Applying for a Property Tax Exemption in Arizona without a 501(c)(3) Letter

  1. Church & Nonprofit
  2. Applying for a Property Tax Exemption in Arizona without a 501(c)(3) Letter
Property tax exemption
Church & Nonprofit, Real Estate


All property is subject to property taxes in Arizona unless exempt under state or federal law. One standard property tax exemption is property held by nonprofit organizations, such as charitable, religious, educational, scientific, or literary purposes. However, you need to meet specific requirements to qualify your organization for a property tax exemption because it is a nonprofit organization.

Use and Ownership Requirements

If a nonprofit organization wants to qualify for a property tax exemption, it must prove that it does not use or hold its property for profit. Using a property owned by a nonprofit organization could involve how the organization itself uses the property or how a tenant uses the property. Therefore, the assessor must consider both factors in determining whether the nonprofit organization is using the property for profit.

Furthermore, the fact that property owned by a nonprofit organization is occasionally used in ways other than for the exempt, nonprofit purpose does not necessarily mean that the property is exempt from property taxes. The organization must primarily use the property for religious worship or the exempt purpose of the nonprofit organization, and sporadic, infrequent use of the property for other purposes does not destroy its tax-exempt status.

Qualifying for a Property Tax Exemption with a 501(c)(3) Letter

A.R.S. § 42-1154(1) provides one of the most common ways a nonprofit confirms its eligibility for a property tax exemption with the assessor. The organization can produce its letter of determination from the Internal Revenue Services (IRS) that it qualifies as tax-exempt under Internal Revenue Code (I.R.C.) 501(c)(3) to prove its nonprofit status. If an organization does this, it does not need to file for an annual property tax exemption until and unless the property changes ownership or is no longer used for religious worship.

However, this IRS requirement does not apply to churches, synagogues, temples, mosques, or similar organizations. As a result, producing a 501(c)(3) letter is not the only way a nonprofit organization can qualify for a property tax exemption under Arizona law.

Qualifying for a Property Tax Exemption without a 501(c)(3) Letter

I.R.C. § 501(c)(3) no longer requires that churches and religious organizations file for recognition of tax-exempt status, although they may continue to do so. Instead, as long as these organizations meet the I.R.C. § 501(c)(3) requirements, the IRS automatically recognizes them as tax-exempt.

As a result, churches may qualify as nonprofits for property tax exemptions under Arizona law even if they do not have a 501(c)(3) letter from the IRS. Under A.R.S. § 42-11109(A), “property or buildings that are used or help primarily for worship, including land, improvements, furniture, and equipment, are exempt from taxation if the property is not used or held for profit.” In this case, according to the Arizona Department of Revenue Assessment Procedures Manual, Chapter 4, the church or other religious nonprofit organization would have to file an annual property tax exemption application with the assessor’s office.

When a Portion of the Nonprofit’s Property is Not Primarily Used for Religious Worship

In some cases, the nonprofit organization or church does not use or hold a portion of its property primarily for religious worship or otherwise does not qualify for a property tax exemption. When this situation occurs, the property tax exemption will proportionally exclude that portion of the property. Disallowance of the portion of the exemption should be based on the amount of space and time dedicated to nonqualifying use compared to the amount of space and time of its qualifying use.

Call Us Today and See How We Can Help

The Arizona attorneys and staff at Provident Law have years of experience advising churches and other religious organizations about federal and state laws that affect their operations. We can evaluate your situation, present your options, and help you make the right decisions for you. Call us today at (480) 388-3343 or connect with us online and learn more about how we can help.

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