February 14, 2022

Expecting Indiana Property Tax Exemptions? Be Sure to Timely File Your Applications

Indiana taxpayers with property that is or may be exempt from real or personal property tax have up to and including April 1 to file an exemption application (the Form 136, with supporting attachments). Exemptions are not automatic or guaranteed, even for property owned by a nonprofit corporation or that has previously been found exempt. Taxpayers should not assume that an application is optional. Whether a taxpayer should file or refile depends on the facts and the statute under which an exemption is sought or may have previously been granted. Missing the filing deadline risks waiving the exemption. While relief valves may be available to restore a lost exemption, taxpayers should review the status of their exempt property ahead of the filing deadline to determine if they should file a new application.

What Properties Are Tax-Exempt?

Many exemptions are available, and taxpayers should pay close attention to which exemptions are available to them and the steps they must take to secure them. Indiana law includes more than 40 property tax exemption statutes, including:

  • Public airports. Land and improvements used for public airports are potentially exempt under Ind. Cod § 6-1.1-10-15. Eligible property includes “land used for the taking off or landing of aircraft, taxiways, runway and taxiway lighting, access roads, auto and aircraft parking areas, and all buildings providing basic facilities for the traveling public,” as well as improvements “used in providing for the shelter, storage, or care of aircraft, including hangars.”
  • Charitable, educational and other purposes. The most common exemption is for property “owned, occupied, and used by a person for educational, literary, scientific, religious, or charitable purposes.” Ind. Code § 6-1.1-10-16. This includes the building (or parts thereof) predominantly used to further the exempt purpose and the land supporting the building.
  • Fine arts. Under Ind. Code § 6-1.1-10-18, property owned by Indiana nonprofits that is “organized and operated for the primary purpose of coordinating, promoting, encouraging, housing, or providing financial support to activities in the field of fine arts” may qualify for exemption.
  • Religious worship. Buildings used for religious worship or as a parsonage, along with the supporting land, may be exempt under Ind. Code § 6-1.1-10-21.
  • Church-affiliated dormitories. Property owned by a church and that is “exclusively used by the church as a dormitory for the students of a college or university which is located within” Indiana may be eligible for exemption. Ind. Code § 6-1.1-10-22.
  • Fraternities and sororities. Property owned by a fraternity or sorority to carry out its purposes, “including as an international, national, state, or local headquarters,” as authorized under Ind. Code § 6-1.1-10-24, may also be exempt.
  • Free medical clinics. Buildings used for the purpose of “gratuitously dispensing medicines and medical advice and aid to people” may be entitled to an exemption. Ind. Code § 6-1.1-10-28.

Lessons From a ‘Remarkable’ Exemption — and a Cautionary Tale

On December 15, 2021, the Indiana Board of Tax Review granted a “remarkable” exemption for charitable and educational purposes relating to special needs children. The Indiana Board approved a 100% exemption for real and personal property owned by the Knox County Association for Remarkable Citizens, Inc. for the 2018-2020 tax years. The Association is an Indiana nonprofit corporation formed for the purpose, in part, of promoting the general welfare of developmentally disabled persons. According to testimony, “KCARC's mission is to advocate and provide opportunities in a dignified and respectful manner for the total well-being of individuals and families with special needs.” The Board explained:

KCARC has owned the real property at issue since 1987. Around 2016, KCARC decided to convert the property into a community center called 1972. KCARC created 1972 to provide a place where the general public could interact with KCARC's clients in an integrated setting with the goal of helping the clients learn the social skills necessary to get hired and remain employed in the community. . . . Additionally, 1972 lets KCARC provide its clients with access to recreational activities, Special Olympics programs, and Medicaid services in a setting specifically designed for individuals and families with intellectual and developmental disabilities.

KCARC, the Indiana Board found, owned this real property and the associated personal property to further its charitable and educational purposes. The Board rejected claims by the Assessor that KCARC failed to provide charitable acts “different from everyday acts of man.” Noting that the community center was not used “as a for-profit enterprise,” the Board explained that use of the center to address “the lack of everyday interactions between KCARC’s clients and the general public” demonstrated it was “relieving human want through charitable acts different from the everyday purposes and activities of man in general.” Importantly, the Board found “KCARC’s use of the facility relieved the government’s burden of serving the developmentally disabled beyond the extent of [Medicaid] reimbursement.”

To get its requested 100% exemption, KCARC had to timely and properly file exemption requests. That was a critical first step.

In contrast, on December 17, 2021, the Indiana Board denied an exemption for a parsonage as of the January 1, 2020 assessment date because the owner, Abyssinian Outreach Ministries, failed to include an affidavit confirming that the parsonage was being used to house a member of the clergy — a requirement of the applicable exemption statute — nor could the Ministry have done so, as the parsonage was not habitable as of the assessment date. The Ministry’s status as an Indiana nonprofit corporation did not save it from having to clear all the statutory hurdles to claim and receive a property tax exemption.

Exemption applications are due on or before April 1, 2022. To receive a property tax exemption, a taxpayer should first timely claim the exemption. Whether a specific taxpayer must file or refile an exemption application for a particular property is a case-by-case decision, based on the individual facts impacting the property and the statute under which an exemption is claimed.

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