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If another church uses the owner-operated church for worship services, the outside operator church must apply for the religious exemption. If any other outside use is allowed on the property, the owner church and the operator will both need to file

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Religious exemptions are available to religious organizations that own property and exclusively use the property to conduct worship services and other related religious activities (i.e. church operated schools, bible studies, weddings, etc). The annual filing period is lien date (January 1) through February 15.

If another church uses the owner-operated church for worship services, the outside operator church must apply for the religious exemption. If any other outside use is allowed on the property, the owner church and the operator will both need to file a  welfare exemption claim.

First-time religious exemption claimants need to submit:

  1.  Religious exemption claim form
  2. Copy of certified articles of incorporation
  3. Tax letter designating non-profit status
  4.  Property Use Report must be submitted if outside use is allowed

Once a religious exemption has been granted, the exemption is continuous until the owner of the property notifies the assessor that the use or ownership of the property has changed. A "change in eligibility or termination card" is sent annually in January to remind claimants of this obligation. This is a simplfied process that eliminates the need for yearly filing and the chance of receiving a late filing penalty.

 

Church Exemptions

Due to the simplified filing process for the "religious claim", it may be more beneficial for organizations that own real property to file a religious exemption.

Church exemptions are available to religious organizations who rent, lease, or own property and conduct worship services on the property. The annual filing period is lien date (January 1) through February 15.

First-time church exemption claimants need to submit:

  1.  Church exemption claim form
  2. Copy of certified articles of incorporation
  3. Tax letter designating non-profit status
  4. Lessor needs to file a Lessor's Exemption Claim form [The annual filing period is lien date (January 1) through February 15.] Please call the assessor's office to obtain this form.
  5. Copy of lease agreement (The lease should indicate that the church is responsible for paying the property taxes. If it does not, documentation must be provided to show that the church is benefiting from the tax exemption by a reduction in the rent.)
  6.  Property use report must be submitted if outside use is allowed (Outside use may jeopardize the exemption.)

 

Requirements for "Outside" use

Exemption claimants allowing outside organizations (other than "religious organizations") to use their property may need to fulfill certain filing requirements in order to avoid jeopardizing their exemption.

To protect the exemption, an "outside operator" must be organized as non-profit and charitable. The owner must file and qualify for a welfare exemption. Any "outside operator" using the property more than once a week must file a complete welfare exemption claim.

Any "outside operator" using the property once a week or less must provide:

  1. A letter indicating they are exempt under Internal Revenue Code 501(c)(3) or 501(c)(4) or State Franchise Tax Code 23701(d), 23701(f), or 23701(w). [If the tax letter is for the national or state organization, we need proof that the local chapter is an affiliate.]
  2. A copy of federal income tax returns if the operator is required to file them.
  3. The name and telephone number of a contact person.

Any "outside operator" using the property less than three times a year has no filing requirements.

 

Non-Qualifying Use

Contrary to common belief, not all property owned or used by non-profit organizations qualifies for property tax exemption.

Common reasons that a property, or a portion of a property, does not qualify for exemption:

  • No exempt activity on lien date (January 1).
  • Living quarters that are not institutionally necessary, such as rental property, etc.
  • Vacant, unused, excess land (the intent to use/sell at a later date does not qualify).
  • For-profit groups using the property.
  • Outside groups not meeting the filing requirements.
  • Areas not exclusively used for exempt activity.
  • Property primarily used for fund raising.
  • Thrift stores (unless they are part of a planned, formal rehabilitation program).

Property where construction has not commenced as of lien date.

 

WELFARE EXEMPTIONS

Welfare exemptions are available to non-profit organizations that are religious, hospital, scientific, or charitable in nature, and:

  1. Own their own property (real or personal) and exclusively use the property for exempt purposes.
  2. Use exempt property owned by another welfare exemption claimant.
  3. Use government-owned property

First-time welfare exemption claimants need to submit in duplicate:

  •  Welfare exemption claim;
  • Tax letter designating non-profit status;
  • Copy of certified articles of incorporation
  • Financial statement for the year(s) exemption is being claimed (e.g. Profit/Loss, balance, etc.)
  •  Property use report if outside use is allowed.

Once eligibility for a welfare exemption has been established, there is a simplified filing process. The annual filing period is lien date (January 1) through February 15.


Outside Use

Exemption claimants allowing outside organizations to use their property may need to fulfill certain filing requirements in order to avoid jeopardizing their exemption.

Requirements include:

  • The "outside operator" must be organized as non-profit and charitable.
  • The owner must file and qualify for a welfare exemption.
  • Any "outside operator" using the property more than once a week must file a complete welfare exemption claim.
  • Any "outside operator" using the property once a week or less must provide:
  1. A letter indicating they are exempt under Internal Revenue Code 501(c)(3) or State Franchise Tax Code 23701(d), 23701(f), or 23701(w). [If the tax letter is for the national or state organization, we need proof that the local chapter is an affiliate.]
  2. A copy of federal income tax returns if the operator is required to file them.
  3. The name and telephone number of a contact person.

Any "outside operator" using the property less than three times a year has no filing requirements.

Outside Use Filing Requirements
Frequency of Use by Outside Operator Owner Needs to File Operator Needs to File
More than once a week Welfare Exemption Claim Welfare Exemption Claim
Once a week or less Welfare Exemption Claim Tax letter stating non-profit status, income tax returns, contact person
Less than three times per year Welfare Exemption Claim Nothing

 



Exemption Division

County Government Center
East Wing, 5th 
Floor
70 West Hedding Street
San Jose, CA 95110
Phone: 408-299-6460
Fax: 408-271-8812
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