Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule explains the two property tax exemptions
available under the provisions of
RCW
84.36.050. The first exemption applies to
property owned or used by or for a nonprofit school or college. The second
exemption is for property owned by a not-for-profit foundation established for
the exclusive support of an institution of higher education, as defined in
RCW 28B.10.016, that
is leased to and used by the institution. Nonprofit schools, colleges, and
not-for-profit foundations seeking a property tax exemption under
RCW
84.36.050 must also comply with the relevant
requirements of
RCW
84.36.805,
84.36.840,
and WAC
458-16-165.
(See subsection (8) of this rule.)
(2)
Definitions. For purposes of
this rule, the following definitions apply:
(a) "College or campus purposes" means
principally designed to further the educational, athletic, or social functions
of an institution of higher education, as defined in
RCW 28B.10.016, and
only applies to property that is owned by a not-for-profit foundation and
leased to and used by such an institution.
(b) "Cultural or art educational program"
means:
(i) An exhibition or presentation of
works of art or objects of cultural or historical significance, such as those
commonly displayed in art or history museums;
(ii) A musical or dramatic performance or
series of performances; or
(iii) An
educational seminar or program, or series of such programs, offered by a
nonprofit school or college to the general public on an artistic, cultural, or
historical subject. (See
RCW
82.04.4328(2).)
(c) "Educational, social and
athletic programs" or "educational, social and athletic functions" individually
or collectively mean those programs offered or functions performed by or for
the school or college in each such general area, including, but not limited to,
those illustrated by the examples set forth in this definition, and including
educational, social, and athletic programs and functions sponsored or
cosponsored by the school or college, offered by others on school or
college-owned property in a manner consistent with the school or college's
programs, and such programs and functions on school or college property that
may involve alumni and community members.
(i)
Examples of educational programs and functions include, in addition to those
described in the definition of "educational purposes" in (d) of this
subsection: Classes, seminars, conferences, providing instructional support to
students and other participants in such programs and functions, and programs
and functions that utilize and apply the academic and instructional resources
and facilities of the school or college, including related administrative and
support activities for these programs and functions.
(ii) Examples of athletic programs and
functions include: Physical training, sport events and practices, athletic
camps, and use of school or college recreational and fitness resources and
facilities by students, alumni, faculty, staff, or third parties, including
related administrative and support activities, which use the property in a
manner consistent with the school or college's programs.
(iii) Examples of social programs or
functions include activities engaged in by or for the school or college that
further the health, safety, well-being, emotional growth, welfare,
psychological development, socialization, preparation and training for
participation in society, development of adaptive skills and cultural awareness
and related activities for students including, but not limited to, theatrical
or musical performances, artistic, cultural, or technology exhibits or fairs,
events, presentations and programs providing students with information about
and access to goods and services they need while a student at the school or
college.
(d)
"Educational purposes" means, in addition to the educational programs and
functions described in (c) of this subsection, systematic instruction, either
formal or informal, in any and all branches of learning directed to an
indefinite class of persons and from which a substantial public benefit is
derived. The term includes all purposes that seek to promote or advance
education.
(e) "Schools and
colleges" means:
(i) Nonprofit educational
institutions that are approved by the superintendent of public instruction or
whose students and credentials are accepted without examination by schools and
colleges established under either Title 28A or 28B RCW and offer students an
educational program of a general academic nature; or
(ii) Nonprofit institutions that meet the
following criteria:
(A) They have a definable
curriculum and measurable outcomes for a specific group of students;
(B) They have a qualified or certified
faculty;
(C) They have facilities
and equipment that are designed for the primary purpose of the educational
program;
(D) They have an
attendance policy and requirement;
(E) They have a schedule or course of study
that supports the instructional curriculum; and
(F) They are accredited, recognized, or
approved by an external agency that certifies educational institutions and the
transferability of courses.
(f) "Net income" means the amount received
from the loan or rental of exempt property that exceeds the amount of the
maintenance and operation expenses, as defined in WAC
458-16-165,
attributable to the portion of the property loaned or rented.
(g) "Pecuniary gain" means the generation of
monetary receipts from commercial operations or other sales activities, when
those receipts exceed expenses of operations or are intended to exceed expenses
of operations.
(h) "Religious
faculty" means a person who:
(i) Teaches at a
school or college; and
(ii) Is a
member of the clergy or a religious order or officially invested with
ministerial or priestly authority, as distinguished from laity.
(i) "Third parties" means
individuals, groups, organizations, associations, corporations, and entities
other than the school or college to which an exemption is granted under this
rule.
(3)
Exemption - Nonprofit schools or colleges. Property owned or used
by or for any nonprofit school or college within this state is exempt to the
extent that it is used for educational purposes or cultural or art educational
programs.
(a) Real property exempt under this
rule cannot exceed four hundred acres. The exempt property includes, but is not
limited to:
(i) Buildings and grounds
principally designed for the educational, athletic, or social programs or
functions of the school or college;
(ii) Buildings that house part-time or
full-time students, religious faculty, or the chief administrator of the school
or college;
(iii) Buildings used
for athletic activities of the school or college; and
(iv) All other school or college facilities,
such as maintenance facilities, heating plants, storage facilities, security
services facilities, food services facilities, transportation facilities,
administrative offices, or a student union building or student commons, which
are needed because of the presence of the school or college.
(b) Property that is not a part
of, or contiguous to, the main campus of a school or college and for which the
institution wishes to obtain an exemption. The department may require the
institution to provide, in detail, the following information to support the
exemption:
(i) The names of courses taught or
a description of the educational purposes or cultural or art educational
programs taking place at the off-campus site;
(ii) A calendar of dates and times that shows
how the subject property is used; and
(iii) The number of students who participate
in the educational activities or cultural or art educational programs conducted
at the off-campus site.
(c) If property is leased to a school or
college, in order to be exempt, the benefit of the exemption must inure to the
school or college.
(4)
Exemption - Property owned by a not-for-profit foundation that is leased
to and used by an institution of higher education.
RCW
84.36.050 also provides a property tax
exemption to real or personal property owned by a not-for-profit foundation
established for the exclusive support of an institution of higher education, as
defined in
RCW 28B.10.016. The
property must be leased to and used by the institution for college or campus
purposes and it must be principally designed to further the educational,
athletic or social functions of the institution.
(a) An institution of higher education is
defined in
RCW 28B.10.016 as
synonymous with "postsecondary institutions" and means the University of
Washington, Washington State University, Western Washington University at
Bellingham, Central Washington University at Ellensburg, Eastern Washington
University at Cheney, The Evergreen State College, the community colleges, and
the technical colleges.
(b) The
exemption can only be obtained for property actively utilized by currently
enrolled students.
(c) The benefit
of the exemption must inure to the educational institution using the exempt
property.
(5)
Uses
of the exempt property that affect the exemption - Exceptions. For
purposes of the school and college exemption:
(a) If exempt property is used by a third
party entitled to a property tax exemption, the property remains exempt as long
as the amount of rent or donations received by the school or college for that
use is reasonable and does not result in net income.
(b) If exempt property is used by a third
party not entitled to a property tax exemption, except as otherwise provided in
this rule, then the property, or portion used is taxable for the entire
assessment year in which the nonqualifying use occurs and will remain taxable
until a new application is filed with the department and approved. When an
exemption is denied for only a portion of the school or college's property, the
renewal application only needs to address that portion of the property denied
and not the entire property.
(c)
There are three general exceptions to the loss of exemption when exempt
property is used by a third party not entitled to a property tax exemption,
which exceptions are described in (i), (ii), and (iii) of this subsection
(5)(c), as follows:
(i) If exempt property is
used by students, alumni, faculty, staff, or other third parties in a manner
consistent with the educational, social, or athletic programs of the school or
college, including property used for related administrative and support
functions, and not for pecuniary gain or to promote business activities, then
the property remains exempt.
(ii)
When the school or college contracts with and permits the use by third parties
of exempt property to provide school or college-related programs or services
directed at students, faculty, and staff, and not primarily at the general
public, then the property remains exempt, regardless of whether payment for the
programs or services is made to such third party by the school or college, or
by program participants or service recipients, and regardless of whether the
use by the third party results in pecuniary gain for the third party or the
promotion of the third party's business. Examples of such programs or services
include school or college educational, social and athletic programs and
functions; the provision of food services, including snack and coffee bars,
food or bottled drink vending machines, or on-campus catering services for
school or college events; placement of an automated teller machine on exempt
property; the operation of a bookstore on campus that sells textbooks and other
student oriented items; and the provision of maintenance, operational, or
administrative services.
(iii) If
exempt property is used for pecuniary gain or to promote business activities
for fifteen days or less each calendar year by third parties who are not
entitled to a property tax exemption, the property remains exempt.
Disqualifying use of more than fifteen days is measured separately with respect
to each specific portion of the exempt property used, and is cumulative with
respect to each such separate portion each year for all such third party use.
For example, if a classroom in a building is used by three separate third
parties for pecuniary gain or to promote business activities on three separate
occasions in one calendar year for periods of four, six, and eight days
respectively (for a total of eighteen days), that classroom, but not the entire
floor or building, loses its exemption for that calendar year. By contrast, if
the six day disqualifying use occurred in a different portion of the building,
such as an auditorium, neither the classroom nor the auditorium would be
disqualified, since neither portion of the building would have been used for
pecuniary gain or to promote business activities for more than fifteen days in
that year. This fifteen day limitation does not apply when exempt property is
used as or for a sports or educational camp or program that is taught,
operated, or conducted by a faculty member who is required or permitted to do
so as part of his or her compensation package, whether or not participants pay
a fee directly to such faculty member.
(d) Unless otherwise authorized under this
rule, the use of exempt property by any individual, group, or entity, does not
nullify the exemption if the property is used for nonex-empt purposes for up to
fifty days each calendar year and is used for pecuniary gain or to promote
business activities, as described in subsection (5)(c)(iii) of this rule, for
not more than fifteen of the fifty days in each calendar year. The fifty and
fifteen-day limitations do not include days for setup and takedown activities
that take place immediately preceding or following a meeting or other
event.
(6)
Examples of uses that do not nullify the exemption. In order to
clarify the property tax exemption for schools and colleges, this subsection
describes and gives examples of the types of use by third parties not entitled
to a property tax exemption that do not nullify the tax exempt status of
property owned or used by or for a school or college. The following examples
should be used only as a general guide. The tax results of other specific
situations must be determined after a review of all of the facts and
circumstances. In the following examples, as long as any rent or donation
associated with the use is reasonable and does not result in net income to the
school or college, the exemption is not affected.
(a) Exempt property is used by students,
alumni, faculty, staff, or other third parties for weddings, anniversary
celebrations, family or school reunions, funeral services, or similar events.
These uses are consistent with the educational or social programs of the school
or college and the property remains exempt. The property remains exempt even
when the persons or groups using the school or college property for such an
event also hire persons such as a caterer, a musical group, or a wedding
photographer specifically for the event.
(b) Exempt property is used by third parties,
such as members of the community, for lectures, presentations, musical
recitals, seminars, debates, or similar educational activities. If the third
party use is contracted for and permitted by the school or college, for example
when the school or college pays the presenter directly, or when the
participants or patrons pay the presenter directly, there is no loss of
exemption, as long as the uses are consistent with the educational, social, or
athletic programs of the school or college. The presenter may also offer for
sale, at the time of the presentation, books, tapes, CDs or similar items that
relate directly to the presentation.
(c) Exempt property is used by third parties
such as students, alumni, faculty, staff, or members of the community for
athletic activities or events on sports fields, tennis courts, and in buildings
used for athletics. These uses are consistent with the athletic programs of the
school or college and the property remains exempt as long as the property is
not used for third party pecuniary gain or to promote business activities. (The
example is intended only to illustrate the application of the exception set
forth in subsection (5)(c)(i) of this rule, and should be distinguished from
the exceptions described under subsections (5)(c)(ii) and (iii) of this rule
which permits the generation of third party pecuniary gain in certain
identified circumstances.) Any fees, charges, rents, donations or other
remuneration for the use of the school or college exempt facilities may not
result in net income.
(d) Exempt
property is used by third parties for educational or instructional programs,
such as private instruction, tutoring, driving instruction, English as a second
language or other language courses, examination preparation, or other similar
programs. These programs are consistent with the educational programs of the
school or college and the property remains exempt as long as the property use
is contracted for and permitted by the school or college and the uses are
consistent with the educational programs of the school or college.
(e) Exempt property, such as student housing,
is used for purposes of recruiting prospective students. Exempt school or
college facilities, when not being used by currently enrolled students, are
offered by the school or college to third parties for educational programs
consistent with the educational purposes of the school or college. Such uses
are consistent with the educational programs of the school or college and the
property remains exempt.
(f) A
school or college provides courses in vocational-technical skills, such as
culinary arts, hotel management, automotive mechanics, or cosmetology. As a
part of the course work, students obtain practical experience by providing
products or services to the public. As long as the charge to the public for
these products or services is exclusively used for the school or college's
educational, social, or athletic programs, this use of exempt property is
consistent with the school's educational programs and functions and will not
result in the loss of exemption.
(g) Exempt property is used by a bank or
credit union in a school or college student orientation program of limited
duration and not more than one time each year, through which students receive
information from a variety of local businesses about services that they may
need while attending a school or college. This is considered to be a social or
educational program of the school or college and is not a disqualifying
use.
(h) The school or college
contracts with and permits third parties to use exempt property to conduct
fund-raising events when the funds raised will be used for educational purposes
or cultural or art educational programs of the school or college. Such events
must be conducted in accordance with the provisions of WAC
458-16-165.
(7)
Examples of
disqualifying use. In order to clarify the property tax exemption for
schools and colleges, this subsection describes and gives examples of the types
of use by third parties not entitled to a property tax exemption that will
nullify the tax exempt status of property owned or used by or for a school or
college. The following examples identify a number of facts and then state a
conclusion. These examples should be used only as a general guide. The tax
results of other specific situations must be determined after a review of all
of the facts and circumstances.
(a) The
placement and operation of a bank or credit union on exempt property. Such an
activity is using the exempt property for pecuniary gain and to promote
business activities and will cause the loss of exemption. Such an operation
provides a service that is not distinguishable from services provided to the
general community. The exemption is nullified for the portion of the property
occupied by the bank or credit union.
(b) An antique shop, gift shop, or retail
store that sells a variety of merchandise, but does not primarily sell products
directed at students, faculty, or staff of the school or college, and occupies
an exempt college-owned building on the school or college campus on a regular
and continuing basis. Such a store does not provide a specific school or
college related program or service, and is being operated for pecuniary gain
and to promote business activities. The exemption is nullified for the portion
of the building occupied by the business.
(8)
Additional requirements.
(a) Any school or college, or not-for-profit
foundation established for the exclusive support of an institution of higher
education, that applies for a property tax exemption under this rule must also
comply with the provisions of
RCW
84.36.805 to the extent applicable. Schools,
colleges, and not-for-profit foundations established for the exclusive support
of an institution of higher education may, without losing the exemption, loan
or rent exempt property to organizations even though the property would not be
exempt if owned by such organizations, as long as the rents or donations
received for the use of the portion of the property loaned or rented are
reasonable and do not exceed the maintenance and operation expenses
attributable to the portion of the property loaned or rented. WAC
458-16-165
describes and explains additional conditions and requirements that must be
complied with to obtain and maintain a property tax exemption for a school,
college, or not-for-profit foundation.
(b) Any school or college, or not-for-profit
foundation established for the exclusive support of an institution of higher
education, that applies for a property tax exemption under this rule must also
comply with the provisions of
RCW
84.36.840. In accordance with that statute,
the applicant must annually file a report with the department on or before
March 31st. The report must be signed, and state that the revenues of the
school, college, or foundation, including donations, have been applied to
maintenance and operation expenses or capital expenditures of the school or
college or foundation and to no other purpose.
Statutory Authority:
RCW
84.36.865,
84.36.040, and
84.36.050. 09-19-069, §
458-16-270, filed 9/14/09, effective 10/15/09; 01-24-037, § 458-16-270,
filed 11/28/01, effective 12/29/01. Statutory Authority:
RCW
84.08.010,
84.08.070 and
chapter
84.36 RCW. 94-07-008,
§ 458-16-270, filed 3/3/94, effective 4/3/94. Statutory Authority:
RCW
84.36.865. 85-05-025 (Order PT 85-1), §
458-16-270, filed 2/15/85. Statutory Authority:
RCW
84.36.389 and
84.36.865. 83-19-029 (Order PT
83-5), § 458-16-270, filed 9/14/83. Statutory Authority:
RCW
84.36.865. 82-22-060 (Order PT 82-8), §
458-16-270, filed 11/2/82; 81-05-017 (Order PT 81-7), § 458-16-270, filed
2/11/81; Order PT 77-2, § 458-16-270, filed 5/23/77; Order PT 76-2, §
458-16-270, filed 4/7/76. Formerly WAC
458-12-230.