Religious & Charitable Organizations

Deadline for filling is March 1st annually

Introduction

Institutions and organizations, such as hospitals, schools, churches, and cultural institutions, may qualify for an exemption from local taxes on the real, personal property and vehicles they own. Ownership, however, does not automatically entitle an organization to an exemption. Non-profit status is not sufficient, nor is exempt status for state or federal tax purposes. These Exemptions are found in various clauses of Massachusetts General Laws Chapter 59, Section 5. Religious or charitable organizations are not automatically exempt from local taxation when it organizes or acquires property. It must meet specific eligibility criteria and follow certain procedures to obtain an exemption. An explanation of the general criteria that must be met and procedures for applying for an exemption are set forth as follows.
 

Qualification Date

Exemption status for Real Estate is determined as of July 1, which is the first day of the fiscal year. An organization must meet all eligibility requirements as of July 1 to receive an exemption from taxes for that year. Exemption from taxation is a privilege and the organization must prove clearly and unequivocally that it qualifies. Exemption status for Personal Property is determined as of January 1.
 

Definition

A charitable organization for property tax exemption purposes is a corporation or trust established for literary, benevolent, charitable, scientific, or temperance purposes. Again, Nonprofit status is not sufficient, nor is exempt status for state or federal tax purposes. The organization must be organized for charitable purposes and must actually operate as a public chattel. Its dominant purposes and activities must benefit the public at large, not just a limited group of people or memberships. In addition, its income and assets cannot be distributed to officers, directors, or shareholders while it operates or when it dissolves, nor may they be used for non-charitable purposes.

Examples of charitable organizations include nonprofit private schools, colleges, universities, hospitals, museums, and cultural facilities. Trade groups, professional associations, or social clubs generally do not qualify, since they operate primarily for the benefit of their members.

Religious Organizations

(M.G.L. Ch. 59, sec.5, clauses 10 and 11) A religious organization is exempt from property taxation on:
All personal property (a) owned by, or (b) held in trust within Massachusetts for use by, the organization for religious or charitable purposes.

A church or house of religious worship (a) owned by, or held in trust for, the organization and (b) used and occupied for religious services or instruction. The exemption also applies to parking lots and halls used exclusively for religious classes and other church activities. Incidental or occasional use for other purposes will not affect the exemption, but any portion regularly occupied for other purposes is taxable.

A parsonage (a) owned by, or held in irrevocable trust for the exclusive benefit of, the organization, and (b) used and occupied as a residence for clergy.

All other property owned by a religious organization is taxable unless it qualifies for a charitable exemption.
 

Charitable Organizations

(M.G.L. Ch. 59, sec.5, clause 3) A charitable organization is exempt from property taxation on:
All personal property it owns regardless of use.

Real estate owned by, or held in trust for, the organization, or its officers, for its charitable purposes, or by another charity, or its officers, for its charitable purposes.

Real estate acquired by the organization with the intention of future charitable use. The property need not be occupied immediately. However, if it is not occupied for charitable use within 2 years of the acquisition, it becomes taxable until put to such use.

All other real estate owned by a charitable organization is taxable. This includes property (a) leased to individuals and noncharitable entities, or (b) occupied or used for noncharitable purposes. In addition, property owned by a taxable individual or entity remains taxable even if leased to and occupied by a charity.

Annual Filings

(M.G.L. Ch. 59, sec. 5, clause 3(b), and sec 29) Form 1B3 (PDF) - Initial Application for First-Time Applicants or When the Third-Quarter Tax Bill Has Been Issued. An organization seeking a charitable exemption for personal property, or a particular parcel of real property, must make an initial application to the Assessors. This initial application is on Form 1B3. No application is required of a religious organization to establish exempt status for a house of worship or parsonage after the initial application.

Initially the organization must provide whatever information is reasonably required to establish eligibility. This information includes, but is not limited to:

• IRS determination letter ruling which shows your foundation classification
• Articles of incorporation
• Charter
• Declaration of trust Organization bylaws Identification of officers
• Directors
• Trustees Description of charitable activities
• Description of the use of property, including use by all lessees or other occupants

3ABC form applications and supporting documentation are due in the Assessors Office annually by March 1. The assessors can extend that deadline if the organization applies and demonstrates a good reason for not filing on time. The latest date the filing deadline can be extended is 30 days after the mailing of the actual tax bills for the fiscal year (3rd quarter). Failure to file timely bars the organization from exemption for that year, no exceptions.

Form 3ABC (PDF) – Every charitable organization owning property on January 1 must file a property return with the Assessors in order to receive an exemption for the fiscal year that begins on the next July 1. The return must be received in the Assessors Office by March 1. The Assessors can extend that deadline if the organization applies and demonstrates a good reason for not filing on time. An extension cannot be granted beyond the deadline for filing an abatement application for the fiscal year. Failure to file in a timely manner bars the organization from exemption for that year. A religious organization does not have to file a 3ABC unless it is seeking exemption for property other than a house of worship or parsonage.

Form PC (PDF) / Instructions (PDF) – A copy of the organization's most recent annual report to the Public Charities Division of the Attorney General's Office (Form PC) must be attached to the 3ABC. Failure to submit Form PC also bars the organization. Religious Organizations are not required to file a Form PC with the Attorney General's Office however many do in order to receive a determination letter from the IRS that proves their exempt status and specifies that contributions to them are tax deductible.

Appeals

Filing an application for abatement of tax for exempt status does not stay the collection of taxes. To preserve the right to appeal, the organization must pay at least 1-half of the personal property tax it is contesting. For appeals involving real estate with a tax over $3,000, the organization must have paid every installment timely without incurring interest. If an exemption is granted, a refund will be made.
The Assessors have 3 months to act on the applications regarding the abatement of tax due to exempt status. If the Assessors deny your application you have 3 months to file an appeal at the Appellate Tax Board (external site).

Taxpayer's Guide and FAQs

Click here for a Taxpayer's Guide established by the Division of Local Services

Click here for Frequently Asked Questions

Click here for IRS Tax exempt website for 501(c)(3) organizations

For more information, please contact Jim Bond via email Jbond@salem.com or contact the Assessors' Office at (978) 619-5607.