Fiscal Summary

Decrease Local Revenue - Exceeds $15,900

Bill Summary

This bill makes various revisions to property tax exemptions for property owned or used by certain not-for-profit entities, as discussed below:

(1) Present law exempts from property taxation properties that are owned by nonprofit organizations and funded by the Housing Opportunities Using State Encouragement (HOUSE) Program when those properties are used for permanent housing for low income or very low income elderly or disabled persons.

This bill removes the above-described exemption and instead exempts properties owned by not-for-profit organizations and funded under a housing trust fund (applicable in Knox County only) or metropolitan government housing trust fund (applicable in Davidson, Moore, and Trousdale counties, if the property is used for permanent housing for low income or very low income elderly or disabled persons.

(2) Present law exempts from property taxation the property, or any part of the property, owned by any religious, charitable, scientific, or nonprofit educational institution ("exempt institution") that is occupied and actually used by another exempt institution for one or more of the exempt purposes for which it was created or exists under an arrangement:

(A) In which the owning institution receives no more rent than a reasonably allocated share of the cost of use, excluding the cost of capital improvements, debt service, depreciation, and interest, as determined by the state board of equalization; or
(B) That is solely between exempt institutions that originated as part of a single exempt institution and that continue to use the property for the same religious, charitable, scientific, or nonprofit educational purposes, whether by charter, contract, or other agreement or arrangement.

This bill revises the above-described provision to instead exempt the real and personal property, or any part of the real and personal property, owned by an exempt institution, but occupied and actually used by:

(A) Another religious, charitable, scientific, or nonprofit educational institution or its officers purely and exclusively for carrying out one or more of the exempt purposes for which the occupying institution was created or exists;
(B) An exempt institution that originated as part of a single exempt institution and that continues to use the property for the same religious, charitable, scientific, or nonprofit educational purposes, whether by charter, contract, or other agreement or arrangement; or
(C) The United States government, this state, or any agency or political subdivision thereof.

(3) This bill specifies that for property owned by a corporation organized for the exclusive purpose of holding title to property for use by any organization that itself qualifies as an exempt institution, only such property of the corporation, or such parts thereof, as would be entitled to an exemption if owned directly by such organization is exempt from property taxation.

(4) Generally, present law requires an owner of real or personal property claiming a property taxation exemption to file an application for the exemption with the state board of equalization. Under present law, the state board of equalization may by rule impose a fee for processing an application for an exemption. Present law specifies that the total fees collected in any fiscal year must not exceed the cost of processing exemption applications in that fiscal year; this bill removes this specification. This bill adds that a single fee covers an application submission that may include multiple parcels, including real and personal property, with a clear nexus to one exemption determination.

(5) Under present law, any institution claiming an exemption as an exempt institution that has not previously filed an application for and been granted an exemption for a parcel must file an application for exemption with the board by May 20 of the year for which exemption is sought. If the application is made after May 20 of the year for which exemption is sought, but prior to the end of the year, the application may be approved but is effective for only a portion of the year. If an application is filed within 30 days after the exempt use of the property began, the property taxation exemption will be effective as of the date the exempt use began or May 20, whichever is later.

This bill revises the above provision to provide that if the application is filed after May 20 but within 30 days after the exempt use of the property began, the exemption will be effective as of the date the exempt use began.

(6) Under present law, the board may revoke an exemption, if it determines that the exemption was approved on the basis of fraud, misrepresentation or erroneous information, or that the current owner or use of the property does not qualify for the exemption.

This bill specifies that the board may revoke either the whole or part of an exemption. This bill also adds that the board may also revoke an exemption if the property is not actually being used for an exempt purpose. This bill provides that property is not actually being used for an exempt purpose if the property is not currently in use, has been abandoned, is not suitable for human habitation, or is being used for a nonexempt purpose.

(7) Present law exempts from property taxation the property or any part thereof of nonprofit artificial breeding associations chartered under the Tennessee Nonprofit Corporation Act. This bill removes this exemption.

(8) Under present law, if an exempt institution constructs improvements to be used by such institution exclusively for carrying out a purpose of the institution, the property, to the extent of the value of such improvements, is considered occupied and used by the exempt institution, from the commencement of the construction and thereafter. However, if, after construction the property is not so used occupied, then the property is not exempt during the construction.

This bill revises the above provisions to instead provide that the construction of such improvements is completed within 12 months of its commencement, then the property, to the extent of the value of the land, in addition to the value of such improvements, will be considered occupied and used by the exempt institution, from the commencement of the construction and after.

(9) Present law requires that construction of improvements described in (8) above be completed within five years in order to qualify for an exemption in (8) for property taxation. This bill removes this requirement.