Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2017

Revenue and Taxation Code

Property Taxation

Part 2. Assessment

CHAPTER 1. Taxation Base

Article 1. Taxable and Exempt Property

Section 203

203. Colleges. (a) The college exemption is as specified in subdivision (e) of Section 3 and Section 5 of Article XIII of the California Constitution.

(b) An educational institution of collegiate grade is an institution incorporated as a college or seminary of learning that requires for regular admission the completion of a four-year high school course or its equivalent, and confers upon its graduates at least one academic or professional degree, based on a course of at least one year in flight test technology or flight test science, for which the master's degree program has been approved by the California Council for Private Postsecondary and Vocational Education or the Bureau for Private Postsecondary and Vocational Education, on a course of at least two years in liberal arts and sciences, or on a course of at least three years in professional studies, such as law, theology, education, medicine, dentistry, engineering, veterinary medicine, pharmacy, architecture, fine arts, commerce, or journalism.

(c) An educational institution of collegiate grade is not conducted for profit when it is conducted exclusively for scientific or educational purposes and no part of its net income inures to the benefit of any private person.

(d) Without prejudice to the right to assert an exemption otherwise available under subdivision (a), (d), or (e) of Section 3 of Article XIII of the Constitution, a property tax under this division shall be imposed upon that portion of the bookstore property determined to be generating the unrelated business taxable income, as defined in Section 512 of the Internal Revenue Code, to the extent property is both of the following:

(1) Owned by an educational institution of collegiate grade or used by a nonprofit corporation operating a student bookstore affiliated with an educational institution of collegiate grade.

(2) Primarily devoted to bookstore use that produces income that is taxable as unrelated business taxable income.

This tax shall be determined by establishing a ratio of the unrelated business taxable income to the bookstore's gross income as defined by the Internal Revenue Code. That percent shall be the maximum percentage of the bookstore property on which a property tax can be levied.

At the end of a fiscal year when unrelated business income has been generated, the nonprofit organization shall file with the assessor copies of the organization's most recent tax return filed with the Internal Revenue Service.

History.—Stats. 1972, p. 147, in effect March 7, 1973, and operative on the lien date in 1973, substituted "two" for "four" in the second paragraph. Stats. 1974, Ch. 311, p. 590, in effect January 1, 1975, substituted "subdivision (e) of Section 3 and Section 5" for "Section 1a" in the first sentence of the first paragraph. Stats. 1987, Ch. 498, in effect January 1, 1988, added "California" before "Constitution" in the first sentence of the first paragraph, and deleted "under the laws of this state," after "learning," in the first sentence of the second paragraph. Stats 1988, Ch. 1606, in effect January 1, 1989 added subdivision headings (a), (b), and (c) to the existing paragraphs and added new subdivision (d). Stats. 1998, Ch. 562 (SB 218), in effect September 18, 1998, substituted "learning that" for "learning, which" after "seminary of" and added "on a course of at least . . . and Vocational Education," after "professional degree, based" in the first sentence of the first paragraph of subdivision (b); and added "both of the following" after "extent property is" in the first sentence of subdivision (d), substituted "institution of collegiate grade." for "institution, and" in the first sentence of paragraph (1) and substituted "Primarily" for "Is primarily" before "devoted" in the first sentence and substituted "the" for "such" after "percentage of" in the second sentence of the second paragraph of subdivision (d).

Construction.—The professions specified in this section were not intended to be exclusive, and the study of acting constitutes a "professional" study within the meaning of this section. Neither is it required that a majority of students take a three- or four-year course, or that they pursue their studies until degrees are obtained. Consequently an institution otherwise meeting the requirements of this section is not deprived of its right to the exemption by reason of the fact that a majority of its students take only a two-years' course and do not receive a degree. Pasadena Playhouse Ass'n v. Los Angeles County, 69 Cal.App.2d 611.

Where an educational institution otherwise exempted by Article XIII, § 1a of the State Constitution and statutes enacted thereunder including this section, accepts transfers to it of money and other property in consideration of issuance by it of annuities and life income contracts to its donors, it does not lose the tax exempt status since the amounts paid are only payments of debts and not distribution of profits. Estate of Letts, 200 Cal.App.2d 708.

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.

Note.—For further annotations relating to the college exemption see Article XIII, Sections 3 and 5, of the Constitution.