Nonprofit corporations in Indiana are not automatically exempt from tax on the property — either real (land and buildings) or personal (furniture and fixtures, machinery and equipment) — that they own or use. A nonprofit cannot rely solely upon its status as an organization described in Section 501(c)(3) of the Internal Revenue Code or upon the fact that it carries out good deeds for the public's benefit. The general rule is that all property is subject to tax. To obtain an exemption, the nonprofit must file a Form 136 application for property tax exemption with the county assessor. A property tax exemption is approved or rejected by a county's Property Tax Assessment Board of Appeals (PTABOA), often based on the advice of the assessor.
By statute, the filing deadline is May 15 of the current year for taxes payable in the next year. For example, to be exempt from property tax payments in 2015, a nonprofit must file the exemption application no later than May 15, 2014. If the application is not filed or is not filed on time, the nonprofit's property may be subject to tax. If that happens, the nonprofit owner's financial viability could be threatened, and valuable program dollars will be paid to the county treasurer instead of being targeted to fulfill the nonprofit's mission.
The Indiana General Assembly doesn't mince its words, explaining: "If the owner does not comply with the statutory procedures for obtaining an exemption, he waives the exemption. If the exemption is waived, the property is subject to taxation." In a 2013 ruling, the property owner had filed an application on June 4 of the tax year, less than a month after the May 15 deadline. There was no dispute that the property was used for charitable and religious purposes, and the owner asked the Indiana Board of Tax Review to "find a way to waive the filing deadline." But it was too little, too late. The Indiana Board couldn't waive the filing failure. The property was 100 percent taxable.
All May Not Be Lost
If an organization has harmed its exemption status due to a late filing or non-filing, an exemption may still be possible. Based on your organization's circumstances, the available options may (but do not necessarily) include:
- An application may not have been required! For nonprofits, exemption applications are typically due in even-numbered years, though an application in an odd-numbered year may be required depending on when the property was acquired or how its use has changed. If a property has previously been found exempt under Ind. Code § 6-1.1-10-16 (which exempts "All or part of a building ... if it is owned, occupied, and used by a person for educational, literary, scientific, religious, or charitable purposes" and tracts of land supporting exempt buildings), a new application may not be required if the property "continues to meet the requirements for an exemption" under this section. An organization shouldn't be punished for a deadline it didn't have to meet. In the late-filing case noted above, the owner failed to show that the property had previously been exempted for charitable or religious uses. If it had, the result may have been different.
- Was the application, in fact, late? That the assessor claims your application was late doesn't make it so. Showing that the Form 136 was timely filed (assuming the property otherwise qualifies) should preserve the exemption. In a ruling issued in August 2013, the Indiana Board concluded that the evidence provided by a diocese, an assistant's testimony, established that it had mailed the exemption applications on time (albeit "barely").
- The legislative option. Exemption filing deadlines are codified on paper, not written in stone. The General Assembly has mandated the May 15 filing deadline, but it can — and often does — alter those deadlines when the circumstances justify the modification. Sometimes the only solution for a nonprofit's exemption dilemma is a legislative one. At this moment, there is a bill pending in the Indiana House of Representatives that, if passed, would grant a nonprofit youth baseball and softball association the opportunity to submit an exemption application in 2014 with respect to the assessment dates in 2008, 2009 and 2010. Legislation is often an organization's most viable option. It is frequently a difficult, time-consuming process. But it can work.
This post is intended for general information purposes only and is not to be considered legal or tax advice. The information herein should not be acted upon without appropriate professional advice.