Nonprofit property tax exemptions
Many charitable nonprofits that own their property are exempt from paying property tax on it if they use their property (or distinct parts of it) “wholly and exclusively” for their nonprofit’s mission-related purposes. North Carolina’s nonprofit property tax exemption law is somewhat complicated, with seven different statutes that provide for property tax exemption for certain types of 501(c)(3) nonprofits:
- Property owned by religious nonprofits, including houses of worship;
- Property owned by educational nonprofits, including many private K-12 schools and private colleges and universities;
- Property owned by religious educational assemblies;
- Property owned by certain specific types of charitable nonprofits, including YMCAs and affordable housing nonprofits;
- Property owned by nonprofit continuing care retirement communities;
- Property owned by most 501(c)(3) nonprofits (other than those specifically exempted by other statutes); and
- Property owned by nonprofit hospitals.
The North Carolina Constitution requires property tax exemptions to be enforced uniformly in all 100 counties of the state. County assessors determine whether nonprofits are exempt from property tax, and each county assessor has its own process for making this determination. Municipalities (cities and towns) generally follow the decisions of county assessors in determining whether nonprofits are exempt from municipal property taxes, but they are not required to do so.
Rented property that is used by 501(c)(3) nonprofits is not exempt from property tax in North Carolina. Consequently, some nonprofits that lease their property wind up paying higher rents to cover their landlords’ property tax bills. This means that nonprofits that lease their property often bear the cost of property tax increases through higher rental rates.
