(a) Definitions. For the purposes of this
regulation:
(1) "Dissolution clause" means a
statement in the organizational documents of a qualifying organization that
upon the liquidation, dissolution, or abandonment of the qualifying
organization, the exempt property will not inure to the benefit of any private
person except another qualifying organization.
(2) "Irrevocable dedication clause" means a
statement in the organizational documents of a qualifying organization that the
property is irrevocably dedicated exclusively to one or more qualifying
purposes.
(3) "Organizational
document" means the articles of incorporation of a corporation, or the articles
of organization of a limited liability company, or the bylaws, articles of
association, constitution or regulations of a community chest, fund, or
foundation, or corporation chartered by an act of Congress.
(4) "Qualifying organization" means a
community chest, fund, foundation, nonprofit corporation, or eligible limited
liability company, organized and operated exclusively for religious, hospital,
scientific, or charitable purposes. Charitable purposes include educational
purposes as defined in Revenue and Taxation Code section
214,
subdivision (j).
(5) "Qualifying
purpose" means a religious, hospital, scientific or charitable purpose.
Charitable purposes include educational purposes as defined in Revenue and
Taxation Code section
214,
subdivision (j).
(b) In
General. In order to qualify for the welfare exemption provided in Revenue and
Taxation Code section
214,
among other requirements specified therein, the property owned by a qualifying
organization must be irrevocably dedicated exclusively to one or more
qualifying purposes, and upon the liquidation, dissolution, or abandonment of
the qualifying organization, the property will not inure to the benefit of any
private person except another qualifying organization. In order to satisfy
these requirements, the organizational document of the qualifying organization
must contain both an irrevocable dedication clause, which meets the
requirements set forth in subdivision (c) below, and a dissolution clause,
which meets the requirements set forth in subdivision (d) below.
(c) Irrevocable Dedication Clause. Property
is deemed to be irrevocably dedicated exclusively to one or more qualifying
purposes provided that a qualifying organization's organizational document
contains a statement that irrevocably dedicates its property exclusively to one
or more qualifying purposes.
(1) If the
organization's charitable purpose is educational purposes as defined in Revenue
and Taxation Code section
214,
subdivision (j), the irrevocable dedication clause shall state that the
property is irrevocably dedicated to educational purposes as defined in section
214,
or that the property is irrevocably dedicated to charitable and educational
purposes meeting the requirements of Revenue and Taxation Code section
214.
(2) If the irrevocable dedication clause
states that the property is dedicated to purposes other than the qualifying
purposes, the property does not qualify for the welfare exemption.
(3) If the irrevocable dedication clause
states that the property is irrevocably dedicated to a "public" or "public
benefit" purpose, the property does not qualify for the welfare
exemption.
(4) The following
examples illustrate irrevocable dedication clauses as defined in subdivision
(a)(2) above:
Example No. 1: The property owned by this organization is
irrevocably dedicated to charitable, scientific, hospital, or religious
purposes.
Example No. 2: The property owned by this organization is
irrevocably dedicated to charitable and educational purposes meeting the
requirements of Revenue and Taxation Code section
214.
Example No. 3: The property owned by this organization is
irrevocably dedicated to educational purposes as defined in Revenue and
Taxation Code section
214,
subdivision (j).
Example No. 4: The property located in California owned by
this organization is irrevocably dedicated to charitable, scientific, hospital,
or religious purposes.
Example No. 5: The property owned by this organization is
irrevocably dedicated to charitable purposes within the meaning of section
501(c)(3) of the Internal Revenue Code.
Example No. 6: The property of this corporation is
irrevocably dedicated to charitable purposes and no part of the net income or
assets of this corporation shall ever inure to the benefit of any director,
officer or member thereof or to the benefit of any private
person.
(d)
Dissolution Clause. In order to qualify for the welfare exemption, the
qualifying organization's organizational document must contain a dissolution
clause, which specifically states that its property will be distributed to
another qualifying organization entity upon its liquidation, dissolution, or
abandonment.
(1) If the dissolution clause in
the organizational document designates a specific organization to receive the
distribution, it must state that the designated organization is a qualifying
organization that is organized and operated for a qualifying purpose.
(2) The dissolution clause of the qualifying
organization may provide that, upon the liquidation, dissolution, or
abandonment of the qualifying organization, the property will inure to the
benefit of a governmental entity.
(3) The following examples illustrate
dissolution clauses as defined in subdivision (a)(1) above:
Example No. 1: Upon the liquidation, dissolution or
abandonment of this organization, its assets, remaining after payment or
provision of payment of all debts and liabilities of this organization, shall
be distributed to an organization organized and operated for a charitable,
scientific, hospital, or religious purpose meeting the requirements of Revenue
and Taxation Code section
214.
Example No. 2: Upon the liquidation, dissolution or
abandonment of this organization, the proceeds or assets related to property
located in California, remaining after payment or provision of payment of all
debts and liabilities of this organization, shall be distributed to an
organization organized and operated for a charitable, scientific, hospital, or
religious purpose meeting the requirements of Revenue and Taxation Code section
214.
Example No. 3: Upon the liquidation, dissolution or
abandonment of this organization, its assets, remaining after payment or
provision of payment of all debts and liabilities of this organization, shall
be distributed to an organization organized and operated exclusively for
charitable and educational purposes meeting the requirements of Revenue and
Taxation Code section
214.
Example No. 4: Upon the liquidation, dissolution or
abandonment of this organization, its assets, remaining after payment or
provision of payment of all debts and liabilities of this organization, shall
be distributed to an organization organized and operated exclusively for
educational purposes meeting the requirements of Revenue and Taxation Code
section 214, subdivision (j).
Example No. 5: Upon the dissolution or winding up of the
corporation, its assets remaining after payment, or provision for payment, of
all debts and liabilities of this corporation shall be distributed to a
nonprofit fund, foundation or corporation which is organized and operated
exclusively for charitable purposes and which has established its tax exempt
status under section 501(c)(3) of the Internal Revenue Code.
Example No. 6: Upon the dissolution or winding up of the
organization, its assets remaining after payment or provision of payment of all
debts and liabilities of this organization, shall be distributed to a nonprofit
organization which is organized and operated exclusively for charitable
purposes.
(e)
Failure to Meet Requirements.
(1) If, at the
time of filing, the applicant's organizational document does not contain an
irrevocable dedication clause and/or a dissolution clause which meets the
requirements of subdivisions (c) and (d), respectively, the organization does
not qualify for the Organizational Clearance Certificate under Revenue and
Taxation Code section
254.6.
However, the applicant may be issued an Organizational Clearance Certificate
for the fiscal year for which the Organizational Clearance Certificate is
requested on its application if the applicant amends its organizational
document to meet the requirements of subdivisions (c) and (d) and submits a
certified copy of the amendment to the State Board of Equalization by the next
succeeding lien date.
(2) If, at
the time of filing, applicant's organizational document did not contain an
irrevocable dedication clause and/or a dissolution clause which meets the
requirements of subdivisions (c) and (d), respectively, and the applicant
amends its organizational document to meet the requirements of subdivisions (c)
and (d) after the next succeeding lien date, an Organizational Clearance
Certificate may be issued under Revenue and Taxation Code section
254.6
for the fiscal year following the lien date by which the applicant amends its
organizational document and submits a certified copy of the amendment to the
State Board of Equalization.
(3) If
the applicant amends its organizational document, a certified copy of the
amendments must be provided to the State Board of Equalization.
(4) The county assessor may not approve a
welfare exemption claim until the State Board of Equalization has issued an
Organizational Clearance Certificate under Revenue and Taxation Code section
254.6.
