Texas Religious Organizations Property Tax Exemption

• Published date: 25 April 2022
• Subject Matter: Tax, Income Tax, Tax Authorities, Property Taxes
• Law Firm: Freeman Law
• Author: Cory Halliburton

Through nearly 20 years of law practice-15 of which have been focused on the representation of tax-exempt organizations-this writer has been involved in numerous seemingly simple-and some cutting edge-applications for exemption from Texas property taxes for religious organizations. In most instances, the organization is advised in advance to revise governing documents, develop program descriptions, or to engage in other effort to place the organization in a best-case scenario to receive favorable tax exemption from the local property tax authorities.

This Freeman Law blog provides an overview of why that front-end due diligence is critical to ensuring that an application for exemption from Texas property tax is favorably received by the local taxing authorities.

Texas Nonprofits, Overview.

A Texas nonprofit corporation may be entitled to exemption from Texas property tax. However, not all nonprofit corporations-even those that enjoy exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code-are entitled to an exemption from state property taxes. See, e.g., Tex. Tax Code ' 11.18(a)-(a)(1)(B) (providing for property tax exemption for qualified "charitable organizations").

The Texas Tax Code sets forth various statutory regimes for exemption that may be available for a Texas nonprofit organization, depending on the purposes for which the organization is formed or organized and the manner in which it is operated. However, the organization must apply for and receive an exemption. That process is usually performed by use of forms promulgated by the Texas Comptroller or local tax appraisal district.

There are numerous categories and subcategories of organizational and operational types that may qualify for an exemption, and these statutes are contained, primarily, in Chapter 11 of the Texas Tax Code. Some of those statutes set forth a complex, yet precise framework for determining whether or not a tax exemption may be available. See, e.g., Tex. Tax Code ' 11.18 (charitable organizations), 11.19 (youth spiritual, mental, and physical development associations), 11.20 (religious organizations), 11.21 (schools).

The Texas Constitution.

All property that the State of Texas has jurisdiction to tax is taxable unless exempt by law. See Tex. Const. art. VIII, ' 2(a). The state has jurisdiction to tax (1) real property if located in Texas and (2) tangible personal property if the property is: (a) located in Texas for longer than a temporary period; (a) temporarily located outside Texas and the owner resides in Texas; or (3) used continually, whether regularly or irregularly, in Texas. See Tex. Tax Code ' 11.01(a)-(d).

"Property" means any matter or thing capable of private ownership. Id. at ' 1.04(1). The term "real property" includes land and improvements. Id. at ' 1.04(2)-(2)(B). "Tangible personal property" means "personal property that can be seen, weighed, measured, felt, or otherwise perceived by the senses, but does not include a document or other perceptible object that constitutes evidence of a valuable interest, claim, or right and has negligible or no intrinsic value." Id. at ' 1.04(5).

The legislature may, by general laws, exempt from taxation actual places of religious worship, clergy residences, property used by charitable institutions, and other. See Tex. Const. art. VIII, ' 2(a). All statutes for the exemption of property from taxation are strictly construed against the exemption and in favor of the state and taxation. Davies v. Meyer, 541 S.W.2d 827, 828 (Tex. 1976).

Section 11.20, Texas Tax Code - Religious Organizations Property Tax Exemption.

Pursuant to the Texas Constitution, article VIII, section 2(a), the Texas Legislature enacted Texas Tax Code section 11.20(a), exempting real and tangible personal property if it is (1) owned by...