Top Ten Church, Charity, and School Illinois Property Tax Exemption Mistakes

By: William A. Price,

  1. Don’t apply for property tax relief before you get your federal exemption letter. You have the burden of proof of exemption, and though the IRS “Good Housekeeping Seal Of Approval” is not enough to prove state qualification, it is a required part of the application packet.
  2. Don’t apply if your zoning or building code compliance is wrong. Local taxing bodies get notice of property tax exemption requests, and if your site is not correctly zoned, you may have local use prohibitions, not just property taxes to pay.
  3. Don’t apply if your organizational entity is not in good standing. Religious or charitable not for profit corporations have to file incorporation papers and annual reports with the Secretary of State. Religious corporations have to file with local county clerks. Proof of current filing status is part of the required property tax application package.
  4. Don’t apply if your other taxes are not paid. Local and state sales tax, federal and state income tax withholding authorities, and other local tax registrars will be informed of any property tax exemption request, and they will get unpaid tax penalties and collections if you are not in compliance, whether or not they also contact the property tax exemption section of the Illinois Department of Revenue or the local assessment appeals boards that rule on your exemption application.
  5. Don’t apply as a charity or religious use property if you cannot prove your use is “exclusively” charitable or religious. The county boards of review, Department of Revenue and reviewing courts all require evidence of free services to all those in need, not just nonprofit operations that do not return profits to individual owners.
  6. Don’t apply as a school if your services are part-time and do not completely avoid the need for public education for children served by your school.
  7. Charitable or religious (or other exempt owner type) title to the property is required, not just a leasehold. You can work with an owner to subdivide and purchase a property on note and mortgage terms that give it back if you don’t make payments, but the ownership has to be free and clear in the exempt entity, not held for profit, or the exemption does not apply.
  8. Make sure you have proof of exempt use for every room and floor and part of a property. Anything less can result in exemption for less than 100% of property tax bills.
  9. Don’t forget the parking lots: these may be exempt if adjacent to and maintained for the benefit of adjacent parcels with exclusively religious or charitable exemptions.

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