Exemptions
From Tennessee State Comptroller of the Treasury, State Board of Equalization
It is extremely important that any organization seeking a Tennessee property tax exemption apply for every parcel of property upon which an exemption is sought. In the case of an exemption for tangible personal property, an applicant should identify any taxing identification information received from the county assessor of property and identify the personal property being applied for.
Once an application is submitted, our office will review the application to ensure it includes all the required information and documentation to be considered properly filed with the board.
Under general exemption law, property owned by a religious, charitable, scientific, or non-profit educational institution and used for an exempt purpose may qualify for exemption. Other types of property might also be exempt, like non-profit theaters, community art centers, or non-profit museums and may be subject to more specific requirements.
State law sets out some basic requirements:
Ownership
The organization applying for tax exemption must own the property that is the subject of the application.
Qualifying Organizations
The State Board of Equalization will look at the documents that govern the organization to determine whether it is a qualifying religious, charitable, scientific, or non-profit educational institution. Most often these documents will be a charter, articles of incorporation, by-laws, or articles of faith. These documents help verify the organization will not make a profit for any of its owners, officers, members, or parishioners. They also help ensure that should the organization dissolve, it will give any assets it has left to another not-for-profit organization. The State Board will also review the organization’s financial information. This may be an IRS Form 990, budget, or income and expense statement.
Use
The property must be used for an exempt purpose. “Use for an exempt purpose” means the property is used for a purpose for which the applying organization was created or exists or a use that is necessary to support the applying organization such as parking, storage, or drainage. Use of property must be constant, but it does not have to be daily. A property that is used every other month, but is always used every other month, may still qualify for exemption. Property that is not used often and is only used at random may not qualify.
Vacant, unused land does not qualify for property tax exemption, even if it will be used in the future or construction is planned. However, property that is under construction or major renovation may be eligible for a full or partial exemption (see "Construction" section below).
Required Documentation
Applications for exemption require the following documentation to be included with an application:
- Proof of ownership of real property (a copy of the warranty or quitclaim deed). In the case of tangible personal property a schedule identifying the property applied for and, if applicable, the identifying taxing information received from the county assessor of property.
- If the organization is incorporated, a copy of the corporate charter and bylaws.
- If the organization is unincorporated, a copy of any document(s) explaining the organization's governing structure.
- Financial information for the last fiscal year (i.e., Form 990 if required by the IRS, a budget for the organization, an income/expense statement, or other similar documentation).
- A non-aerial photograph of the property.
Construction
Property undergoing construction at the time of application is eligible to receive a full or partial property tax exemption. If an application has been filed with the State Board of Equalization and construction lasts less than twelve (12) months, then a full property tax exemption for the constructed improvements and a necessary portion of the underlying land may be approved. If construction lasts more than twelve (12) months, only the improvements undergoing construction are eligible for a property tax exemption.
Subject to the same Effective Dates as a typical application, an application for property undergoing construction must be timely filed before or within thirty (30) days of when construction begins. The State Board of Equalization will then review and, if necessary, hold any pending applications for approximately (12) twelve months pending the completion of construction. If construction lasts more than twelve (12) months a partial exemption may be issued, and the applicant may have to re-apply for an exemption on the underlying land once construction has completed.
Leases
An organization may lease all or a portion of its property and still acquire or maintain a property tax exemption so long as the following requirements are met:
- The owner of the property must be a qualifying religious, charitable, scientific, or nonprofit educational organization eligible to receive a property tax exemption.
- The occupant organization (i.e. the lessee or renter) must also be a qualifying religious, charitable, scientific, or nonprofit educational organization eligible to receive a property tax exemption.
- The property must be occupied and actually used for a religious, charitable, scientific, or nonprofit educational purpose.
An organization has an ongoing responsibility to report any change in use which could affect their exempt status to the local county assessor of property. Organizations currently receiving a property tax exemption who have begun or wish to begin renting to another organization should update the local county assessor of property and the State Board of Equalization.