Bill Summary – FastDemocracy

Enrolled Copy                                                                               S.B. 59
                   GOVERNMENT LEASED PROPERTY TAX EXEMPTION
                                           2024 GENERAL SESSION
                                                STATE OF UTAH
                                       Chief Sponsor: Lincoln Fillmore House Sponsor: Steve Eliason
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  LONG TITLE
  General Description:
      This bill amends the property tax exemptions in the Property Tax Act.
  Highlighted Provisions:
      This bill:
      ▸ defines terms to provide the circumstances under which property leased to a government
  entity qualifies for a property tax exemption; and
      ▸ makes technical and conforming changes.
  Money Appropriated in this Bill:
      None
  Other Special Clauses:
      This bill provides retrospective operation.
  Utah Code Sections Affected:
  AMENDS:
      59-2-1101, as last amended by Laws of Utah 2023, Chapters 16, 147 and 471
      59-2-1102, as last amended by Laws of Utah 2023, Chapter 471
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  Be it enacted by the Legislature of the state of Utah:
        Section 1. Section 59-2-1101 is amended to read:
        59-2-1101 . Definitions -- Exemption of certain property -- Proportional
  payments for certain property -- Exception -- County legislative body authority to adopt
  rules or ordinances.
  (1) As used in this section:
      (a) "Charitable purposes" means:
          (i) for property used as a nonprofit hospital or a nursing home, the standards outlined
               in Howell v. County Board of Cache County ex rel. IHC Hospitals, Inc., 881 P.2d
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               880 (Utah 1994); and
           (ii) for property other than property described in Subsection (1)(a)(i), providing a gift
               to the community.
       (b) "Compliance period" means a period equal to 15 taxable years beginning with the
           first taxable year for which the taxpayer claims a tax credit under Section 42, Internal
           Revenue Code, or Section 59-7-607 or 59-10-1010.
       (c) (i) "Educational purposes" means purposes carried on by an educational
           organization that normally:
               (A) maintains a regular faculty and curriculum; and
               (B) has a regularly enrolled body of pupils and students.
           (ii) "Educational purposes" includes:
               (A) the physical or mental teaching, training, or conditioning of competitive
                   athletes by a national governing body of sport recognized by the United States
                   Olympic Committee that qualifies as being tax exempt under Section
                   501(c)(3), Internal Revenue Code; and
               (B) an activity in support of or incidental to the teaching, training, or conditioning
                   described in this Subsection (1)(c)(ii).
       (d) "Exclusive use exemption" means a property tax exemption under Subsection
           (3)(a)(iv), for property owned by a nonprofit entity used exclusively for one or more
           of the following purposes:
           (i) religious purposes;
           (ii) charitable purposes; or
           (iii) educational purposes.
       (e) (i) "Farm machinery and equipment" means tractors, milking equipment and
           storage and cooling facilities, feed handling equipment, irrigation equipment,
           harvesters, choppers, grain drills and planters, tillage tools, scales, combines,
           spreaders, sprayers, haying equipment, including balers and cubers, and any other
           machinery or equipment used primarily for agricultural purposes.
           (ii) "Farm machinery and equipment" does not include vehicles required to be
               registered with the Motor Vehicle Division or vehicles or other equipment used
               for business purposes other than farming.
       (f) "Gift to the community" means:
           (i) the lessening of a government burden; or
           (ii) (A) the provision of a significant service to others without immediate
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              expectation of material reward;
              (B) the use of the property is supported to a material degree by donations and gifts
                   including volunteer service;
              (C) the recipients of the charitable activities provided on the property are not
                   required to pay for the assistance received, in whole or in part, except that if in
                   part, to a material degree;
              (D) the beneficiaries of the charitable activities provided on the property are
                   unrestricted or, if restricted, the restriction bears a reasonable relationship to
                   the charitable objectives of the nonprofit entity that owns the property; and
              (E) any commercial activities provided on the property are subordinate or
                   incidental to charitable activities provided on the property.
      (g) "Government exemption" means a property tax exemption provided under
          Subsection (3)(a)(i), (ii), or (iii).
      (h) (i) "Nonprofit entity" means an entity:
              (A) that is organized on a nonprofit basis, that dedicates the entity's property to the
                   entity's nonprofit purpose, and that makes no dividend or other form of
                   financial benefit available to a private interest;
              (B) for which, upon dissolution, the entity's assets are distributable only for
                   exempt purposes under state law or to the government for a public purpose; and
              (C) for which none of the net earnings or donations made to the entity inure to the
                   benefit of private shareholders or other individuals, as the private inurement
                   standard has been interpreted under Section 501(c)(3), Internal Revenue Code.
          (ii) "Nonprofit entity" includes an entity:
              (A) if the entity is treated as a disregarded entity for federal income tax purposes
                   and wholly owned by, and controlled under the direction of, a nonprofit entity;
                   and
              (B) for which none of the net earnings and profits of the entity inure to the benefit
                   of any person other than a nonprofit entity.
          (iii) "Nonprofit entity" includes an entity that is not an entity described in Subsection
              (1)(h)(i) if the entity jointly owns a property that:
              (A) is used for the purpose of providing permanent supportive housing;
              (B) has an owner that is an entity described in Subsection (1)(h)(i) or that is a
                   housing authority that operates the permanent supportive housing;
              (C) has an owner that receives public funding from a federal, state, or local
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      S.B. 59                                                                                  Enrolled Copy
                     government entity to provide support services and rental subsidies to the
                     permanent supportive housing;
               (D) is intended to be transferred at or before the end of the compliance period to
                     an entity described in Subsection (1)(h)(i) or a housing authority that will
                     continue to operate the property as permanent supportive housing; and
               (E) has been certified by the Utah Housing Corporation as meeting the
                     requirements described in Subsections (1)(h)(iii)(A) through (D).
       (i) "Permanent supportive housing" means a housing facility that:
           (i) provides supportive services;
           (ii) makes a 15-year commitment to provide rent subsidies to tenants of the housing
               facility when the housing facility is placed in service;
           (iii) receives an allocation of federal low-income housing tax credits in accordance
               with 26 U.S.C. Sec. 42; and
           (iv) leases each unit to a tenant:
               (A) who, immediately before leasing the housing, was homeless as defined in 24
                     C.F.R. 583.5; and
               (B) whose rent is capped at no more than 30% of the tenant's household income.
       (j) (i) "Property of" means property that an entity listed in Subsection (3)(a)(ii) or (iii)
           has a legal right to possess.
           (ii) "Property of" includes a lease of real property if:
               (A) the property is wholly leased to a state or political subdivision entity listed in
                     Subsection (3)(a)(ii) or (iii) under a triple net lease; and
               (B) the lease is in effect for the entire calendar year.
       [(j)] (k) "Supportive service" means a service that is an eligible cost under 24 C.F.R.
           578.53.
       (l) "Triple net lease" means a lease agreement under which the lessee is responsible for
           the real estate taxes, building insurance, and maintenance of the property separate
           from and in addition to the rental price.
   (2) (a) Except as provided in Subsection (2)(b)[ ], an exemption under this part may be
       allowed only if the claimant is the owner of the property as of January 1 of the year
       the exemption is claimed.
       (b) [Notwithstanding Subsection (2)(a), a] A claimant shall collect and pay a proportional
           tax based upon the length of time that the property was not owned by the claimant if:
           (i) the claimant is a federal, state, or political subdivision entity described in
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              Subsection (3)(a)(i), (ii), or (iii); or
          (ii) pursuant to Subsection (3)(a)(iv):
              (A) the claimant is a nonprofit entity; and
              (B) the property is used exclusively for religious, charitable, or educational
                    purposes.
  (3) (a) The following property is exempt from taxation:
          (i) property exempt under the laws of the United States;
          (ii) property of:
              (A) the state;
              (B) school districts; and
              (C) public libraries;
          (iii) except as provided in Title 11, Chapter 13, Interlocal Cooperation Act, property
              of:
              (A) counties;
              (B) cities;
              (C) towns;
              (D) special districts;
              (E) special service districts; and
              (F) all other political subdivisions of the state;
          (iv) except as provided in Subsection (6) or (7), property owned by a nonprofit entity
              used exclusively for one or more of the following purposes:
              (A) religious purposes;
              (B) charitable purposes; or
              (C) educational purposes;
          (v) places of burial not held or used for private or corporate benefit;
          (vi) farm machinery and equipment;
          (vii) a high tunnel, as defined in Section 10-9a-525;
          (viii) intangible property; and
          (ix) the ownership interest of an out-of-state public agency, as defined in Section
              11-13-103:
              (A) if that ownership interest is in property providing additional project capacity,
                    as defined in Section 11-13-103; and
              (B) on which a fee in lieu of ad valorem property tax is payable under Section
                    11-13-302.
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      S.B. 59                                                                                 Enrolled Copy
       (b) For purposes of a property tax exemption for property of school districts under
           Subsection (3)(a)(ii)(B), a charter school under Title 53G, Chapter 5, Charter
           Schools, is considered to be a school district.
   (4) Subject to Subsection (5), if property that is allowed an exclusive use exemption or a
       government exemption ceases to qualify for the exemption because of a change in the
       ownership of the property:
       (a) the new owner of the property shall pay a proportional tax based upon the period of
           time:
           (i) beginning on the day that the new owner acquired the property; and
           (ii) ending on the last day of the calendar year during which the new owner acquired
               the property; and
       (b) the new owner of the property and the person from whom the new owner acquires
           the property shall notify the county assessor, in writing, of the change in ownership
           of the property within 30 days from the day that the new owner acquires the property.
   (5) Notwithstanding Subsection (4)(a), the proportional tax described in Subsection (4)(a):
       (a) is subject to any exclusive use exemption or government exemption that the property
           is entitled to under the new ownership of the property; and
       (b) applies only to property that is acquired after December 31, 2005.
   (6) (a) A property may not receive an exemption under Subsection (3)(a)(iv) if:
           (i) the nonprofit entity that owns the property participates in or intervenes in any
               political campaign on behalf of or in opposition to any candidate for public office,
               including the publishing or distribution of statements; or
           (ii) a substantial part of the activities of the nonprofit entity that owns the property
               consists of carrying on propaganda or otherwise attempting to influence
               legislation, except as provided under Subsection 501(h), Internal Revenue Code.
       (b) Whether a nonprofit entity is engaged in an activity described in Subsection (6)(a)
           shall be determined using the standards described in Section 501, Internal Revenue
           Code.
   (7) A property may not receive an exemption under Subsection (3)(a)(iv) if:
       (a) the property is used for a purpose that is not religious, charitable, or educational; and
       (b) the use for a purpose that is not religious, charitable, or educational is more than de
           minimis.
   (8) A county legislative body may adopt rules or ordinances to:
       (a) effectuate an exemption under this part; and
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      Enrolled Copy                                                                                   S.B. 59
      (b) designate one or more persons to perform the functions given to the county under
          this part.
  (9) If a person is dissatisfied with an exemption decision made under designated
      decision-making authority as described in Subsection (8)(b), that person may appeal the
      decision to the commission under Section 59-2-1006.
        Section 2. Section 59-2-1102 is amended to read:
        59-2-1102 . Determination of exemptions by board of equalization -- Appeal --
  Application for exemption -- Annual statement -- Exceptions.
  (1) (a) For property assessed under Part 3, County Assessment, the county board of
      equalization may, after giving notice in a manner prescribed by rule, determine
      whether certain property within the county is exempt from taxation.
      (b) The decision of the county board of equalization described in Subsection (1)(a) shall:
          (i) be in writing; and
          (ii) include:
              (A) a statement of facts; and
              (B) the statutory basis for its decision.
      (c) Except as provided in Subsection (10)(a), a copy of the decision described in
          Subsection (1)(a) shall be sent on or before May 15 to the person applying for the
          exemption.
  (2) Except as provided in Subsection (7) and subject to Subsection (8), [a reduction in the
      value of property may not be made under this part,] a county board of equalization may
      not grant an exemption under this part unless the person affected or the person's agent:
      (a) submits a written application to the county board of equalization; and
      (b) verifies the application by signed statement.
  (3) (a) The county board of equalization may require a person making an application for
      exemption [or reduction] to appear before the county board of equalization and be
      examined under oath.
      (b) If the county board of equalization requires a person making an application for
          exemption [or reduction] to appear before the county board of equalization, [a
          reduction may not be made or exemption granted unless the person] the county board
          of equalization may not grant an exemption unless the person affected or the person's
          agent appears and answers all questions pertinent to the inquiry.
  (4) For the hearing on the application, the county board of equalization may subpoena any
      witnesses, and hear and take any evidence in relation to the pending application.