Property Tax Exemptions - The Civic Federation

In the United States, not-for-profit organizations have a long history of receiving specialtreatment under Federal, state and local tax codes. Qualifying organizations receive taxexemptions of varying sorts and to varying degrees. At the state and local levels, certainnot-for-profit organizations are exempted from paying local property taxes. This practiceoccurs throughout the country and is an area that has received little attention byresearchers and tax practitioners.The Civic Federation undertook the Property Tax Exemption Procedure Study inresponse to concerns by local property tax experts and business owners concerning thescarcity of research in this area and, more importantly, a growing concern regardingerroneous and questionable property tax exemptions afforded not-for-profitorganizations. The concern focused on organizations that received property taxexemptions improperly, i.e., organization’s not meeting the minimum standards ofeligibility, as well as, organizations that continued to receive property tax exemptionseven though the justification for the exemption ceased to exist.Given the status of the limited data, the Federation agreed to conduct a basic study,focusing on property tax exemption laws in states and localities, as well as on proceduresfor granting and removing property tax exemptions for not-for-profit organizations. Thepurpose of the study is to shed new light on the exemption process and identify areaswhere local assessing jurisdictions can improve and strengthen existing procedures.This part of the study is a compendium of state constitutional provisions and state statutesgoverning the granting, maintaining, and removal of property tax exemptions. Itconcentrates on exemptions for charitable properties, but a variety of other exemptionsare also included. While the work is not exhaustive, it is our hope that it will be avaluable resource to those interested in the laws regulating these procedures.The Civic Federation is a nonpartisan government and fiscal watchdog and researchorganization founded in 1894. The Federation provides three primary services. First, itpromotes efficiency and economy in the organization and management of publicbusiness. Second, it guards against excessive taxation and wasteful expenditure of publicfunds. Finally, the organization serves as a technical resource providing objectiveinformation regarding state and local governmental revenues and expenditures. TheCivic Federation fulfills its mission by analyzing public finance and government servicedelivery through research reports and public commentary. Recent research reports haveassessed the impact of tax increment finance in northeastern Illinois, evaluated the statusof major local pension funds and analyzed Cook County property tax trends.2