Section 170 of the Kentucky Constitution authorizes exemption from property taxation for the following types of organizations:
- Government owned property;
- Institutions of education;
- Religious institutions;
- Public libraries;
- Cemeteries not held for private or corporate profit; and
- Institutions of purely public charity.
This section of the Constitution also authorizes a homestead exemption for property owners who are at least 65 years of age or who have been determined to be totally disabled and are receiving payments pursuant to their disability. Find out more about the homestead exemption.
Government Owned Property
The identification of this type of property is generally straight forward and most property valuation administrators will handle the administrative process of exempting this property without any guidance from the Department of Revenue. The one issue to keep in mind is that the property must be both publicly owned and used for a public purpose.
A court of appeals case defined an institution of education as a place where systematic instruction in any and all useful branches of learning is given by methods common in schools and institutions of learning. Under this definition, the more obvious examples of property qualifying for this type of exemption would include public and private school buildings and property owned by universities and colleges. This definition also precludes organizations such as driving schools, horseback riding schools and other organizations that teach what would be considered a special accomplishment from being granted an exemption.
The educational exemption extends not only to the real estate and tangible property actually being used for educational activities, but also to any income producing property that may be owned by the institution, provided that the income is used to further its educational programs.
Institutions of Religion
According to the Constitution, real property must be both owned and occupied by a church in order to qualify for an exemption. Examples of what normally should be considered exempt would include:
The property used for regularly scheduled worship services;
Land and improvements regularly used for church camps;
Buildings used for meetings and social events aimed primarily at church members; and
Parking lots or garages essential for the congregation's use – even if the garage or lot is rented out during the week.
If real property is being used in any type of religious capacity in a regular manner, then an exemption can likely be granted. One common situation that results in the property remaining on the tax roll is vacant land being held for future development. It is the position of the Department of Revenue that vacant land cannot be considered to be occupied by the church; therefore, this type of property must be placed on the tax rolls by the local property valuation administrator. Other examples of church owned property that would continue to be taxable include:
- Property leased to or used by another entity for non-religious purposes; and
- Parking lots or garages used only incidentally for church purposes.
One other situation that has been encountered on several occasions is when real property is actually being used for religious worship or other religious activities, but the property is owned by individuals. Since the ownership requirement is not met, no exemption can be granted in this instance.
This exemption is a straight forward. As long as the property is owned and utilized by a publicly funded library, a property tax exemption can be granted.
Section 170 of the Constitution authorizes a property tax exemption for places of burial not held for private or corporate profit. Therefore, it must be determined that the entity owning a cemetery is organized as a non-profit. If this is the case, then an exemption can be granted.
Purely Public Charities
Various court cases have determined that to be recognized as a purely public charity an entity must be both organized as a non-profit and be a public charity rather than a private charity. The courts have stated that whatever is done or given for the relief of public burdens or for the advancement of the public good qualifies as public charity. The courts have also ruled that charity is broader than relief to the needy and includes activities which reasonably better the condition of mankind.
Most applications forwarded to the Department of Revenue to review involve entities applying as a purely public charity. The Department relies on the various court decisions addressing this area as well as a thorough review of the information provided in support of the charitable activities conducted by the applicant.
Applying for a Property Tax Exemption
The first step in applying for a property tax exemption is to complete the application form (Revenue Form 62A023) and submit it along with all supporting documentation to the property valuation administrator of the county in which the property is located. If the PVA is comfortable making the decision, everything can be handled at the county level. However, if the PVA is unsure if the applicant qualifies for an exemption, the application is forwarded to the Department of Revenue for review. If this occurs, you may receive a letter from the Department requesting additional information. When the Department has made a decision, a letter is sent to the PVA and the PVA then sends the final determination letter to the applicant.
Application for Exemption from Property Taxation (Form 62A023)
If you have any questions about any aspect of the application process, please do not hesitate to contact the Office of Property Valuation at 502-564-8338.