Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule
explains the real and personal property tax exemption available under
RCW
84.36.030(1) to nonprofit
organizations, associations, or corporations organized and conducted for
nonsectarian purposes.
(2)
Definitions. For purposes of this rule, the following definitions
apply:
(a) "Benevolent social services" are
services provided to persons of all ages for charitable reasons to promote the
happiness and prosperity of others through generosity and pleasure at doing
good works, or for the purpose of doing good. Examples of benevolent social
services include, but are not limited to, providing a food bank or soup
kitchen.
(b) "Character building
social services" are services offered for the general public good that assist
people with general living or job seeking skills, or assist people in working
towards independent living and self-sufficiency. Examples of character building
social services include, but are not limited to, providing financial assistance
and counseling, and vocational training which includes resume writing and job
interview training.
(c)
"Commercial" refers to an activity or enterprise that has profit making as its
primary purpose.
(d) "Community
outreach group" means a nonprofit group organized to extend social services to
a particular segment of the community. Examples of a community outreach group
include, but are not limited to, a rescue mission organized to feed the
homeless or a program that targets juveniles "at risk" of criminal or abusive
behavior.
(e) "Nonsectarian
purpose" means a purpose that is not associated with or limited to a particular
religious group or denomination.
(f) "Protective social services" are services
that protect other persons from injury or destruction, save others from
financial loss, or assist persons with behavioral problems by providing
encouragement, support, and training. Examples of protective social services
include, but are not limited to, providing housing, counseling, encouragement,
or support for battered persons or the physically or mentally
disabled.
(g) "Rehabilitative
social services" are services that restore individuals to a former capacity, to
a condition of health, or to useful or constructive activity. Examples of
rehabilitative social services include, but are not limited to, assisting an
exoffender's reentry into the community, assisting persons to overcome alcohol
or substance abuse, or to overcome the effects of a physical injury, stroke, or
heart attack.
(3)
Exemption. The real and personal property owned by nonprofit
organizations, associations, or corporations (collectively, "organizations")
are exempt from taxation if the following requirements are satisfied:
(a) The nonprofit organization is organized
and conducted for nonsectarian purposes;
(b) The property is exclusively used to
provide benevolent, character-building, protective, or rehabilitative social
services to persons of all ages;
(c) The services provided by the nonprofit
organization relieves a public obligation; and
(d) A portion of the nonprofit organization's
services are gifted or donated to the people it serves as explained in
subsection (4) of this section.
(4)
Gift and giving. To qualify
for this exemption, there must be an element of gift and giving by the
nonprofit to the people it serves. This requires voluntarily giving something
of value with no expectation of compensation or remuneration. To comply with
this requirement, the nonprofit organization must demonstrate on an annual
basis that it meets one of the following conditions:
(a) Provides goods and/or services free of
charge or at a rate that is reduced by at least twenty percent of its standard
rate, to a minimum of fifteen percent of the total number of people it assists;
or
(b) Contributes at least ten
percent of its total annual income earned from the property towards the support
of benevolent, character-building, protective, or rehabilitative social service
programs. To determine whether the ten percent requirement has been met:
(i) "Total annual income" refers to the total
income the nonprofit organization earns from the property and reports to the
Internal Revenue Service for the calendar year and includes, but is not limited
to, funds received through direct and indirect public support, government
grants, membership fees, and other contributions. The term does not include
funds that are specifically donated or contributed for capital
improvements.
(ii) A nonprofit
organization may include in its ten percent calculation the value of time
volunteers donate to carry out program services and functions, the loan of its
facilities free of charge to community outreach groups, and gifts of
scholarships and other fee subsidies.
(A)
Volunteer time. If a nonprofit organization includes volunteer time in its ten
percent calculation, it must maintain records identifying the individuals who
donated their services and the number of hours they donated. The value of
donated time will be calculated by using the federal minimum wage
standard.
(B) Free use of facility.
If a nonprofit organization allows community outreach groups to use its
facility free of charge, it must maintain records identifying the community
outreach groups that used the facility and the number of hours of use. The
value of this use will be calculated by taking the number of hours, or any
portion of an hour, the facility is used by these groups and multiplying it by
the customary fee the nonprofit organization charges to rent its facility to
any other group.
(5)
Additional exemption
information. A nonprofit organization that applies for this property tax
exemption must also comply with the provisions of WAC
458-16-165
and may not impose conditions or restrictions on the use of the exempt
property, except those that are reasonably necessary to safeguard the exempt
property and to comply with this exemption.
(a) Fraternal organizations. Property used by
a fraternal organization or association for fraternal purposes does not qualify
for this exemption.
For information regarding exemptions for property used for
fraternal organizational purposes, see WAC
458-16-300
Public meeting hall-Public meeting place-Community meeting hall.
(b) Commercial purpose. If
any portion of the nonprofit organization's property is used for a commercial
rather than a nonprofit, nonsectarian exempt purpose, then that portion will
not qualify for this exemption and must be segregated from property used for
exempt purposes. The burden is on the nonprofit organization to prove that the
property is not used for a commercial purpose.
(c) Selling donated merchandise. When
property is otherwise exempt under this rule, the sale of donated merchandise
is not considered a disqualifying commercial purpose, but rather an exempt use
of the property if the proceeds are dedicated to the exempt purpose of the
nonprofit organization . For example, a job training program conducted through
the operation of a thrift store is eligible for this exemption if the thrift
store can verify the proceeds are directed to an exempt purpose.
(d) Property with option to repurchase.
According to
RCW
84.36.031, property leased, loaned, sold with
the option to repurchase, or otherwise made available to organizations
described in
RCW
84.36.030, does not qualify for an exemption
under
RCW
84.36.030 unless:
(i) The property is owned by an organization
exempt under
RCW
84.36.020 or
84.36.030
and the organization loans, leases, or rents the property to another
organization for the exempt purposes provided in RCW 84.36.-030; or
(ii) The property is owned by an entity
formed exclusively for the purpose of leasing the property to an organization
that will use the property for the exempt purposes provided in
RCW
84.36.030 if:
(A) The lessee uses the property for the
exempt purposes provided in
RCW
84.36.030;
(B) The immediate previous owner of the
property had received an exemption under
RCW
84.36.020 or
84.36.030
for the property; and
(C) The
benefit of the exemption is passed on to the nonprofit organization using the
property for exempt purposes.
Statutory Authority:
RCW
84.08.010,
84.08.070 and
chapter
84.36 RCW. 94-07-008,
§ 458-16-210, filed 3/3/94, effective 4/3/94. Statutory Authority:
RCW
84.36.865. 88-02-010 (Order PT 87-10), §
458-16-210, filed 12/28/87; 86-12-034 (Order PT 86-2), § 458-16-210, filed
5/30/86; 85-05-025 (Order PT 85-1), § 458-16-210, filed 2/15/85. Statutory
Authority:
RCW
84.36.389 and
84.36.865. 83-19-029 (Order PT
83-5), § 458-16-210, filed 9/14/83. Statutory Authority:
RCW
84.36.865. 81-05-017 (Order PT 81-7), §
458-16-210, filed 2/11/81; Order PT 77-2, § 458-16-210, filed 5/23/77;
Order PT 76-2, § 458-16-210, filed 4/7/76. Formerly WAC
458-12-205.