Institutions and organizations, such as hospitals, schools, churches and cultural facilities, may qualify for exemption from local taxes on their real and personal property. These exemptions are found in various clauses of Massachusetts General Laws Chapter 59, Section 5 (M.G.L. c. 59, § 5). However, a religious or charitable organization is not automatically exempt from local taxation when it organizes or acquires property. It must meet specific eligibility criteria and follow certain procedures to obtain an exemption.
Exempt status for real estate is determined as of July 1, which is the beginning of the municipal fiscal year. Exempt status for personal property is determined as of the January 1 before the beginning of the fiscal year. Your organization must own the property, and meet all other eligibility requirements, on the applicable day to receive an exemption for the fiscal year. It is not entitled to a pro-rata exemption for property acquired after that date. Exemption from taxation is a privilege and your organization must prove that it clearly and unequivocally qualifies.
(M.G.L. Ch. 59, sec.5, clauses 10 and 11) A religious organization is exempt from property taxation on:
All personal property (a) owned by, or (b) held in trust within Massachusetts for use by, the organization for religious or charitable purposes.
A church or house of religious worship (a) owned by, or held in trust for, the organization and (b) used and occupied for religious services or instruction. The exemption also applies to parking lots and halls used for religious classes and other church activities. Incidental or occasional use for other purposes will not affect the exemption, but any portion regularly occupied for other purposes is taxable.
A parsonage (a) owned by, or held in irrevocable trust for the exclusive benefit of, the organization, and (b) used and occupied as a residence for clergy.
All other property owned by a religious organization is taxable unless it qualifies for a charitable exemption.
(M.G.L. Ch. 59, sec.5, clause 3) A charitable organization is exempt from property taxation on:
All personal property it owns regardless of use.
Real estate owned by, or held in trust for, the organization, or its officers, for its charitable purposes, or by another charity, or its officers, for its charitable purposes.
Real estate acquired by the organization with the intention of future charitable use. The property need not be occupied immediately. However, if it is not occupied for charitable use within 2 years of the acquisition, it becomes taxable until put to such use.
All other real estate owned by a charitable organization is taxable. This includes property (a) leased to individuals and non-charitable entities, or (b) occupied or used for non-charitable purposes. In addition, property owned by a taxable individual or entity remains taxable even if leased to and occupied by a charity.
A charitable organization for property tax exemption purposes is a corporation or trust established for literary, benevolent, charitable, scientific, or temperance purposes. Nonprofit status is not sufficient, nor is exempt status for state or federal tax purposes. The organization must be organized for charitable purposes and must actually operate as a public chattel. Its dominant purposes and activities must benefit the public at large, not just a limited group of people. In addition, its income and assets cannot be distributed to officers, directors, or shareholders while it operates or when it dissolves, nor may they be used for non-charitable purposes.
Examples of charitable organizations include nonprofit private schools, colleges, universities, hospitals, museums, and cultural facilities. Trade groups, professional associations, or social clubs generally do not qualify, since they operate primarily for the benefit of their members.
Form 1B3 (PDF) - Initial Application for First-Time Applicants or When the Third-Quarter Tax Bill Has Been Issued. An organization seeking a charitable exemption for personal property, or a particular parcel of real property, must make an initial application to the Assessors. This initial application is on Form 1B3. No application is required of a religious organization to establish exempt status for a house of worship or parsonage.
Initially the organization must provide whatever information is reasonably required to establish eligibility. This information may include, but is not limited to:
- Articles of incorporation
- Declaration of trust Organization bylaws Identification of officers
- Trustees Description of charitable activities
- Description of the use of property, including use by all lessees or other occupants
You may file this application and supporting documentation prior to the issuance of the actual tax bill.
Once the tax bill has been issued, you must file with the Assessors no later than the due date of the "actual tax bill" (third-quarter bill), for the fiscal year. There are no exceptions.
Once an exemption is established, no further application is required, provided there is no change in ownership, occupancy, or other eligibility criteria. Annual filings on the 3ABC form by March 1 are required.
Form 3ABC (PDF) – Every charitable organization owning property on January 1 must file a property return with the Assessors in order to receive an exemption for the fiscal year that begins on the next July 1. The return must be received in the Assessors Office by March 1. The Assessors can extend that deadline if the organization applies and demonstrates a good reason for not filing on time. An extension cannot be granted beyond the deadline for filing an abatement application for the fiscal year. Failure to file in a timely manner bars the organization from exemption for that year. A religious organization does not have to file a 3ABC unless it is seeking exemption for property other than a house of worship or parsonage.
Form PC (PDF) – The form PC is filed annually by all nonprofit charitable organizations conducting business in the Commonwealth of Massachusetts.
Form PC Instructions (PDF) - Every public charity organized or operating in Massachusetts or soliciting funds in Massachusetts must file a Form PC, except organizations which hold property for religious purposes or certain federally chartered organizations. The Form PC, including attachments, becomes a public record and is open to public inspection. Failure to file may result in legal action by the Attorney General, including the assessment of civil penalties against the charity or its officers or other authorized agents.
Filing an application for abatement of tax for exempt status does not stay the collection of taxes. To preserve the right to appeal, the organization must pay at least 1-half of the personal property tax it is contesting. For appeals involving real estate with a tax over $3,000, the organization must have paid every installment timely without incurring interest. If an exemption is granted, a refund will be made.
The Assessors have 3 months to act on the applications regarding the abatement of tax due to exempt status. If the Assessors deny your application you have 3 months to file an appeal at the Appellate Tax Board (external site).
For more information, please contact the Assessors' Office at (413)263-3050.