Property Tax Payment & Relief – Welfare or Veterans' Organization Exemptions Frequently Asked Questions (FAQs)
Open All Close AllGeneral Welfare Exemption Questions
What is the Welfare Exemption?
The Legislature has the authority to exempt property (1) used exclusively for religious, hospital, or charitable purposes, and (2) owned or held in trust by nonprofit organizations operating for those purposes. This exemption is popularly known as the welfare exemption and was first adopted by voters as a constitutional amendment on November 7, 1944. When the Legislature enacted section 214 of the Revenue and Taxation Code to implement the Constitutional provision in 1945, a fourth purpose scientific, was added to the three mentioned in the Constitution.
In general, the welfare exemption from local property tax is available to property of organizations formed and operated exclusively for qualifying purposes (religious, scientific, hospital or charitable), which use their property exclusively for those purposes. Both the organizational and property use requirements must be met for the exemption to be granted.
The Welfare and Veterans' Organization Exemptions are jointly administered by the Board of Equalization (BOE) and the county assessor. The BOE determines whether the organization is eligible to receive the welfare or veterans' organization exemption and the county assessor determines whether the use of the property is eligible for the exemption.
If the BOE determines that an organization is eligible, the BOE issues an Organizational Clearance Certificate for the claimant to provide with exemption claim forms filed in any of the 58 counties.
The county assessor reviews claims for the welfare exemption, and the assessor's determination of whether an organization's property use satisfies the requirements of section 214 will be made by the county assessor without review by the BOE staff. However, the assessor may not grant a claim unless the organization holds a valid Organizational Clearance Certificate issued by the BOE. The assessor may deny an exemption claim, based on non-qualifying use of the property, notwithstanding the claimant's organizational clearance certificate granted by the BOE.
What is the Veterans' Organization Exemption?
Section 215.1 provides for the exemption of all buildings, and the real property required for the convenient use and occupation of the exempt buildings, owned by a veterans' organization which has been chartered by the Congress of the United States and is organized and operated for charitable purposes, when such premises are used and operated exclusively for charitable purposes by such organization and are not being conducted for profit and no part of the net earnings of the operation inures to the benefit of any private individual or member of the organization. This exemption is popularly known as the veterans' organization exemption.
Personal property of veterans' organizations is exempt under Revenue and Taxation Code section 215; it is not necessary to file a claim form requesting exemption on personal property.
How does an organization file a claim for the Welfare or Veterans' Organization Exemption?
A county assessor may not grant a claim for the welfare exemption unless the organization holds a valid Organizational Clearance Certificate issued by the BOE. Claim form BOE-277, Claim for Organizational Clearance Certificate-Welfare Exemption, and claim form BOE-279, Claim for Organizational Clearance Certificate-Veterans' Organization Exemption, are available on the BOE's website. You may also request a copy of a claim form by contacting the BOE's Welfare Exemption Section at 1-916-274-3430.
When must a claim for the Welfare or Veterans' Organization Exemption claim be filed?
Claims to obtain an Organizational Clearance Certificate may be filed with the BOE at any time throughout the year. Claims for the welfare exemption must be filed annually with the county assessor, generally by February 15. If a claim is filed after February 15, a partial exemption may still be granted. The assessor may not grant a claim unless the organization holds a valid Organizational Clearance Certificate issued by the BOE.
The law recognizes mid-year acquisitions of real property by qualified organizations. The property will be eligible for exemption from the supplemental assessment if the organization claiming the exemption is a qualified organization and meets the qualifications for the exemption no later than 180 days after the date of the change in ownership or the completion of new construction. A claim for exemption from supplemental assessment must be made on or before the 30th day following the notice of supplemental assessment sent by the county assessor. If a claim is filed after the 30-day period, a partial exemption is available.
What documents do I file with the assessor to request a Welfare or Veterans' Organization exemption from property taxes
Claims are filed on the following forms:
- BOE-267: Claim for Welfare Exemption (First Filing), (claim form for initial request of welfare exemption for a specific property when the claimant is a new filing in the county or requesting exemption for a new location in the county)
- BOE-267-A: Claim for Welfare Exemption (Annual Filing), (claim form filed on an annual basis after initial “been met” finding. May be filed on properties that were granted exemption in the prior year)
- BOE-269-AH: Claim for Veterans' Organization Exemption, (claim form filed for request for Veterans' Organization Exemption)
Supplemental affidavits are also required for certain property types:
- BOE-267-H: Welfare Exemption Supplemental Affidavit, Housing-Elderly or Handicapped Families, (claim form filed for properties used for housing for elderly or handicapped families)
- BOE-267-L: Welfare Exemption Supplemental Affidavit, Housing-Lower-Income Households, (claim form filed for properties used for low income households)
- BOE-267-L1: Welfare Exemption Supplemental Affidavit, Low-Income Housing Property of (Limited Partnership), (claim form filed for properties used for low income households owned by limited partnerships)
- BOE-267-R: Welfare Exemption Supplemental Affidavit, Rehabilitation-Living Quarters, (claim form filed for properties used for rehabilitation and associated living quarters)
Can my organization claim the Welfare Exemption for prior years? Is it too late to file now?
An organization may, subject to a late-filing penalty, file a claim for the Welfare Exemption without limitation. However, the law limits refunds of taxes paid to four years from the date the payment was made. Thus, if an organization were to qualify for the Welfare Exemption in December of 2008 for years 2002 through 2008, had paid taxes on its real property timely for all those years, and filed claims for refund of taxes paid, it could expect a refund of taxes paid for the first installment due November 1, 2008, for both installments due in 2005, 2006, and 2007, and possibly for the first installment due November 1, 2004. No refund would be possible for taxes paid timely for 2002 or 2003, since these years were beyond the four-year statute of limitations (section 5097(a)(2), Revenue and Taxation Code).
According to the Internal Revenue Service, my nonprofit organization is a section 501(c)(3) organization and, therefore, exempt from income taxation. Why must we file separately for a Welfare Exemption. Aren't we automatically exempt from property taxation?
No. The income tax exemption does not automatically confer property tax exemption to a nonprofit organization. Both ownership and use of the property drive the Welfare Exemption.
Mere ownership of property by a nonprofit corporation does not satisfy the requirements for property tax exemption. The property must also be used exclusively for an exempt (religious, scientific, hospital, or charitable) purpose and activity. Certain uses of property will not qualify for exemption even though conducted by the nonprofit owner:
- Fundraising
- Unrelated business
- Allowing other unqualified individuals or organizations to use the property for private benefit
The assessor determined that the property was not eligible for the welfare or veterans' organization exemption. What is my recourse if I do not agree?
If you disagree with the assessor's determination of ineligibility for the welfare or veterans' organization exemption, you may seek a refund of property taxes paid by filing a claim for refund with the county board of supervisors. If the refund claim is denied, you may file a refund action in superior court.
Organizational Clearance Certificates
What documents do I file with the BOE to request an Organizational Clearance Certificate?
Organizations that intend to claim the welfare or veterans' organization exemption and are not currently eligible for these exemptions in any county in the state (i.e., new to state) must file a claim form requesting the certificate (BOE-277, Claim for Organizational Clearance Certificate-Welfare Exemption, or BOE-279, Claim for Organizational Clearance Certificate-Veterans' Organization Exemption).
Additional information that should be included with the claim (as indicated on the claim form) include the following organizational documents:
- Articles of incorporation and amendments (or equivalent formative document)
- Tax exemption letter
- Financial statements of organization
- Documentation supporting/describing the activities of the organization
- Other information (as requested from Board staff)
Why must my nonprofit organization amend its Articles of Incorporation to qualify for the Organizational Clearance Certificate, which is a prerequisite to qualifying for the Welfare Exemption? The Internal Revenue Service found the wording in our articles acceptable for purposes of income tax exemption.
California property tax law has its own requirements that may differ from other state and federal law. One of these differences affects organizations applying for the Welfare Exemption. Our law requires an explicit statement that an exempt organization's property is irrevocably dedicated to religious, charitable, scientific, or hospital purposes (sections 214(a)(6) and 214.01, Revenue and Taxation Code) also see Property Tax Rule 143, and that upon dissolution of the organization the assets will go to another fund, foundation, or corporation organized and operated for similar purposes and having federal section 501(c)(3) status.
The following language would satisfy California property tax law requirements for domestic (incorporated in California) corporations:
“The property of this [legal entity] is irrevocably dedicated to [religious/charitable/scientific/hospital purposes or charitable and educational purposes meeting the requirements for exemption provided by section 214 of the Revenue and Taxation Code] and no part of the net income or assets of this organization shall inure to the benefit of any private persons. Upon the dissolution or winding up of the [legal entity] its assets remaining after payment, or provision for payment, of all debts and liabilities of this [legal entity], shall be distributed to a nonprofit fund, foundation, or corporation which is organized and operated exclusively for [religious/ charitable/scientific/hospital purposes or charitable and educational purposes meeting the requirements for exemption provided by section 214 of the Revenue and Taxation Code] and which has established its tax exempt status under section 501(c)(3) of the Internal Revenue Code.”
After my organization receives an Organizational Clearance Certificate, do I need to file a form annually to retain the certificate?
You are not required to file a form annually with the BOE to retain an Organizational Clearance Certificate. However, you are required to file form BOE-278-OCC, Verification for Continued Eligibility of Organizational Clearance Certificate upon request of the BOE. This claim form requests information required to ensure that the organization continues to qualify for exemption. (Please note that you are required to file claim forms annually with the county assessor where the property is located.)
What are the conditions that an organization must meet in order to be considered a "charitable" organization for purposes of qualifying for the Organizational Clearance Certificate?
In general, the organization must demonstrate that it is in receipt of substantial donations from outside sources. Those donations, in turn must be passed on to a segment of the public that is sufficiently large that a gift to the organization may be viewed as benefiting the community as a whole.
Although an organization's receipt of donations is an important criteria by which its charitable purpose can be demonstrated, the absence of donations, by itself, will not result in a determination that a charitable purpose does not exist if it can be shown that the organization is providing a benefit or gift to the community. (Stockton Civic Theatre v. Board of Supervisors (1967) 66 Cal.2d. 20)
In addition, the organization must meet ALL of the following criteria:
- It must not be organized or operated for profit.
- No part of the net earnings of the organization may benefit any private person.
- The organization's property (1) must be irrevocably dedicated to religious, hospital, scientific, or charitable purposes, and (2) may not benefit any private person upon liquidation, or abandonment except a fund, foundation, or corporation organized and operated for religious, hospital, scientific, or charitable purposes.
- The organization must qualify as an exempt organization for state or federal income tax purposes.
- The charitable activities must be found to primarily benefit persons within the geographical boundaries of the State of California.
Supplemental Clearance Certificates
What documents do I file with the BOE to request a Supplemental Clearance Certificate?
The limited partnership is required to file with the Board a claim for a Supplemental Clearance Certificate (BOE-277-L1, Claim for Supplemental Clearance Certificate for Limited Partnership, Low-Income Housing Property – Welfare Exemption). The initial claim with wet signature must be accompanied by the following documents:
- Copy of a recorded deed restriction or regulatory agreement with a public agency that verifies that the property receives either government financing or low-income housing tax credits, as required by section 214, subd. (g)(1)(A);(g)(1)(B)
- Copy of the recorded grant deed, or if the land is not owned by the limited partnership, documents evidencing the limited partnership's ownership of the improvements
- Copy of all formative documents filed and endorsed by a Secretary of State’s office such as LP-1, Certificate of Limited Partnership, and if applicable form LP-2, Amendment to Certificate of Limited Partnership
- BOE-277 and/or BOE-277-LLC for the managing general partner if they do not already hold a valid Organizational Clearance Certificate.
The claim form for Supplemental Clearance Certificate is supplied by the Board of Equalization. If you are unable to access the form on our website using the link above, contact the Welfare Exemption Section at 1-916-274-3430.
What happens when a Limited Partnership has purchased a qualifying property from another limited partnership that already holds an active Supplemental Clearance Certificate? Does the new limited partnership use the existing Supplemental Clearance Certificate issued to the prior limited partnership for exemption purposes?
When title to the property changes, then the new managing general partner of the Limited Partnership that acquired the property, must hold an active Organizational Clearance Certificate. If they do not hold a valid Organization Clearance Certificate, then the new managing general partner must file a BOE-277, Claim for Organizational Clearance Certificate – Welfare Exemption claim form to obtain an Organizational Clearance Certificate if they are a nonprofit corporation (or file form BOE-277-LLC, if they are a limited liability company) and they must file a BOE-277-L1, Claim for Supplemental Clearance Certificate for Limited Partnership, Low-Income Housing Property – Welfare Exemption claim form for a new Supplemental Clearance Certificate on behalf of the new Limited Partnership. If the managing general partner does hold a current and active Organizational Clearance Certificate, then only a new Supplemental Clearance Certificate claim form BOE-277-L1 is required. Claim forms are at Claim Forms for Organizational Clearance Certificate or Supplemental Clearance Certificate for Managing General Partner.
See additional information on our Welfare Exemption for Low Income Rental Housing and Supplemental Clearance Certificate Requirements for Limited Partnerships page.
When submitting a claim for a Supplemental Clearance Certificate, is a full copy of the Limited Partnership Agreement (LPA) or the Amended Limited Partnership Agreement (ALPA) required?
No, when submitting your claim for Supplemental Clearance Certificate, only excerpts of the cover page, first narrative page, and signature pages of the LPA/ALPA are needed to verify the identity, and duties, of the managing general partner (MGP).
To qualify for the Supplemental Clearance Certificate, does the Limited Partnership have to receive "government financing" or "low-income housing tax credits" as the terms are stated in Property Tax Rule 140 or can a Use Restriction Agreement, restricting the use of the property to affordable housing be submitted?
To qualify for the Supplemental Clearance Certificate, the Limited Partnership must submit a recorded regulatory agreement which indicates that the Limited Partnership was granted either "government financing" or "state tax credits" as the terms are used in Property Tax Rule 140.2 which clarifies some of the specific requirements that must be met in order for a Supplemental Clearance Certificate to be issued. The Use Restriction Agreement alone cannot satisfy this requirement.
To qualify for the Supplemental Clearance Certificate, does the regulatory agreement, showing evidence of government financing or tax credits, need to be recorded by the County Recorder in the county where the property is located? For example, does a regulatory agreement between a Limited Partnership (as property owner) and the Department of Housing and Urban Development (as the agency awarding government financing) need to be recorded?
Yes. Property Tax Rule 140(b)(1) states that limited partnerships in which the managing general partner is an eligible nonprofit corporation or an eligible limited liability company, "may qualify for the exemption for a particular property provided that: (A) the claimant receives low-income housing tax credits or government financing for the particular property; and (B) the property is subject to a recorded deed restriction or a regulatory agreement which is recorded in the county in which the property is located." PTR140 defines "recorded deed restriction" and "regulatory agreement" and for both terms the applicable agreement must be recorded in the county in which the property is located.
Why does a Department of Housing and Urban Development (HUD) agreement need to be recorded?
HUD Project Based Section 8 contracts qualify as government financing for purposes of the Welfare Exemption in accordance with Property Tax Rule 140. Since the government financing for this property is in the form of a Project Based Section 8 contract, which is subject to renewal, and the project does not receive low-income housing tax credits, each renewal contract must be recorded with a county recordation stamp. To evidence receipt of such government financing, you must submit a copy of the initial regulatory agreement. If there is an assignment and assumption of the regulatory agreement, you will submit a copy of it with the county recordation stamp. A copy of each renewal contract with the county recordation stamp for the period prior to the first fiscal year sought and all subsequent periods to date.
All Property Tax Rules are available on our Property Tax Rules page.
Property Taxes Law Guides for the Revenue and Taxation Code are under BOE Resources on our Property Tax page.