Current through September 17, 2024
005.01 A five part statutory test is used to
determine eligibility for educational, religious, charitable, and cemetery
property tax exemptions. The five mandated criteria are ownership, exclusive
use, no financial gain or profit, restricted alcoholic liquor sales, and
prohibited discrimination. The property must meet all five criteria for the
exemption to be allowed.
An organization need not be established solely for
educational, religious, charitable, or cemetery purposes; it may be established
for a combination of two or more of the exempt uses. For example, a religious
organization may own a cemetery or an educational organization which also
provides religious activities.
005.01A
Educational organization means an institution operated exclusively for the
purpose of offering regular courses with systematic instruction in academic,
vocational, or technical subjects, or an organization that assists students
relating to the origination, processing, or guaranteeing of federally insured
student loans for higher education.
005.01A(1) Educational organization shall
also mean a museum or historical society operated exclusively for the benefit
and education of the public.
005.01B Religious organization means an
organization whose purpose is the dedication to or profession of a sectarian
creed and belief in a divine or superhuman power or powers to be obeyed or
worshipped, or the furtherance and enrichment of spiritual faith involving a
code of ethics and a spiritual philosophy.
005.01C Charitable organization means an
organization operated exclusively for the purpose of the mental, social, or
physical benefit of the public or an indefinite number of persons.
005.01D Cemetery organization means an
organization whose purpose is to maintain areas formally set apart for the
interment of human dead.
005.02 Ownership, except for motor vehicles
Ownership, except for motor vehicles, means the property must
be owned by an educational, religious, charitable, cemetery organization, or
any organization for the exclusive benefit of the educational, religious,
charitable, or cemetery organization. Ownership also means the right to sell,
lease, use, give away, or enter the property and the right to refuse to do any
of these. All rights may or may not be vested in one owner or interest
holder.
005.03 Exclusive Use
Exclusive Use means the property must be used exclusively for
religious, educational, charitable, or cemetery purposes. The property need not
be used solely for one of the four categories of exempt use, but may be used
for a combination of exempt uses. For purposes of this regulation, the term
exclusive use shall mean the predominant or primary use of the property as
opposed to incidental use. The exemption will not be lost if the property is
used in an incidental manner as long as the predominant or primary use of the
property is for one or more of the exempt uses.
005.03A If the property, when considered as a
whole, is not used exclusively for exempt purposes, but the property has a
separate and distinct exempt use portion, an exemption for the value of the
portion used for exempt purposes will be allowed. No exemption for a portion of
the property is allowed where the exempt and nonexempt uses are commingled and
the property, when considered as a whole, is not used exclusively for exempt
purposes. Property which is vacant and unused for any purpose is not entitled
to an exemption.
005.03B An
organization claiming a property tax exemption shall have the burden of
establishing that the property is used exclusively for exempt purposes. The
following is a list of factors to be considered in determining if the
organization shall be allowed the tax exemption in whole or in part.
005.03B(1) In the case of a private
residence, an officer or employee of the organization shall be required to
reside in the residence as part of his or her employment and for the
convenience of the organization. The property is used for the convenience of
the organization and its members to such a degree that the property is an
integral part of the organization. The use of the property as a residence must
be incidental to the use of the property as a part of the organization's
mission.
005.03B(2) If property is
separate from the organization's main building, exclusive exempt use of the
property must still be proved. The relative proximity of the property to the
main building is one factor that may be considered in making this
determination.
005.03B(3) Using
income from the property for exempt purposes under federal and state income tax
laws does not qualify the property for a property tax exemption. It is the use
of the property that establishes whether the property is exempt. If an
organization is organized under section 501(c)(3) of the Internal Revenue Code,
it will not necessarily be exempt from Nebraska property taxes.
005.03B(4) Exclusive use of the property
includes ongoing construction of a building or improvement that, when complete,
will be used exclusively for exempt purposes. The future use of the completed
building or improvement may be ascertained by the actions of the organization
owning the property, including, but not limited to, resolutions of an
organization's board of directors, or the amendment of the organization's
articles of incorporation or bylaws, that indicate a clear intent to use the
property for an exempt purpose. During construction, other nonexempt uses must
be prohibited to render the property exempt from tax. Demolition of existing
structures to prepare the property for its exempt use may be considered an
exempt use of the property.
005.04 The following examples are provided as
general guidelines. All relevant factors of each particular case must be
considered when using these examples.
005.04A
Exclusive Use of Residence. A qualifying organization owns
residential property, which is used as the residence of an officer or employee
of the organization. The officer or employee is required to reside in the
residence as a condition of his or her employment and for the convenience of
the organization. In addition to being the residence of the officer or
employee, the residence is used for various activities of the organization, to
such an extent that the residence becomes an integral part of the organization.
Considering all these factors together, an exemption for the residential
property would be allowed as the exclusive use is for exempt
purposes.
005.04B
Separate
and Distinct. A qualifying organization owns a two-story building. The
first floor is used by the organization as a bar and restaurant where food and
alcoholic liquors are sold. The second floor is used exclusively by the
organization for exempt purposes. The first floor has a nonexempt use and the
second floor has an exempt use. The total actual value of this entire property
is $90,000, consisting of $10,000 for the land and $80,000 for the
improvements. The actual value of the first floor is $50,000 and the actual
value of the second floor is $30,000. The exempt value is the value of the
second floor plus the percentage of the lot corresponding to the percentage of
the second floor with respect to the total improvements. The value of the
second floor is $30,000. The percentage of the second floor with respect to the
total improvements is ($30,000/$80,000)*100 = 37.50%. The corresponding
percentage exempt value of the lot is $10,000 * 37.50% = $3,750. Hence, the
total exempt value is $30,000 + $3,750 = $33,750. In addition, personal
property used on the nonexempt first floor for nonexempt purposes is taxable,
while personal property on the exempt second floor used for exempt purposes is
eligible for exemption.
005.04C
Motor Vehicle. A qualifying organization provides a motor vehicle
to an employee to use in the activities of the organization. The employee also
uses the motor vehicle for personal and family use beyond incidental use. The
motor vehicle is taxable since the motor vehicle is not used exclusively for
exempt purposes. Motor vehicles cannot be apportioned between exempt and
nonexempt use. Personal use includes the use of the motor vehicle as
transportation to and from the workplace, but this personal use does not
automatically preclude an exemption.
005.04D
Incidental Use. A
qualifying organization conducts bingo games in the basement of its buildings
two nights per week. Although conducting bingo games is not an exempt use, the
use of the property for bingo is incidental, and the predominant use of the
building remains exempt. No apportionment of the property is required and the
entire building is exempt.
005.04E
Exclusive Use. A qualifying organization owns a building, which is
used for its office space, and leases a portion of the building to a private
law firm. The portion leased to the private law firm is not used exclusively
for exempt purposes and is not eligible for an exemption.
005.04F
Vacant Lot. A qualifying
organization buys a vacant lot for future use as a building site. However, the
land is held idle for several years. No exemption is allowed for the tax years
during which the vacant land sits idle, because the land is not used for an
exempt purpose.
005.04G Use of
Property. A qualifying organization owns agricultural land on which it plans to
build at some future date. In the interim, the land is rented to a farmer who
plants and harvests crops on the land. No exemption is allowed for the land
because it is used for nonexempt purposes and the use is not incidental. The
use of the income by the organization for exempt purposes will not qualify the
land for a property tax exemption. It is the use of the property that qualifies
it for an exemption.
005.04H
Under Construction. A qualifying organization begins construction
of a building on its previously-nonexempt property that will, when completed,
be exclusively used for an exempt purpose. The construction effectively
precludes other uses of the property. An exemption for the property under
construction will be permitted.
005.04I
Residential Purpose. A
qualifying corporation owns and operates a residential facility for low-income
elderly persons. Rent, cost of meals, and other charges are designed to cover
the actual cost of the services provided. The property is used for residential
purposes, not used exclusively for charitable purposes, and no exemption is
allowed.
005.04J
Health Care
and/or Assisted Living Facility. A qualifying organization owns a health
care facility which is made up of a nursing home and assisted living housing.
The organization does not prescreen the applicants for financial ability prior
to admission. The criteria for admission are the need for health care due to
age, ill-health, or physical disability. The facility meets the definition of a
health care facility and/or assisted living facility under Nebraska law. All
residents are permitted to remain in the facility regardless of their ability
to pay for the services provided. In this case, the property is allowed an
exemption because the property is used exclusively for charitable
purposes.
005.05 No
Financial Gain or Profit
The property must not be used for financial gain or profit to
either the owner or user. There is no financial gain or profit if no part of
the income from the property is distributed to the owner's or user's, members,
directors, or officers, or to private individuals. Reasonable salaries paid to
employees of the owner or user shall not constitute a distribution of financial
gain or profit.
The following are examples illustrative of the above
principles. These examples are provided as general guidelines to be used in
particular cases. In utilizing these examples, all relevant factors of each
particular case must be considered.
005.05A
Lease by Charitable
Organization. A qualifying organization leases office space in its
building to other charitable organizations. All of the building is used
exclusively for charitable purposes. The lease payments are used for charitable
activities. The entire building is allowed an exemption, since no financial
gain or profit exists and the actual use of the entire property remains
charitable.
005.05B
Residential Facility. A qualifying corporation owns and operates a
residential facility for low-income persons. Only nominal amounts are charged
for rent, or no rent is charged, depending on the residents' ability to pay.
Operational deficits are made up from outside donations and fund-raising
activities. In this case, the property is allowed an exemption because:
(1) no financial gain or profit exists; and
(2) the use of the property is
charitable since all or part of the actual cost of the housing is donated to
the residents in need.
005.06 Prohibited Alcoholic Liquor Sales
The property must not be used for the sale of alcoholic
liquors for more than 20 hours per week. The sale of liquor is not considered
to be an exempt use for educational, religious, charitable, or cemetery
purposes. Property (or portions of property) used for selling alcoholic liquors
include all areas in which alcoholic liquors are normally sold, served, or
consumed. For purposes of determining whether alcoholic liquor is sold in
excess of 20 hours per week, a reasonable average for the tax year may be
used.
005.07 Prohibited
Discrimination
The property must not be owned or used by an organization
which discriminates in membership or employment based on race, color, or
national origin. Such discrimination is contrary to public policy and may not
be subsidized through a tax exemption. There must be some actual formal or
informal policy of discrimination present, which denies or otherwise abridges
membership or employment to disallow an exemption. An organization is not
deemed to be discriminatory even though all of its members or employees are of
the same race, color, or national origin, if it is willing to admit and employ
on a nondiscriminatory basis. Similarly, an organization may be deemed to be
discriminatory even though it may have "token" members or employees, if it has
a discriminatory policy towards prospective new members or
employees.
