Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2012
 

Revenue and Taxation Code

Property Taxation

Part 2. Assessment

CHAPTER 1. Taxation Base

Article 1. Taxable and Exempt Property

Section 214.05

214.05. Welfare exemption; unrelated business taxable income. For purposes of Section 214:

(a) If the property of an organization is granted an exemption pursuant to Section 214, that property is deemed to be used exclusively for the organization's exempt purposes. However, to the extent that income derived from the organization's use of the property is unrelated business taxable income, as defined in Section 512 of the Internal Revenue Code, and the regulations implementing that section, and is subject to the tax on unrelated business taxable income which is imposed by Section 511 of the Internal Revenue Code, the property shall be exempt from taxation under Section 214 only to the extent provided in subdivision (b) or (c).

(b) (1) If the use of property which has qualified for the welfare exemption under Section 214 involves activities of the organization, some of which produce income that is exempt from income or franchise taxation and some of which produce income that is taxable as unrelated business taxable income, and those activities are attributable to a reasonably ascertainable portion of the entire property, that portion of the property shall be entitled only to a partial exemption from property taxation equal to that proportion of the total value of the portion of the property which the amount of income of the organization that is exempt from income or ranchise taxation and that is attributable to that portion bears to the total amount of income of the organization that is attributable to that portion. The remaining proportion of the total value of that portion of the property shall be subject to taxation pursuant to this division.

(2) If the use of property which has qualified for the welfare exemption under Section 214 involves activities of the organization, some of which are exempt for property tax purposes and produce no income and some of which produce income that is taxable as unrelated business taxable income, or produce both income that is taxable as unrelated business taxable income and income that is exempt from income or franchise taxation and those activities are attributable to a reasonably ascertainable portion of the entire property, that portion of the property shall be entitled only to a partial exemption equal to that proportion of the total value of the portion of the property which the amount of time actually devoted to those exempt nonincome-producing activities of the organization attributable to that portion bears to the total amount of time actually devoted to all of the activities of the organization attributable to that portion. The remaining proportion of the total value of that portion of the property shall be subject to taxation pursuant to this division.

(3) If the activities described in paragraphs (1) and (2) cannot be attributed to a reasonably ascertainable portion of the entire property, the entire property shall be entitled only to a partial exemption. In the case of activities of the organization described in paragraph (1), the partial exemption shall be equal to that proportion of the value of the entire property which the amount of income of the organization that is exempt from income or franchise taxation and that is attributable to the entire property bears to the total amount of income of the organization that is attributable to the entire property. In the case of activities of the organization described in paragraph (2), the partial exemption shall be equal to that proportion of the value of the entire property which the amount of time actually devoted to exempt nonincome-producing activities of the organization attributable to the entire property bears to the total amount of time actually devoted to all of the activities of the organization attributable to the entire property. In either case, the remaining proportion of the total value of the entire property shall be subject to taxation pursuant to this division.

(c) Notwithstanding subdivision (b), if more than 75 percent of the income of an organization is attributable to property which has qualified for the welfare exemption under Section 214, but is not specifically related to the organization's use of particular property, the property shall be entitled only to a partial exemption equal to that proportion of the total value of the property which the amount of the income of the organization attributable to activities in this state and exempt from income or franchise taxation bears to the amount of total income of the organization that is attributable to activities in this state.

(d) Whenever property is claimed exempt under Section 214 and activities of the organization on the property produce unrelated business taxable income, as defined in Section 512 of the Internal Revenue Code, the organization, as a part of its claim for exemption, shall file with the assessor each of the following:

(1) The organization's information and tax returns filed with the Internal Revenue Service for its immediately preceding fiscal year.

(2) Information indicating the amount of time devoted to its income-producing and its nonincome-producing activities and, where applicable, a description of that portion of the property in which those activities are conducted.

(3) A statement listing the specific activities which produce the unrelated business taxable income.

(4) Whenever subdivision (c) is applicable, the amount of income of the organization that is attributable to activities in this state and is exempt from income or franchise taxation and the amount of total income of the organization that is attributable to activities in this state.

(5) Any other information as prescribed by the board.

(e) Nothing in this section shall be construed to enlarge the welfare exemption provided in Section 214.

History.—Added by Stats. 1988, Ch. 1606, in effect January 1, 1989.

Note.—Section 4 of Stats. 1988, Ch. 1606, provided that if any provision of this act or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of the act which can be given effect without the invalid provision or application, and to this end the provisions of this act are severable. Sec. 5 thereof provided that no reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the Legislature finds and declares that there are savings as well as costs in this act which, in the aggregate, do not result in additional net costs. Sec. 6 thereof provided that notwithstanding Section 2229, the requirements of that section shall not apply to the exemption of property for purposes of ad valorem property taxation 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. Sec. 7 thereof provided that this act shall apply to property taxes levied for the 1989–90 fiscal year and fiscal years thereafter.