By Courtney S. Lynch, Quarles & Brady LLP
As 2019 opens, the season of property tax assessment begins anew. In Indiana, the annual assessment date for real property is January 1. Nearly a decade has passed since the Constitution of the State of Indiana was amended to install property tax caps, which went into effect for property taxes payable in 2012, and the dust seems to have settled on those issues in large part. But the landscape pertaining to exemptions from property tax continues to shift, both through statutory changes and case law. Whether a property qualifies for a property tax exemption is a question routinely asked in real estate transactions as developers and buyers explore options to reduce and budget for ongoing costs.
The most expansive exemption provision that applies to properties not owned by governmental entities pertains to properties “owned, occupied, and used” for “educational, literary, scientific, religious, or charitable purposes.” Ind. Code § 6-1.1-10-16(a). Most case law related to this statute involves what qualifies as a charitable purpose. Indiana courts have given the word “charity” a broad definition, and to qualify for a charitable purpose exemption the owner must show relief of human want manifest by obviously charitable acts different from everyday purposes and activities of man in general. And, the owner must provide a benefit to the general public that justifies the loss of tax revenue. Other specific property tax exemptions are set forth in Ind. Code § 6-1.1-10, et seq.
In order to request a property tax exemption, a property owner must complete a Form 136 - Application for Property Tax Exemption (the “application”) and file it with the assessor of the county where the property is located on or before April 1 of the assessment year. Generally, the application requires an owner to explain how the property is owned, occupied, and used for charitable purposes and why it qualifies for a property tax exemption. Once the owner submits the application to the assessor, the application is reviewed and either approved or denied by the Property Tax Assessment Board of Appeals (“PTABOA.”) In many instances, the PTABOA or the assessor will contact the owner if questions or concerns arise regarding the application. If the application is denied by the PTABOA, the owner has the option to begin an appeal process.
Real estate developers and buyers should carefully review options related to property tax exemption, along with a property’s assessed value and property tax abatement opportunities, as they contemplate a property’s future costs. And, a property tax exemption may apply to a percentage of a property, even if the entire property is not owned, occupied and used for charitable purposes. Exploring the availability of a property tax exemption could positively impact a project’s financial viability and make one of life’s certainties less certain.