General Information:

1. What is the Welfare Exemption?
2. What is the Veterans' Organization Exemption?
3. Who can qualify for the Welfare or Veterans' organization exemption?
4. Who administers the Welfare and Veterans' Organization Exemptions?
5. How did Senate Bill 1062 (Stats. 2003, Ch. 471) amending statutory provisions relating to the Welfare and Veterans' Organization Exemptions effect the administration of these exemptions?

Filing Requirements:

6. How does an organization file a claim for the Welfare or Veterans' Organization Exemption?
7. When must a claim for the Welfare or Veterans' Organization Exemption be filed?
8. What documents do I file with the assessor to request a Welfare or Veterans' Organization exemption from property taxes?
9. Can my organization claim the Welfare Exemption for prior years? Is it too late to file now?
10. What documents do I file with the Board of Equalization to request an Organizational Clearance Certificate?
11. 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.
12. After my organization receives an Organizational Clearance Certificate, do I need to file a form annually with the Board of Equalization to retain the certificate?
13. According to the Internal Revenue Service, my nonprofit organization is a section 501(c)(3) organization and, therefore, exempt form income taxation. Why must we file separately for a Welfare Exemption, aren't we automatically exempt from property taxation?

Qualifying Conditions for Organizational Clearance Certificate:

14. 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, which is needed to receive the Welfare or Veterans' Organization Exemption?

Recourse if Denied Organizational Clearance Certificate or Property Tax Exemption:

15. Board staff determined that the organization was not eligible for an Organizational Clearance Certificate, what is my recourse if I do not agree?
16. 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?

Other:

17. My charitable organization recently purchased real property. Can we have our taxes canceled now?

General Information:

1. 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.

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2. What is the Veterans' Organization Exemption?

Section 215.1 provides for the exemption of all buildings, and the real property required for the convenient use and occupation of the exempt buildings, owned by a veterans' organization which has been chartered by the Congress of the United States and is organized and operated for charitable purposes, when such premises are used and operated exclusively for charitable purposes by such organization and are not being conducted for profit and no part of the net earnings of the operation inures to the benefit of any private individual or member of the organization. This exemption is popularly known as 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.

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3. Who can qualify for the Welfare or Veterans' organization exemption?

In general, the welfare and veterans' organization exemptions from local property taxes are 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.

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4. Who administers the Welfare and Veterans' Organization Exemptions?

The Welfare and Veterans' Organization Exemptions are jointly administered by the Board of Equalization (Board) and the county assessor. Effective with claims filed on or after January 1, 2004, the Board 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 Board determines that an organization is eligible, the Board 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 and veterans' organization 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 Board staff; but, the assessor may not grant a claim unless the organization holds a valid Organizational Clearance Certificate issued by the Board. 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 Board.

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5. How did Senate Bill 1062 (Stats. 2003, Ch. 471) amending statutory provisions relating to the Welfare and Veterans' Organization Exemptions effect the administration of these exemptions?

The amendments streamline the administration of the welfare and veterans' organization exemptions by eliminating duplicative review functions performed by the assessors and the State Board of Equalization (Board). These changes, effective January 1, 2004, apply to claims filed on or after January 1, 2004, regardless of the claim year.

Under the previous administration, the assessor reviewed each claim and made an initial determination of eligibility. The assessor then forwarded the application and supporting documents, along with the assessor's recommendation, to Board staff, who conducted an independent review of the application and issued their own finding of eligibility. Both agencies were independently reviewing the claim form to determine whether the organizational and property use requirements for exemption were met.

Under the new administration, the Board determines whether an organization is eligible for the welfare or veterans' organization exemption and the county assessor determines whether the use of the property is eligible for the exemption.

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Filing Requirements:

6. How does an organization file a claim for the Welfare or Veterans' Organization Exemption?

Claims for the Welfare or Veterans' Organization Exemption must be filed annually with the County Assessor (see Listing of County Assessors) in the county in which the organization's property is located, or, in the case of personal property, being used. The claim form and required documents (supplemental affidavits, if necessary) will be supplied by the County Assessor's office. Claims are made on the following forms: BOE 267 (Claims for Welfare Exemption (First Filing)); BOE 267-A (Claim for Welfare Exemption (Annual Filing); BOE 269-AH (Claim for Veterans' Organization Exemption).

The assessor may not grant a claim unless the organization holds a valid Organizational Clearance Certificate issued by the Board. Please contact the Board of Equalization to request a Claim for Organizational Clearance Certificate if your organization does not have a valid Organizational Clearance Certificate.

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7. When must a claim for the Welfare or Veterans' Organization Exemption be filed?

Claims must be filed annually with the county assessor, generally by February 15. If a claim is filed after February 15, a partial exemption may still be granted. The assessor may not grant a claim unless the organization holds a valid Organizational Clearance Certificate issued by the Board. Please contact the Board of Equalization to request a Claim for Organizational Clearance Certificate if your organization does not have a valid Organizational Clearance Certificate.

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8. What documents do I file with the assessor to request a Welfare or Veterans' Organization exemption from property taxes?

Claims are filed on the following forms:

• BOE-267: Claim for Welfare Exemption (First Filing), (claim form for initial request of welfare exemption for a specific property with 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, Housing-Lower-Income Households (Limited Partnership), (claim form filed for properties used for low income households owned by limited partnerships, claimant must also file BOE-267-L)
• BOE-267-R: Welfare Exemption Supplemental Affidavit, Rehabilitation-Living Quarters, (claim form filed for properties used for rehabilitation and associated living quarters)

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9. Can my organization claim the Welfare Exemption for prior years? Is it too late to file now?

An organization may, subject to a late-filing penalty, file a claim for the Welfare Exemption without limitation. However, the law limits refunds of taxes paid to four years from the date the payment was made. Thus, if an organization were to qualify for the Welfare Exemption in December of 1999 for years 1993 through 1999, had paid taxes on its real property timely for all those years, and filed claims for refund of taxes paid, it could expect a refund of taxes paid for the first installment due November 1, 1999, for both installments due in 1996, 1997, and 1998, and possibly for the first installment due November 1, 1995. No refund would be possible for taxes paid timely for 1993 or 1994, since these years were beyond the four-year statute of limitations (section 5097(a)(2), Revenue and Taxation Code).

Welfare and veterans' organization exemption claims should be filed with the assessor. The assessor determines whether an organization's property use satisfies the requirements of section 214 (the assessor may not grant a claim unless the organization holds a valid Organizational Clearance Certificate issued by the Board).

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10. What documents do I file with the Board of Equalization to request an Organizational Clearance Certificate?

Organizations currently eligible for the welfare or veterans' organization exemptions (eligible prior to January 1, 2004) will automatically receive an Organizational Clearance Certificate from the Board in December 2003.

Organizations that intend to claim the welfare or veterans' organization exemption and are not currently eligible for these exemptions in any county in the state (i.e., new to state) must file a claim form requesting the certificate (BOE-277, Claim for Organizational Clearance Certificate-Welfare Exemption, or BOE-279, Claim for Organizational Clearance Certificate-Veterans' Organization Exemption).

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
• Other information (as requested from Board staff)

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11. 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.

California property tax law has its own requirements that may differ from other state and federal law. One of these differences affects organizations applying for the Welfare Exemption. Our law requires an explicit statement that an exempt organization's property is irrevocably dedicated to religious, charitable, scientific, or hospital purposes (sections 214(a)(6) and 214.01, Revenue and Taxation Code), and that upon dissolution of the organization the assets will go to another fund, foundation, or corporation organized and operated for similar purposes and having federal section 501(c)(3) status.

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."

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12. After my organization receives an Organizational Clearance Certificate, do I need to file a form annually with the Board of Equalization to retain the certificate?

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13. According to the Internal Revenue Service, my nonprofit organization is a section 501(c)(3) organization and, therefore, exempt form income taxation. Why must we file separately for a Welfare Exemption, aren't we automatically exempt from property taxation?

No. The income tax exemption does not automatically confer property tax exemption to a nonprofit organization. Both ownership and use of the property drive the Welfare Exemption.

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:

• Fundraising
• Unrelated business
• Allowing other unqualified individuals or organizations to use the property for private benefit

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Qualifying Conditions for Organizational Clearance Certificate

14. 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, which is needed to receive the Welfare or Veterans' Organization Exemption?

In general, the organization must demonstrate that it is in receipt of substantial donations from outside sources. Those donations, in turn must be passed on to a segment of the public that is sufficiently large that a gift to the organization may be viewed as benefiting the community as a whole.

Although an organization's receipt of donations is an important criteria by which is 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 my 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.

Recourse if Denied Organizational Clearance Certificate or Property Tax Exemption::

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15. Board staff determined that the organization was not eligible for an Organizational Clearance Certificate, what is my recourse if I do not agree?

If the claimant disagrees with the Board's determination of ineligibility for an Organizational Clearance Certificate, the claimant may file an appeal of the Board staff's finding within 60 days of the date of mailing of the final notice of ineligibility (BOE-277-F2) with the Board Proceedings Division. The appeal may be submitted to the Board for a decision without a hearing (the claimant and the Board agree in writing), or the Board will conduct a hearing in accordance with the Board's Rules of Practice.

If the Board denies the organization's claim for an Organizational Clearance Certificate as a result of appeal, its remedy is to file a claim for refund of property taxes with the local county board of supervisors. If the refund claim is denied, the organization may file a refund action in superior court.

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16. 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 the claimant disagrees with the assessor's determination of ineligibility for the welfare or veterans' organization exemption, the claimant 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, the organization may file a refund action in superior court.

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Other

17. My charitable organization recently purchased real property. Can we have our taxes canceled now?

The law recognizes mid-year acquisitions of real property by qualified organizations. If the property is put to an exempt use within 90 days of acquisition, it may be possible to have the Welfare Exemption applied to the current year's taxes. For property acquired between January 1 and June 30, full cancellation of taxes is possible for the ensuing fiscal year (beginning July 1). For property acquired between July 1 and December 31, prorated cancellation is available from the date of acquisition to the end of the fiscal year (June 30). (Property tax bills are issued and collected at the county level.)

Welfare and veterans' organization exemption claims should be filed with the assessor. The assessor determines whether an organization's property use satisfies the requirements of section 214 (the assessor may not grant a claim unless the organization holds a valid Organizational Clearance Certificate issued by the Board).

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