What property tax exemptions can non-profit organizations claim in Texas?

Texas non-profit organizations may be eligible for a full property tax abatement. Eligibility for such an exemption includes but is not limited to:

Charitable organizations

Tangible personal property and real property owned by charitable organizations are exempt. To qualify as a charitable organization, the organization must be organized exclusively to perform religious, charitable, scientific, literary, or educational purposes. Non-profit medical care facilities and organizations that extend support or relief to orphans, delinquent, dependent, or handicapped children in need of residential care, abused or battered spouses or children in need of temporary shelter, the impoverished, the elderly or victims of natural disaster without regard to the beneficiaries' ability to pay also qualify.

Exemptions for charitable organizations require the property owner to have a charter or bylaws dedicating property to particular purposes and providing for the disposition of property upon dissolution. The organization may not allow the realization of private gains from its activities or the property.

Performance of non-charitable functions by a charitable organization that owns or uses exempt property does not result in loss of an exemption if those other functions are incidental to the organization's charitable functions.

Youth development organizations

Youth development organizations are exempt from property taxes for tangible property that is reasonably necessary for its operation and real property. This includes endowment funds the association owns that are used exclusively for the support of the association and are invested exclusively in bonds, mortgages, or property purchased at a foreclosure sale for the purpose of satisfying or protecting the bonds or mortgages.

Youth spiritual, mental, and physical development associations must be organized and operated primarily for the purpose of promoting the threefold spiritual, mental, and physical development of boys, girls, young men, or young women. Such organizations must operate in a way that does not result in accrual of distributable profits, the realization of private gain resulting from payment of compensation in excess of a reasonable allowance for salary or other compensation for services rendered, or realization of any other form of private gain.

Youth development organizations are expected to operate in conjunction with a state or national organization that is organized and operated for the same purpose as the association.

The organization is required to direct that on discontinuance of the association by dissolution or otherwise the assets are to be transferred to this state, the United States, or a charitable, educational, religious, or other similar organization that is qualified as a charitable organization by charter, bylaw or any other regulation adopted by the association to govern its affairs.

Religious organizations

A place of religious worship is exempt from paying any property taxes. This includes the clergy residences owned by qualifying religious groups.

A religious organization is operated by an individual, corporation or an association. It must be organized and operated primarily for the purpose of engaging in religious worship or promoting the spiritual development or well-being of humans.

A qualifying religious organization must operate in such a way that does not result in accrual of distributable profits, the realization of private gain resulting from payment of compensation in excess of a reasonable allowance for salary or other compensation for services rendered, or the realization of any other form of private gain. It is also required to declare that on discontinuance of the organization by dissolution or otherwise, the assets are to be transferred to this state, the United States, or a charitable, educational, religious, or other similar organization that is qualified as a charitable organization. Such a declaration is considered valid if directed by a charter, bylaw or other regulation adopted by the organization to govern its affairs. Use of property that qualifies for the exemption for occasional secular purposes other than religious worship does not result in loss of the exemption.

Non-profit private schools

This exemption applies to property used for school purposes. The buildings and tangible personal property that are reasonably necessary for the operation of the school for educational purposes are exempt. This includes incomplete improvements that are under active construction or designed and intended to be used for a school that is qualified. The exemption extends to endowment funds owned by the property owner, that are used exclusively for the support of the school and are invested exclusively in bonds, mortgages, or property purchased at a foreclosure sale for the purpose of satisfying or protecting the bonds or mortgages.

To qualify as a non-profit private school, an organization must meet the following criteria:

• It must be organized and operated primarily for the purpose of engaging in educational

functions.

• It must normally maintain a regular faculty and curriculum and normally have a regularly

organized body of students in attendance at the place where its educational functions are carried on.

• It must use its assets in performing the organization's educational functions or the

educational functions of another educational organization.

• It must be operated in a way that does not result in accrual of distributable profits, the

realization of private gain resulting from payment of compensation in excess of a reasonable allowance for salary or other compensation for services rendered, or realization of any other form of private gain.

• It must by charter, bylaw, or other regulation adopted by the organization to govern its

affairs direct that on discontinuance of the organization by dissolution or otherwise the assets are to be transferred to this state, the United States, or an educational, charitable, religious, or other similar organization that is qualified as a charitable organization.

• If the organization is a corporation, be organized as a nonprofit corporation as defined by

the Texas Non-Profit Corporation Act.

Cemeteries

A property owned by a person exclusively for human burial is entitled to an exemption, provided he does not hold the land for any profits.

Veteran organizations

Property owned by a veterans' organization is exempt from taxation of each of the buildings including the land that is reasonably necessary to use, access and ornament the buildings. Veterans' organizations are classified as non-profit organizations that are composed primarily of members or former members of the armed forces of the United States or its allies. Veterans' organizations are chartered or incorporated by the United States Congress. A qualifying organization is eligible for the exemption as long as the property is used for no private gain or to produce revenue. Occasional renting of the post or chapter property for other non-profit activities does not result in loss of exemption as long as the rental proceeds are used solely for the maintenance and improvement of the property.

Community land trusts

Property owned by a community land trust that provides affordable housing for low and moderate-income individuals, promotes resident ownership of housing, keeps housing affordable for future residents, and captures value from public investment in the long term is exempt. The exemption must be adopted by the governing body of the taxing unit before July 1 and must be reclaimed only if ownership changes.

A community land trust must also qualify as a charitable organization that does not accrue distributable profits or realizes private gains to be eligible for this exemption.
The property cannot be exempted after the third year on which the trust acquired the property unless the trust is offering to sell or lease the property or is leasing the property as per Local Government Code Chapter 373B .