats. 2008, Ch. 524 (SB 1284), in effect September 28, 2008, substituted "any" for "either" after "year in which" in the first sentence of paragraph (1) of subdivision (g) and added subparagraph (D) thereto.

Note.—Section 2 of Stats. 1986, Ch. 29, provided that the amendment of subdivision (e) in Section 214 of the Revenue and Taxation Code made by Section 1 of this act shall be operative for the 1986–87 fiscal year and fiscal years thereafter.

Note.—Section 3 of Stats. 1985, Ch. 542, provided that the addition of subdivision (e) to Section 214 of the Revenue and Taxation Code made by Section 2 of this act shall be operative for the 1986–87 fiscal year and fiscal years thereafter.

Note.—Section 3.5 of Stats. 1985, Ch. 542, provided that the amendment of subdivision (f) of Section 214 of the Revenue and Taxation Code by Section 2 of this act is operative for the 1985–86 fiscal year and fiscal years thereafter.

Note.—Section 9 of Stats. 1979, Ch. 1188, provided that under existing provisions of Section 214 of the Revenue and Taxation Code, the Welfare exemption from property taxes provided by Section 214 is specifically "in addition to any other exemption now provided by law." It has been the legislative intent that the exemption provided by Section 214 be in addition to and not in limitation of any other exemptions provided by other provisions of the Revenue and Taxation Code or the California Constitution. The purpose of the amendments to Section 214 is to reaffirm such legislative policy with respect to museum and library property. Sec. 11 thereof provided that the changes made by Section 1.5 of this act are declarative of existing law, and that it is the intent of the Legislature that Section 1.5 be applied to determine the eligibility of exemptions under Section 214 of the Revenue and Taxation Code for any property otherwise taxable on March 1, 1979. Section 13 thereof provided no payment by state to local governments because of this act.

Note.—Sec. 2 of Stats. 1984, Ch. 1102, in effect January 1, 1985, provided no payment by state to local governments because of this act.

Note.—Section 3 of Stats. 1987, Ch. 1228, provided that this act makes a classification or exemption of property for purposes of ad valorem taxation within the meaning of Section 2229 of the Revenue and Taxation Code. Sec. 4 thereof provided that the amendment made by this act shall be operative for the 1988–89 fiscal year and fiscal years thereafter.

Note.—Section 2 of Stats. 1987, Ch. 1469, provided that this act makes a classification or exemption of property for purposes of ad valorem taxation within the meaning of Section 2229 of the Revenue and Taxation Code. Sec. 3 thereof provided that the amendments made by this act shall be operative for the 1988–89 fiscal year and each fiscal year thereafter.

Note.—Section 2 of Stats. 1988, Ch. 1591 provided that the amendments to the section made by this act do not constitute a change in, but are declaratory of existing law. Sec. 3 thereof provided that the Legislature finds and declares that these amendments are codification of Board practice. Therefore, no escape assessments shall be levied and no refunds made as a result of the enactment of this act. Sec. 4 thereof provided that notwithstanding Section 2229, the requirements of that section relating to any exemption of property for more than 5 years or for more than 75 percent of the value thereof shall not apply to any exemptions made by this act. In addition, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act.

Note.—Section 2 of Stats. 1989, Ch. 1292, stated that the amendment of this Section made at the 1989–90 Regular Session of the Legislature does not constitute a change in, but is declaratory of, existing law.

Note.—Section 30 of Stats. 1993, Ch. 1187, provided that the amendments made by Chapter 1180 of the Statutes of 1992 to subdivision (g) of Section 214, relating to veterans' organizations, shall be operative with respect to taxes levied for the 1989–90 fiscal year and each fiscal year thereafter.

Note.—Section 5 of Stats. 1999, Ch. 927 (AB 1559) provided that notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act. Section 6 thereof provided that the provisions of this act shall apply on and after the January 1, 2000, lien date.

Note.—Section 4 of Stats. 2000, Ch. 601 (AB 659) provided that notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenues lost by it pursuant to this act.

Note.—Section 1 of Stats. 2008, Ch. 524 (SB 1284), provided that the Legislature finds and declares all of the following:

(a) That maintaining the affordability of lower income housing fulfills both of the following:

(1) The legal commitment entered into by the Department of Transportation in a consent decree to replace affordable housing stock lost as a result of the construction of the Century Freeway.

(2) Addresses California's serious shortage of decent, safe, and sanitary housing, which persons and families of low or moderate income, including the elderly and handicapped, can afford.

(b) That expanding the criteria for the partial welfare exemption, as provided by this act, extends the application of the partial welfare exemption in a consistent manner to all eligible taxpayers in order to ensure that all eligible and similarly situated taxpayers are treated in a fair and equitable manner.

(c) Therefore, the Legislature finds and declares that this act serves a public purpose of the state.

Section 4 thereof provided that notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made by this act and the state shall not reimburse any local agency for any property tax revenue lost by it pursuant to this act.

Boys' camp.—Property was used in the actual operation of a charitable boys' camp where it was not a part of the main campground, but was used for roads, trails, and overnight campsites. The fact the club had excess timber logged from a portion of the land was consistent with prudent management of the land and did not destroy the exemption. San Francisco Boy's Club, Inc. v. Mendocino County, 254 Cal.App.2d 548.

Hospital property.—The welfare exemption extends to the property of a hospital devoted to the housing of essential hospital personnel, to the conduct of a nurses' training school operated in connection with the hospital, and to a tennis court maintained as a recreational facility for hospital employees. Hospital buildings under construction but not yet in use and a "thrift shop" operated for the sale of donated clothing, the proceeds therefrom being devoted to the maintenance of a free children's clinic, are not exempt. Cedars of Lebanon Hospital v. Los Angeles County, 35 Cal.2d 729.

The 1953 amendment, providing that a hospital shall not be deemed operated for profit if during the preceding fiscal year the excess of income over expenses did not exceed 10 percent of the expenses, contravenes the prohibition against gifts of public money of Section 31 of Article IV of the State Constitution insofar as it is expressly made retroactive as to all taxes levied on or after January 1, 1953, since the right to tax moneys for the year 1953–54, due November 1, 1953, vested in the state on the lien date, the first Monday in March, whereas the amendment was not enacted until May 18, 1953, and the amendment does not compel a hospital to use the 10 percent profit exclusively for such hospital purposes as would also be proper public purposes. Doctors General Hospital v. Santa Clara County, 150 Cal.App.2d 53.

A hospital with net operating revenue in excess of ten percent of operating expenses is not automatically precluded from invoking the welfare exemption. Legislative history of Section 214(a)(1) indicates an intent not to deny the exemption to a non-profit hospital using such excess revenue for debt retirement, facility expansion or operating cost contingencies but rather, to merely require that the hospital is, in fact, not operated for profit and meets other statutory requirements for exemption. Rideout Hospital Foundation, Inc. v. Yuba County, 8 Cal.App.4th 214.

Property of religious institution.—The entire retreat house of a qualified nonprofit religious institution, including that part used for living quarters for priests and laybrothers whose presence on the retreat property is essential in carrying out the religious and charitable activities of the retreat, is exempt from taxation. Serra Retreat v. Los Angeles County, 35 Cal.2d 755.

The test for determining whether property is used exclusively for religious or charitable purposes is not whether such property is essential, indispensable and necessary for the accomplishment of such purposes, but whether the use is incidental to and reasonably necessary for the accomplishment of such purposes; thus, the exemption applies to temporary, low-cost housing facilities for missionaries on furlough and for other religious workers who work in establishing Christian purposes throughout the world. House of Rest v. Los Angeles County, 151 Cal.App.2d 523.

Exemption applies to property principally used for religious instruction and the sale of religious books, the profit of which is dedicated toward religious purposes. St. Germain Foundation v. County of Siskiyou, 212 Cal.App.2d 911.

The actual use required by subparagraph (3) is not limited to "actual physical use." Exempt nonphysical uses of a religious retreat may include use of nearby areas surrounding trails for meditation and of more remote hilltops for a buffer. Christward Ministry v. San Diego County, 271 Cal.App.2d 805.

A swimming pool, tennis courts, locker rooms and sauna owned by a church did not qualify as property used for religious purposes where the primary user of these facilities was a boosters organization, not the church. At the very least, the term "exclusive use" must mean that the property is used primarily for exempt purposes. Peninsula Covenant Church v. San Mateo County, 94 Cal.App.3d 382.

A tax exempt lessor of a church will not be disqualified from receiving the welfare exemption by leasing the church to another exempt organization where such leasing arrangement is not intentionally profit-making or commercial in nature. Christ The Good Shepherd Lutheran Church of San Jose v. Dwight L. Mathiesen, et al., 81 Cal.App.3d 355.

Y.M.C.A. property.—Portions of Y.M.C.A. buildings devoted to dormitory accommodations are within the welfare exemption even though a moderate charge is made for such accommodations, where there is no real profit motive, the dormitory portions operate at a loss and are incidental to and reasonably necessary for the accomplishment of the organization's religious and charitable purposes. Portions of Y.M.C.A. buildings devoted to a restaurant, a barbershop, a valet shop and a "gym store," all of which are open to the public as well as to Y.M.C.A. members, a meeting room where meals are served to outside groups and office rooms rented to the Selective Service Board are not, however, entitled to exempt status. Young Men's Christian Ass'n v. Los Angeles County, 35 Cal.2d 760. Y.M.C.A.'s health club facility served valid charitable purposes, benefiting the community as a whole, so as to qualify it for a charitable property tax exemption. All its activities had some potentially valid charitable purpose, and it was unrealistic to analyze the degree of community benefit for each category of activity offered by the organization, since all activities were conducted in the same building, directed by the same staff, and often shared the same sources of financial support and the same overhead costs. And it was immaterial that the facility competed with private health clubs, since a charitable enterprise does not lose its exemption merely because it engages in competition with businesses that are subject to taxation. Clubs of California for Fair Compet. v. Kroger, 7 Cal.App.4th 709.

Charges and entrance requirements.—A nonprofit corporation operating a home for aged people on a "life care contract" basis is entitled to the welfare exemption even though it requires that each applicant for admission pay an entry charge and meet the approval of the board of directors after a three-month probationary period, where the payments made by the elderly residents are within the reach of persons of limited means and are not commensurate with the benefits they receive, there is no element of private gain, and all the income of the corporation, approximately 65 percent being received from residents and the balance from gifts and other sources, is devoted exclusively to affording a reasonable standard of care to the aged persons. The portion of the corporation's property used to house personnel whose presence on its property constitutes an institutional necessity is also entitled to the exemption. Fredericka Home v. San Diego County, 35 Cal.2d 789.

A home for the aged which caters to wealthy persons and furnishes them the services and care needed by the old and infirm, rich or poor, does not cease to be a charitable institution so long as its charges do not yield more than actual cost of operation. Fifield Manor v. Los Angeles County, 188 Cal.App.2d 1.

Profit, prior law.—Prior to the 1953 amendment, a nonprofit hospital purposely operating to produce a surplus of income over expenses, and making a surplus of slightly more than 8 percent of gross income to retire bonded indebtedness and expand facilities was not exempt. Sutter Hospital v. City of Sacramento, 39 Cal.2d 33.

A hospital's main hospital building, living quarters for resident personnel, and a building used for a nursing school were exempt in 1951, notwithstanding the corporation made a surplus of $130,400 (4.4 percent of gross receipts), principally from certain properties for which it did not claim exemption, consisting of a parking lot for use by doctors who patronized the hospital and a building housing a pharmacy, offices rented to various doctors and dentists, and a coffee shop, where evidence supported the trial court's findings that the properties for which exemption was claimed and the hospital as owner were organized and operated for hospital and charitable purposes and were not organized and operated for profit. St. Francis Memorial Hospital v. San Francisco, 137 Cal.App.2d 321.

Presentation of concerts by paid professional artists does not result in a more advantageous pursuit of their profession and deny the exemption to an otherwise qualified nonprofit organization. Greek Theater Assn. v. Los Angeles County, 76 Cal.App.3d 768.

Island, open space property was used exclusively for charitable purposes even though fees were charged to the public in connection with certain activities conducted on the property and even though the former owner of the property and an independent contractor derived profits from motor tours and a hunting program. In addition to recreational uses, the Conservancy's preservation of the unique, partly wild, island environment containing exceptional geological features and rare plant and animal species provided incalculable benefit to all members of society. Santa Catalina Island Conservancy v. Los Angeles County, 126 Cal.App.3d 221.

More advantageous pursuit.—A facility conducting research under an agreement granting exclusive license options to develop, market, and sell research products in exchange for research funding provided by the optionee was not property used for the more advantageous pursuit of the optionee's business because the agreement was an arms'-length transaction that did not result in consideration above fair market value. Scripps Clinic & Research Foundation v. San Diego County, 53 Cal.App.4th 402.

Irrevocable dedication to exempt purposes.—This requirement is not violated by the possibility of diversion, through sale or otherwise, of any particular piece or portion of the property to nonexempt uses provided the proceeds thereof are irrevocably dedicated to exempt purposes. Property is not so irrevocably dedicated if the articles of incorporation of the owner permit present use for and permanent diversion of the property to nonexempt purposes even though the owner's use of the property, both past and present, has been for exempt purposes. Pasadena Hospital Ass'n, Ltd. v. Los Angeles County, 35 Cal.2d 779.

The requirement is satisfied where the property is impressed with a charitable trust for exempt purposes by virtue of the express declaration of such purposes in the articles of incorporation of the owner, even though in the event of dissolution the property will pass to a successor which is organized for nonexempt, as well as exempt, purposes. Pacific Home v. Los Angeles County, 41 Cal.2d 844 and 41 Cal.2d 855.

The requirement is also satisfied absent an express declaration where the articles of incorporation construed as a whole show the corporation is organized for charitable purposes. The assets are then impressed with a trust and can be used by a successor organized for charitable as well as nonexempt purposes, for charitable purposes only. Stockton Civic Theatre v. Board of Supervisors, 66 Cal.2d 13.

Note.—After 1966, see Section 214.01.

Educational purposes.—The property of a corporation whose articles permit use of the property for educational purposes is not irrevocably dedicated to exempt purposes and the welfare exemption does not extend to such property. (Based on the section as it existed prior to the 1951 amendment enlarging its scope as to educational purposes.) Moody Institute of Science v. Los Angeles County, 105 Cal.App.2d 107; Goodwill Industries v. Los Angeles County, 117 Cal.App.2d 19.

A nonprofit corporation whose sole purpose is to conduct a girls' school of less than collegiate grade and whose articles prohibit individual profit and provide for distribution to a religious benevolent or charitable corporation or fund in case of dissolution is organized for charitable purposes. Sarah Dix Hamlin School v. San Francisco City and County, 221 Cal.App.2d 336.

As is true of vocational schools generally the property of an educational institution which trains personnel for the funeral-service industry does not qualify for the welfare exemption as property used exclusively for charitable purposes in that its activities do not benefit the community as a whole or an unascertainable and indefinite portion thereof. California College of Mortuary Science v. Los Angeles County, 23 Cal.App.3d 702.

A construction industry vocational training school operated under a trust created by a labor union and construction industry employers pursuant to a collective bargaining agreement does not qualify for the exemption where the trust was primarily intended to benefit and did primarily benefit the union and the employers rather than the community in general. Alcoser v. San Diego County, 111 Cal.App.3d 907.

Special assessments.—The real property of an institution qualifying for the welfare exemption from taxation under this section is not exempt from special assessments, such as those imposed under authority of the Los Angeles County Flood Control Act. Cedars of Lebanon Hospital v. Los Angeles County, 35 Cal.2d 729 (hospital property); Young Men's Christian Ass'n v. Los Angeles County, 35 Cal.2d 760 (Young Men's Christian Association property).

School property.—The 1951 amendment of this section, approved by the voters on referendum at the general election of 1952, providing for the exemption of property "used exclusively for school purposes of less than collegiate grade and owned and operated by religious, hospital or charitable funds, foundations or corporations," is valid under the State and Federal Constitutions. Lundberg v. Alameda County, 46 Cal.2d 644; appeal dismissed in a companion case, Heisey v. Alameda County, 352 U.S. 921.

Museum property.—A qualifying nonprofit organization may qualify for the welfare exemption, the free museum exemption, or both, the use of property for a free museum being a charitable activity, and facilities in the course of construction on the lien date intended as a free museum are eligible for the welfare exemption. J. Paul Getty Museum v. Los Angeles County, 148 Cal.App.3d 600.

Interest payable from net earnings.—A part of the net earnings of a hospital does not inure to the benefit of private shareholders or individuals within the purview of subdivision (2) of this section by reason of the payment of interest upon certain promissory notes issued by the hospital which are in the form of an obligation to pay only out of "net earnings" rather than the usual absolute, unqualified obligation. St. Francis Memorial Hospital v. San Francisco, 137 Cal.App.2d 321.

Course of construction.—A building is in the course of construction within the meaning of former Article XIII, Section 1c, when at noon on the first Monday in March some trenches for the foundation of the building had been dug. National Charity League, Inc. v. Los Angeles County, 164 Cal.App.2d 241.

Low-rental housing for the elderly and handicapped.—The 1968 and 1969 amendments did not exempt all low-rental housing from taxation; rather, they included only that housing financed pursuant to the specified federal programs, whichprovide low-interest, long-term federal loans whereby the savings may be passed on to the tenants in the form of lower rents. Martin Luther Homes v. Los Angeles County, 12 Cal.App.3d 205.

Municipal property.—City property operated by the Parks and Recreation Department exclusively for the purpose of furnishing camping facilities to persons and organizations at less than cost was not eligible for the welfare exemption since the city was not operated exclusively for charitable purposes and the Parks and Recreation Department was neither a separately organized nor an autonomous agency of the city capable of itself qualifying for the exemption. City of Los Angeles v. Los Angeles County, 19 Cal.App.3d 968.

Possessory interest.—Property "owned", as used in the section, includes possessory interests, and a qualifying charitable organization's leasehold interest in public property was exempt under the section where the organization used the leasehold for charitable purposes. Tri-Cities Children's Center, Inc. v. Board of Supervisors, 166 Cal.App.3d 589.

Note.—See Constitutional Provisions, Art. XIII, § 4, subtitle "Educational Purposes."