Frequently Asked Questions

A "nonprofit organization" is defined by U.S.C. 59-2-1101(1)(g)(i) in the following way.                                         

• that is organized on a nonprofit basis, that dedicates the entity's property to the entity's nonprofit purpose, and that makes no dividend or other form of financial                                                 benefit available to a private interest;                                           
• for which, upon dissolution, the entity's assets are distributable only for exempt purposes under state law or to the government for a public purpose;                                            
• that does not receive income from any source, including gifts, donations, or payments from recipients of products or services, that produces a profit to the entity in the sense that the income exceeds operating and long-term maintenance expenses; and                                          
• for which none of the net earnings or donations made to the entity inure to the benefit of private shareholders or other individuals, as the private inurement standard                                                 has been interpreted under Section 501(c)(3), Internal Revenue Code.

"Nonprofit organization" also includes the following as defined by U.S.C. 59-2-1101(1)(g)(ii).                                         

• An organization that is treated as a disregarded entity for federal income tax purposes and wholly owned by, and controlled under the direction of, a nonprofit entity;                                                 AND                                          
• Which none of the net earnings and profits of the entity inure to the benefit of any person other than a nonprofit entity.
  
  In addition, a nonprofit organization must meet one of the three criteria listed below.                                       
• "Charitable purpose" defined as:                                    
  • Property used as a nonprofit hospital or a nursing home, the standards outlined in Howell v. County Board of Cache County ex rel. IHC Hospitals, Inc., 881 P.2d 880 (Utah 1994); AND                                        
  • Property other than property described in Subsection (1)(a)(i), providing a gift to the community.                               
• "Educational purposes" means purposes carried on by an educational organization that normally:                                    
  • Maintaining a regular faculty and curriculum; AND                                        
  • Has a regularly enrolled body of pupils and students.
  "Educational purposes" also includes:                                    
  • the physical or mental teaching, training, or conditioning of competitive athletes by a national governing body of sport recognized by the United States Olympic Committee that qualifies as being tax exempt under Section 501(c)(3), Internal Revenue Code; AND                                       
  • an activity in support of or incidental to the teaching, training, or conditioning described above.                               
• Religious organization defined as:                                    
  • Any organization that has a religious exemption under IRS 501(c)(3) guidelines.

As defined by U.S.C. 59-2-1101(1)(c) any property owned by a nonprofit organization that is used exclusively for a charitable, educational, or religious purpose may be eligible for exemption from property tax.

Qualification for an exemption is contiquent upon ownership AND use. A property that is owned by an individual or for-profit business, but leased or, in some other way, used by a non-profit organization cannot be exempted. Also, property owned by a nonprofit organization but leased or, in some other way, used by an individual or for-profit organization may be subject to taxation.      

The Utah Supreme Court has determined that although exclusivity should be strictly construed, minor deviations from “exclusive use” should not automatically defeat an exemption. Clearly defined sections of a property can also qualify for an exemption even if other sections are used for profit, or another non-qualifying purpose. [Loyal Order of Moose 259 v. Salt Lake County Board of Equalization (657 P2d 257), 1982].

When a non-profit entity acquires property on or after January 1 that may qualify for an exclusive use exemption, that entity may apply for the exclusive use exemption on or before the later of MARCH 1ST (or the next business day if the 1st falls on a weekend) or 120 days after the property is acquired (§§ 59-2-1101 and 59-2-1102). If an exemption is not applied for timely, they will be required to apply during the next application period starting January 1st through March 1st of the next year.

After the Board of Equalization initially grants an organization a property tax exemption, the organization is required to file an "ANNUAL STATEMENT FOR CONTINUED PROPERTY TAX EXEMPTION" each subsequent year. This statement confirms their continued non-profit status and exclusive use of the property to maintain the property's tax exemption (§ 59-2-1102).

Vacant Land which is not actively used by the religious, charitable, or educational organization, is not deemed to be devoted exclusively to exempt purposes, and therefore not exempt from property taxes. If the vacant land is being held for future development or utilization by an organization, it is deemed not exclusively used for exempt purposes, and therefore not tax exempt. The vacant land will remain taxable until either construction commences or a building permit is issued for construction of improvements that are intended for exclusive use.