Property Tax Exemptions for Nonprofits. All real and personal property is subject to a tax each year based on the highest and best use, unless a specific exemption is provided by law. Nonprofit organizations, though exempt from federal taxes, are not generally exempt from property taxes in Washington. Organizations must exclusively use their property to conduct an activity specifically exempted by the Legislature to qualify. Schools, churches, cemeteries, hospitals, social service agencies, character building organizations, nursing homes, homes for the aging, museums, performing arts facilities, and public meeting halls are examples of organizations that may receive a property tax exemption.

Property Tax Exemption for Nonsectarian Nonprofits. Property owned by a nonsectarian nonprofit organization used for character-building, benevolent, protective, or rehabilitative social services is exempt from property tax.

Tax Preference Performance Statement. State law provides a range of tax preferences that confer reduced tax liability upon a designated class of taxpayer. Tax preferences include tax exclusions, deductions, exemptions, preferential tax rates, deferrals, and credits. Legislation that establishes or expands a tax preference must include a tax preference performance statement that identifies the public policy objective of the preference, as well as specific metrics that the Joint Legislative Audit and Review Committee (JLARC) can use to evaluate the effectiveness of the preference. All new tax preferences automatically expire after ten years unless an alternative expiration date is provided or the tax preference is exempted from expiration. 

Property owned by a nonsectarian nonprofit organization is exempt from property taxes if the organization loans, leases, or rents the property to any government entity, a federally recognized Indian tribe located in Washington, or another nonprofit organization using the property to provide character-building, benevolent, protective, or rehabilitative social services.

The exemption is not subject to the automatic ten-year expiration date or JLARC review.

 PRO: Currently, the Department of Revenue interprets the tax exemption in a narrow way and applies a rule to charge property taxes on spaces used by other nonprofits to provide social services on site. The bill clarifies the tax code to eliminate the drag on existing social purpose real estate. It clarifies the property tax exemption for nonprofit organization in the state to allow for more social services to lower barriers to access and increase collaboration and connection between nonprofits.

OTHER: The Department of Revenue administers the tax exemption as counties administer the property tax. The legislation is administrable and easy for taxpayers to comply.

PRO: Kim Sarnecki, Together Center; Melissa Stuart, Together Center.