Nonprofit Blog

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Wednesday, August 31, 2011

California Denies Property Tax Exemption to Nonprofits

Posted by Armanino Nonprofit Team

The California Board of Equalization has created quite a buzz across the non-profit community lately. Lawyers have come forth in the past two weeks stating that their clients have been denied property tax exemptions by the state of California because they did not “primarily benefit persons within the geographical boundaries of the State of California.”

Known as the “welfare exemption” property used exclusively for religious, hospital, scientific, or charitable purposes, and owned and operated by nonprofits organized and operated for such purposes, generally is exempt from California property tax. However, the California Board of Equalization (BOE) has taken the position that “since the property tax is limited to the state’s boundaries, the charitable benefits and services should likewise be limited to those same boundaries.” Many do not believe that the state has the legal or legislative grounds to make such claims and that these actions even violate the commerce clause of the Constitution.

This news, along with increasing revenue generating activities by other state and local authorities concerns me. As CPAs, we help clients with many different tax issues apart from just their 990 filings. Cash strapped governments are looking for funds and seem to have targeted non-profits as sources to draw from whether it be payroll taxes, sales and use taxes, charitable solicitation registration fees, or now property taxes. Have you noticed this as well? What have your experiences been with the Board of Equalization or other tax collecting bodies? As issues arise, or if you want to work to prevent issues with taxing authorities, AMLLP can help you take steps to devise the best plan of action.

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