How does a Mississippi county decide if a 501(c)(3) qualifies for property-tax exemption as a charitable society?
Plain-English summary
A 501(c)(3) nonprofit asked the Sunflower County Board of Supervisors for an ad valorem (property) tax exemption on real estate it owned, claiming status as a "charitable society" under Miss. Code Ann. § 27-31-1(d). The county attorney brought seven questions to the AG, ranging from "does the 501(c)(3) tax status automatically grant the exemption?" to "could the county get sued either way?"
The AG ran the table on the substantive questions and declined the liability questions.
1. 501(c)(3) status alone does not qualify the entity as a charitable society. Federal tax-exempt status is a federal concept; Mississippi's property-tax exemption is a state concept and uses its own definitions. Tax exemptions are strictly construed in favor of the taxing authority (Hattiesburg Area Senior Services, Inc. v. Lamar County, 633 So. 2d 440 (Miss. 1994)).
2. The Board's determination is the gatekeeping step. The exemption is mandatory if the entity qualifies. Section 27-31-1 says exempt property "shall be exempt." If the Board determines the entity meets the definition of a charitable society and the property is used exclusively for the nonprofit purpose, the exemption attaches. The Board can't refuse a qualifying entity, and it can't grant to a non-qualifying entity. The legal standard for "charitable society" comes from the AG's prior opinion in Haque (1998), which adopted the definition of charitable organization in § 79-11-501(a)(i)(B): an entity established for "voluntary health and welfare, benevolent, philanthropic, patriotic, educational, humane, scientific, public health, environmental conservation, civic, or other eleemosynary purpose," etc.
3. Partial exemptions on a percentage of the property are not authorized. "It is the property itself which is either taxed or exempt from taxation." Either the property is exclusively used for the charitable, nonprofit purpose, or it is not. Mixed-use complications (e.g., a church-owned building with a coffee shop) usually mean the property does not qualify as a whole.
4. The use restrictions in § 79-11-33 (which apply to religious organizations) probably extend to charitable societies. Hattiesburg Area Senior Services suggests that § 27-31-1(d)'s reference to "the amount of land which such association or society may own as provided in Section 79-11-33" pulls in not just the acreage limit but the use limits too. Whether a particular property fits is a factual question for the Board.
5. The exemption is not permanent. Each year's tax roll requires review. § 27-35-50 requires the appraisal to be made "according to current use." If the use changes (the charitable society starts running a side business, leases the property, or shutters), the Board can revoke the exemption through the standard assessment process under §§ 27-35-1 through 27-35-711.
6. and 7. The AG declined to opine on liability questions, which involve mixed issues of law and fact.
The structure of the AG's answer is procedural: federal status does not control, the Board's factual findings do, and those findings get revisited every year on the tax roll.
What this means for you
If you serve on a Mississippi county board of supervisors handling an exemption application
Build a written checklist for charitable-society applications: confirm the entity meets the § 79-11-501(a)(i)(B) definition (purpose-based), confirm the property is used exclusively for that purpose and not for profit, confirm the property fits the use restrictions referenced in § 79-11-33, document the findings on the minutes. If the entity owns multiple parcels, evaluate each parcel separately. If the use is mixed, the property generally does not qualify. The Mississippi Supreme Court's "pierce the veil" language from Better Living Services, Inc. v. Bolivar County (1991) is your basis to look beyond the entity's stated mission to its actual operations.
If you run a Mississippi nonprofit applying for property-tax exemption
Bring the substantive evidence, not just the IRS determination letter. Operating budget, mission statement, programs delivered, hours of facility use for charitable activities, percentage of revenue from nonprofit-purpose activities. If any portion of the property generates fee revenue, lease income, or unrelated business income, expect the Board to scrutinize whether the exemption fits. A clear, single-purpose use story wins more easily than a hybrid story. The federal 501(c)(3) status helps establish you are a nonprofit but does not prove the state-law charitable-society category.
If you are a tax assessor or tax collector
Each year's tax roll is the moment to revisit. § 27-35-50 ties appraisal to current use. If a parcel previously listed as exempt has changed use (sold, leased to a for-profit, shifted to substantial fee-based programming), bring the change to the Board's attention before certifying the roll. Property owners get notice and a right to protest. Document the changes in the file.
If you are an attorney advising on a denial
The Board's denial is reviewable. § 27-35-1 et seq. provides the assessment-protest framework. The AG correctly declines to address county liability for granting or denying, but a wrongful denial can lead to an appeal in chancery court. Document the Board's specific findings and the evidence presented.
If you are a competing taxpayer in the county
If the Board grants an exemption you believe is unlawful, the protest framework gives you standing to object during the tax-roll certification process. Bring your evidence to the public meeting. The AG opinion specifically declines to address whether other taxpayers can sue, but the standard administrative protest process is your first step.
Common questions
Q: Does my 501(c)(3) status guarantee any state tax benefit in Mississippi?
A: No. The 1996 Hammack opinion was direct: "A nonprofit organization is not eligible for tax exempt status under state law by virtue of the fact that it has tax exempt status under Section 501(c)(3) of the Internal Revenue Code." Federal exemption is a separate analysis.
Q: What is a "charitable society" under Mississippi tax law?
A: The 1998 Haque opinion adopted the § 79-11-501(a)(i)(B) definition: any entity established for "voluntary health and welfare, benevolent, philanthropic, patriotic, educational, humane, scientific, public health, environmental conservation, civic, or other eleemosynary purpose," etc. The definition is purpose-based, not status-based.
Q: What does "used exclusively" mean?
A: The property must be used exclusively for the charitable society's nonprofit purpose. The Better Living Services case underscores that Mississippi courts will look past the entity's name and ownership to the actual activity on the property. If the entity has "entered into a proprietary function in competition with private enterprise," the property fails the test.
Q: Can the Board grant a partial exemption based on percentage of charitable use?
A: No. Mississippi treats the property as either exempt or not. The 2007 Locke opinion is clear: "It is the property itself which is either taxed or exempt from taxation." Mixed-use generally means the property is taxable.
Q: Are the property-use limits in § 79-11-33 (which lists what religious organizations can own) applicable to charitable societies too?
A: The Mississippi Supreme Court in Hattiesburg Area Senior Services suggested yes: "Sec. 79-11-33, dealing specifically with religious societies, suggests strongly that the tax exempt property of all of the societies mentioned in the first clause of 27-31-1(d) is limited to the specific usages enumerated in [79-11-33]." The Board makes the factual determination on each property.
Q: Is the exemption permanent once granted?
A: No. The annual tax roll process under §§ 27-35-1 through 27-35-711 lets the Board revisit assessments. § 27-35-50 anchors the appraisal to current use. If the use changes, the exemption can be revoked through the standard process.
Q: Can the Board be sued for granting or denying an exemption?
A: The AG declined to opine on liability. Aggrieved parties (the applicant if denied, other taxpayers if granted) typically use the assessment-protest process, which can lead to chancery court review.
Q: What about a charitable society that leases part of its property to another nonprofit?
A: The "exclusive use" requirement asks whether the property is used exclusively for the society's nonprofit purpose. Leasing to another nonprofit may or may not satisfy that, depending on the lease terms and the lessee's activity. The Board has to make the factual determination on the specific arrangement.
Background and statutory framework
Mississippi's general rule on tax exemptions is unfavorable to the taxpayer. Hattiesburg Area Senior Services, Inc. v. Lamar County, 633 So. 2d 440 (Miss. 1994), articulates the rule: "statutes exempting property from taxation are to be strictly construed in favor of the taxing authority and against the exemption." That is the lens through which every exemption application is evaluated.
§ 27-31-1(d) lists the exempt categories: religious societies, ecclesiastical bodies, charitable societies, historical or patriotic associations, garden or pilgrimage clubs. The two qualifying conditions are (a) ownership by a qualifying entity and (b) exclusive use for that entity, not for profit. The statute also references § 79-11-33's land limits.
§ 79-11-501(a)(i)(B) is a definition borrowed from the charitable solicitation statute, used by the AG to fill the gap that § 27-31-1(d) leaves by not defining "charitable society."
The annual revenue cycle is fixed by §§ 27-35-1 through 27-35-711. The tax assessor lists each parcel. The Board approves the tax roll. Taxpayers can protest. Each year's exemption is freshly examined; nothing is permanent.
Citations
- Miss. Code Ann. § 27-31-1 (general property tax exemption)
- Miss. Code Ann. § 27-31-1(d) (charitable, religious, and similar societies)
- Miss. Code Ann. § 79-11-33 (religious-society land use limits)
- Miss. Code Ann. § 79-11-501(a)(i)(B) (charitable organization definition)
- Miss. Code Ann. §§ 27-35-1 through 27-35-711 (assessment process)
- Miss. Code Ann. § 27-35-50 (appraisal according to current use)
- Hattiesburg Area Senior Services, Inc. v. Lamar County, 633 So. 2d 440 (Miss. 1994) (strict construction of exemptions)
- Better Living Services, Inc. v. Bolivar County, 587 So. 2d 914 (Miss. 1991) (look-through analysis of activities)
- MS AG Op., Haque (Feb. 20, 1998) (charitable society definition)
- MS AG Op., Tennyson (Dec. 14, 2001) (local determination of nonprofit qualification)
- MS AG Op., Woodard (June 19, 2008) (501(c)(3) status not automatic; exclusive use required)
- MS AG Op., McWilliams (Dec. 28, 1999) (501(c)(3) does not automatically exempt)
- MS AG Op., Hammack (Apr. 19, 1996) (federal nonprofit status does not establish state exemption)
- MS AG Op., Locke (May 23, 2007) (no partial exemption)
- MS AG Op., Andrews (Dec. 17, 1999) (local factual determination on § 79-11-33)
- MS AG Op., Barber (Oct. 5, 2001) and (Jan. 23, 1989) (§ 79-11-33 factual determination)
- MS AG Op., Lee (Jan. 30, 1979) (factual determination)
- MS AG Op., Barry (June 26, 2006) (exemption review through normal assessment process)
- MS AG Op., Head (Nov. 25, 1998) (AG does not address liability)
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2022/10/J.McWilliams-October-21-2022-Ad-Valorem-Tax-Exemption-for-Charitable-Society.pdf
Original opinion text
October 21, 2022
John McWilliams, Esq.
Attorney, Sunflower County Board of Supervisors
220 Second Street
Indianola, Mississippi 38751-0107
Re:
Ad Valorem Tax Exemption for Charitable Society
Dear Mr. McWilliams:
The Office of the Attorney General has received your request for an official opinion.
Background
According to your request, a 501(c)(3) nonprofit corporation ("entity") has requested that the
Board of Supervisors ("Board") grant it an ad valorem tax exemption on real property it owns in
the county because it is a charitable society under Mississippi Code Annotated Section 27-31-1(d).
You state that the entity has registered with the Mississippi Secretary of State and may now solicit
charitable donations. The entity has provided the Board with a list of charitable and/or civic
activities in which it is involved. You present the following questions for our consideration.
Questions Presented
1. Does the fact that the entity is a nonprofit corporation with a 501(c)(3) tax status and has
properly registered as a charitable organization with the Secretary of State automatically
authorize ad valorem tax exemption for all of its property?
2. Is the granting of such a tax exemption by the Board mandatory or discretionary?
3. May the Board grant an exemption for the percentage of the property actually in use for
charitable purposes?
4. Do the limitations on the uses of property belonging to religious organizations in Section
79-11-33 also apply to a charitable society?
- Is a tax exemption granted to a charitable organization permanent as to the property of that
organization, or is it limited by the present use of such property? Is the Board required to
review the use of such property each year in order for the exemption to continue? - What is the potential liability of the Board if the requested tax exempt status is denied? Is
the Board subject to a suit by the requesting taxpayer? - What is the potential liability of the Board if the requested tax exempt status is granted? Is
the Board subject to a suit by other taxpayers of the county whose taxes will be increased
because of the loss of revenue attributable to this exemption?
Brief Response - Status as a 501(c)(3) nonprofit does not automatically qualify the entity as a charitable
society as contemplated by Section 27-31-1(d). - The Board must determine whether the entity is actually a charitable society entitled to the
exemption, which is mandatory for those qualifying under the statute. - The exemption flows from the property as a whole and can only be granted when it is used
exclusively for the charitable society and not for profit. - Whether the property in question falls under Section 79-11-33 is a factual determination to
be made by the Board. - The tax assessor/collector presents a new tax roll to the Board for its approval each year
based on the current uses and valuations of taxable property. - This office is unable to answer questions of liability with an official opinion.
- See our response to Question 6.
Applicable Law and Discussion
The statute under which the entity is seeking tax exemption is Section 27-31-1, which states, in
pertinent part:
The following shall be exempt from taxation:
(d) All property, real or personal, belonging to any religious society, or
ecclesiastical body, or any congregation thereof, or to any charitable society, or to
any historical or patriotic association or society, or to any garden or pilgrimage club
or association and used exclusively for such society or association and not for
profit; not exceeding, however, the amount of land which such association or
society may own as provided in Section 79-11-33.
(emphasis added). Section 27-31-1(d) exempts property, both real and personal, belonging to "any
charitable society" which is "used exclusively for such society . . . and not for profit. . . ." Id. The
Mississippi Supreme Court stated the following regarding tax exemptions: "Under our general
rule, statutes exempting property from taxation are to be strictly construed in favor of the taxing
authority and against the exemption." Hattiesburg Area Senior Services, Inc. v. Lamar County,
633 So. 2d 440, 444 (Miss. 1994). The Court continued, regarding the qualification as a charitable
society under the statute:
For an organization to qualify for a "charitable" exemption under § 27-31-1(d), it
must thus be evident that: 1) the organization meets the definition of "charitable"
as contemplated by the statute; 2) the property for which the exemption is sought
to be claimed is "used exclusively for such society or association" and must not
exceed the amount of land permitted to be owned under Section 79-11-33,
Mississippi Code 1972 Annotated; and 3) the property is not used "for profit."
Hattiesburg Area Senior Services, Inc., 633 So. 2d at 443 (Miss. 1994).
While the statute does not define charitable society, this office has previously approved the
definition of charitable organization found in Section 79-11-501(a)(i)(B) as sufficient to define
charitable society. MS AG Op., Haque at 3 (Feb. 20, 1998). Charitable organization is defined
as:
(B) Any person actually or purporting to be established for any voluntary health
and welfare, benevolent, philanthropic, patriotic, educational, humane, scientific,
public health, environmental conservation, civic, or other eleemosynary purpose or
for the benefit of law enforcement personnel, fire fighters, or other public safety
organizations, or any person employing in any manner a charitable appeal as the
basis of any solicitation or an appeal that suggests that there is a charitable purpose
to any solicitation and includes each local, county or area division within this state
of such charitable organization, provided such local, county or area division has
authority and discretion to disburse funds or property otherwise than by transfer to
any parent organization.
Whether the entity or any other entity qualifies as a charitable society under the statute is a question
of fact that this office cannot answer by way of official opinion. Haque at 3; MS AG Op.,
Tennyson at 1 (Dec. 14, 2001) ("This office has consistently opined that local governing
authorities must make the factual determination as to whether a particular non-profit organization
is qualified to receive tax exemptions.") However, this office has long maintained that property
owned by a 501(c)(3) does not automatically qualify for a tax exemption because it is a nonprofit.
MS AG Op., Woodard at 2 (June 19, 2008); see also MS AG Op., McWilliams at 1 (Dec. 28,
1999) ("[R]eceipt of a Section 501 (c)(3) tax exemption alone does not qualify an entity to be
exempt from ad valorem taxation."); MS AG Op., Hammack at 1 (Apr. 19, 1996) ("A nonprofit
organization is not eligible for tax exempt status under state law by virtue of the fact that it has tax
exempt status under Section 501(c)(3) of the Internal Revenue Code.")
In addition to the entity qualifying as a charitable society under the statute, its property must be
used exclusively for its organization and not for profit. In previous opinions, this office has opined
that "even if the organization you inquire about is one of the ones listed in the above statute (e.g.,
a religious or charitable society, fraternal or benevolent organization, etc.), the property still must
be used exclusively for that purpose." MS AG Op., Woodard at 1 (June 19, 2008). Such a
determination is a factual one to be made by the Board. Id. at 2. In examining earlier opinions
that denied tax exemptions to charitable and religious organizations, the Mississippi Supreme
Court stated that it had "pierced the veil of the religious institution or charitable society and looked
at the use being made of the property upon which the tax exemption was sought." Better Living
Services, Inc. v. Bolivar County, 587 So. 2d 914, 916 (Miss. 1991). The court found that in both
of the earlier cases, the organization "had entered into a proprietary function in competition with
private enterprise." Id. The Board must take all of these factors into consideration when
determining whether the entity qualifies as a charitable society and is entitled to the tax exemption.
Next, you ask whether the tax exemption is mandatory or discretionary. The introductory language
of the statute states that "[t]he following shall be exempt . . . ." Miss. Code Ann. § 27-31-1
(emphasis added). Again, it depends on the findings of the Board. If the Board ultimately finds
that the entity qualifies as a charitable society under the statute, and its property is being used
exclusively for its nonprofit purpose, then the mandatory language of the statute must be followed.
You next inquire about your authority to grant a partial exemption based on a specified percentage
of the property. We assume that your question refers to a situation in which the property owned
by the charitable society is not being used exclusively for the organization and its nonprofit
purpose. This office has opined that, rather than the owner of the property, "[i]t is the property
itself which is either taxed or exempt from taxation . . . and any exemption depends on the
property's exclusive, non-profit use." MS AG Op., Locke at 1 (May 23, 2007); see also Woodard
at 1-2 (opining that one of the criteria for the tax exemption is the property being used exclusively
for the charitable, nonprofit purpose). Either the property is exclusively used for a charitable,
nonprofit purpose and therefore exempt from ad valorem taxes, or it is not and does not qualify for
the exemption.
Your fourth question asks whether the language in Section 27-31-1(d), which limits the type or
use of property that may be exempted by religious organizations to that specified in Section 79-11-33, also applies to a charitable society. Section 79-11-33 begins thus: "Any religious society,
ecclesiastical body and/or any congregation thereof may hold and own the following real property,
but no other . . . ." The statute proceeds to delineate the many and various uses available to
property owned by religious organizations.
As this office explained in MS AG Op., Barber at 3 (Oct. 5, 2001), the Court in Hattiesburg Area
Senior Services, Inc. stated that "Sec. 79-11-33, dealing specifically with religious societies,
suggests strongly that the tax exempt property of all of the societies mentioned in the first clause
of 27-31-1(d) is limited to the specific usages enumerated in [79-11-33]." (internal quotations
omitted). Previously issued opinions from this office about Section 79-11-33 have stated that
whether the property falls under that section is a factual determination to be made by the local
authority based upon the best information available to it. MS AG Op., Andrews at 1 (Dec. 17,
1999); MS AG Op., Barber at 1 (Jan. 23, 1989); MS AG Op., Lee at 2 (Jan. 30, 1979).
Next, you ask whether a tax exemption granted to a charitable organization is permanent as to the
property of that organization, or is it limited by the present use of such property, and whether the
Board is required to review the use of such property each year in order for the exemption to
continue. In answering a similar question about revocation of exemptions granted under Section
27-31-1(d), this office opined that "[a]ny change in an assessment from exempt to non-exempt (or
vice-versa) is accomplished by going through the usual assessment process as laid out in Sections
27-35-1 through 27-35-711. . . ." MS AG Op., Barry at 2 (June 26, 2006). The tax assessor is
responsible for placing all land on the tax rolls with parcels marked exempt or not, and the Board
approves it in the process of certifying the tax roll. Id. A taxpayer will have the right to protest the
published tax roll, and the tax assessor shall determine the true value of all classes of property
annually. Id. For all Class I and Class II property —which would include the real property
belonging to the entity— "the appraisal shall be made according to current use. . . ." Miss. Code
Ann. § 27-35-50. "Whether or not an exemption under Section 27-31-1(d) of the Mississippi Code
should be revoked is a factual determination which must be made by the [] Board of Supervisors."
Barry at 2.
Your sixth and seventh questions ask about potential liability of the Board. This office is unable
to opine on questions of liability. Questions of liability involve "mixed issues of law and fact which
cannot be addressed by an Attorney General's opinion." MS AG Op., Head at 1 (Nov. 25, 1998);
see also MS AG Op., Hammack at 2 (Oct. 13, 1993) ("We cannot by opinion determine
liability."); MS AG Op., Lawrence at *1 (July 20, 2007) ("[W]e cannot speculate to the various
potential liabilities which might arise and may not render an opinion in that regard.").
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By:
/s/ Misty Monroe
Misty Monroe
Assistant Attorney General