005.01 A five part statutory test is used to determine eligibility for educational, religious, charitable, and cemetery property tax exemptions. The five mandated criteria are ownership, exclusive use, no financial gain or profit, restricted alcoholic liquor sales, and prohibited discrimination. The property must meet all five criteria for the exemption to be allowed. An organization need not be established solely for educational, religious, charitable, or cemetery purposes; it may be established for a combination of two or more of the exempt uses. For example, a religious organization may own a cemetery or an educational organization which also provides religious activities.
005.01A Educational organization means an institution operated exclusively for the purpose of offering regular courses with systematic instruction in academic, vocational, or technical subjects, or an organization that assists students relating to the origination, processing, or guaranteeing of federally insured student loans for higher education. 005.01A(1) Educational organization shall also mean a museum or historical society operated exclusively for the benefit and education of the public. 005.01B Religious organization means an organization whose purpose is the dedication to or profession of a sectarian creed and belief in a divine or superhuman power or powers to be obeyed or worshipped, or the furtherance and enrichment of spiritual faith involving a code of ethics and a spiritual philosophy.005.01C Charitable organization means an organization operated exclusively for the purpose of the mental, social, or physical benefit of the public or an indefinite number of persons.005.01D Cemetery organization means an organization whose purpose is to maintain areas formally set apart for the interment of human dead.005.02 Ownership, except for motor vehicles Ownership, except for motor vehicles, means the property must be owned by an educational, religious, charitable, cemetery organization, or any organization for the exclusive benefit of the educational, religious, charitable, or cemetery organization. Ownership also means the right to sell, lease, use, give away, or enter the property and the right to refuse to do any of these. All rights may or may not be vested in one owner or interest holder.
005.03 Exclusive Use Exclusive Use means the property must be used exclusively for religious, educational, charitable, or cemetery purposes. The property need not be used solely for one of the four categories of exempt use, but may be used for a combination of exempt uses. For purposes of this regulation, the term exclusive use shall mean the predominant or primary use of the property as opposed to incidental use. The exemption will not be lost if the property is used in an incidental manner as long as the predominant or primary use of the property is for one or more of the exempt uses.
005.03A If the property, when considered as a whole, is not used exclusively for exempt purposes, but the property has a separate and distinct exempt use portion, an exemption for the value of the portion used for exempt purposes will be allowed. No exemption for a portion of the property is allowed where the exempt and nonexempt uses are commingled and the property, when considered as a whole, is not used exclusively for exempt purposes. Property which is vacant and unused for any purpose is not entitled to an exemption.005.03B An organization claiming a property tax exemption shall have the burden of establishing that the property is used exclusively for exempt purposes. The following is a list of factors to be considered in determining if the organization shall be allowed the tax exemption in whole or in part. 005.03B(1) In the case of a private residence, an officer or employee of the organization shall be required to reside in the residence as part of his or her employment and for the convenience of the organization. The property is used for the convenience of the organization and its members to such a degree that the property is an integral part of the organization. The use of the property as a residence must be incidental to the use of the property as a part of the organization's mission.005.03B(2) If property is separate from the organization's main building, exclusive exempt use of the property must still be proved. The relative proximity of the property to the main building is one factor that may be considered in making this determination.005.03B(3) Using income from the property for exempt purposes under federal and state income tax laws does not qualify the property for a property tax exemption. It is the use of the property that establishes whether the property is exempt. If an organization is organized under section 501(c)(3) of the Internal Revenue Code, it will not necessarily be exempt from Nebraska property taxes.005.03B(4) Exclusive use of the property includes ongoing construction of a building or improvement that, when complete, will be used exclusively for exempt purposes. The future use of the completed building or improvement may be ascertained by the actions of the organization owning the property, including, but not limited to, resolutions of an organization's board of directors, or the amendment of the organization's articles of incorporation or bylaws, that indicate a clear intent to use the property for an exempt purpose. During construction, other nonexempt uses must be prohibited to render the property exempt from tax. Demolition of existing structures to prepare the property for its exempt use may be considered an exempt use of the property.005.04 The following examples are provided as general guidelines. All relevant factors of each particular case must be considered when using these examples.005.04AExclusive Use of Residence. A qualifying organization owns residential property, which is used as the residence of an officer or employee of the organization. The officer or employee is required to reside in the residence as a condition of his or her employment and for the convenience of the organization. In addition to being the residence of the officer or employee, the residence is used for various activities of the organization, to such an extent that the residence becomes an integral part of the organization. Considering all these factors together, an exemption for the residential property would be allowed as the exclusive use is for exempt purposes.005.04BSeparate and Distinct. A qualifying organization owns a two-story building. The first floor is used by the organization as a bar and restaurant where food and alcoholic liquors are sold. The second floor is used exclusively by the organization for exempt purposes. The first floor has a nonexempt use and the second floor has an exempt use. The total actual value of this entire property is $90,000, consisting of $10,000 for the land and $80,000 for the improvements. The actual value of the first floor is $50,000 and the actual value of the second floor is $30,000. The exempt value is the value of the second floor plus the percentage of the lot corresponding to the percentage of the second floor with respect to the total improvements. The value of the second floor is $30,000. The percentage of the second floor with respect to the total improvements is ($30,000/$80,000)*100 = 37.50%. The corresponding percentage exempt value of the lot is $10,000 * 37.50% = $3,750. Hence, the total exempt value is $30,000 + $3,750 = $33,750. In addition, personal property used on the nonexempt first floor for nonexempt purposes is taxable, while personal property on the exempt second floor used for exempt purposes is eligible for exemption.005.04CMotor Vehicle. A qualifying organization provides a motor vehicle to an employee to use in the activities of the organization. The employee also uses the motor vehicle for personal and family use beyond incidental use. The motor vehicle is taxable since the motor vehicle is not used exclusively for exempt purposes. Motor vehicles cannot be apportioned between exempt and nonexempt use. Personal use includes the use of the motor vehicle as transportation to and from the workplace, but this personal use does not automatically preclude an exemption.005.04DIncidental Use. A qualifying organization conducts bingo games in the basement of its buildings two nights per week. Although conducting bingo games is not an exempt use, the use of the property for bingo is incidental, and the predominant use of the building remains exempt. No apportionment of the property is required and the entire building is exempt.005.04EExclusive Use. A qualifying organization owns a building, which is used for its office space, and leases a portion of the building to a private law firm. The portion leased to the private law firm is not used exclusively for exempt purposes and is not eligible for an exemption.005.04FVacant Lot. A qualifying organization buys a vacant lot for future use as a building site. However, the land is held idle for several years. No exemption is allowed for the tax years during which the vacant land sits idle, because the land is not used for an exempt purpose.005.04G Use of Property. A qualifying organization owns agricultural land on which it plans to build at some future date. In the interim, the land is rented to a farmer who plants and harvests crops on the land. No exemption is allowed for the land because it is used for nonexempt purposes and the use is not incidental. The use of the income by the organization for exempt purposes will not qualify the land for a property tax exemption. It is the use of the property that qualifies it for an exemption.005.04HUnder Construction. A qualifying organization begins construction of a building on its previously-nonexempt property that will, when completed, be exclusively used for an exempt purpose. The construction effectively precludes other uses of the property. An exemption for the property under construction will be permitted.005.04IResidential Purpose. A qualifying corporation owns and operates a residential facility for low-income elderly persons. Rent, cost of meals, and other charges are designed to cover the actual cost of the services provided. The property is used for residential purposes, not used exclusively for charitable purposes, and no exemption is allowed.005.04JHealth Care and/or Assisted Living Facility. A qualifying organization owns a health care facility which is made up of a nursing home and assisted living housing. The organization does not prescreen the applicants for financial ability prior to admission. The criteria for admission are the need for health care due to age, ill-health, or physical disability. The facility meets the definition of a health care facility and/or assisted living facility under Nebraska law. All residents are permitted to remain in the facility regardless of their ability to pay for the services provided. In this case, the property is allowed an exemption because the property is used exclusively for charitable purposes.005.05 No Financial Gain or Profit The property must not be used for financial gain or profit to either the owner or user. There is no financial gain or profit if no part of the income from the property is distributed to the owner's or user's, members, directors, or officers, or to private individuals. Reasonable salaries paid to employees of the owner or user shall not constitute a distribution of financial gain or profit.
The following are examples illustrative of the above principles. These examples are provided as general guidelines to be used in particular cases. In utilizing these examples, all relevant factors of each particular case must be considered.
005.05ALease by Charitable Organization. A qualifying organization leases office space in its building to other charitable organizations. All of the building is used exclusively for charitable purposes. The lease payments are used for charitable activities. The entire building is allowed an exemption, since no financial gain or profit exists and the actual use of the entire property remains charitable.005.05BResidential Facility. A qualifying corporation owns and operates a residential facility for low-income persons. Only nominal amounts are charged for rent, or no rent is charged, depending on the residents' ability to pay. Operational deficits are made up from outside donations and fund-raising activities. In this case, the property is allowed an exemption because: (1) no financial gain or profit exists; and (2) the use of the property is charitable since all or part of the actual cost of the housing is donated to the residents in need.005.06 Prohibited Alcoholic Liquor Sales The property must not be used for the sale of alcoholic liquors for more than 20 hours per week. The sale of liquor is not considered to be an exempt use for educational, religious, charitable, or cemetery purposes. Property (or portions of property) used for selling alcoholic liquors include all areas in which alcoholic liquors are normally sold, served, or consumed. For purposes of determining whether alcoholic liquor is sold in excess of 20 hours per week, a reasonable average for the tax year may be used.
005.07 Prohibited Discrimination The property must not be owned or used by an organization which discriminates in membership or employment based on race, color, or national origin. Such discrimination is contrary to public policy and may not be subsidized through a tax exemption. There must be some actual formal or informal policy of discrimination present, which denies or otherwise abridges membership or employment to disallow an exemption. An organization is not deemed to be discriminatory even though all of its members or employees are of the same race, color, or national origin, if it is willing to admit and employ on a nondiscriminatory basis. Similarly, an organization may be deemed to be discriminatory even though it may have "token" members or employees, if it has a discriminatory policy towards prospective new members or employees.
350 Neb. Admin. Code, ch. 40, § 005