Reference Number: 
CTAS-1536

There shall be exempt from property taxation the real and personal property, or any part of the real and personal property, owned by any religious, charitable, scientific or nonprofit educational institution that is occupied and actually used by the institution or its officers purely and exclusively for carrying out one or more of the exempt purposes for which the institution was created or exists. There shall further be exempt from property taxation the property, or any part of the property, owned by an exempt institution that is occupied and actually used by another exempt institution for one  or more of the exempt purposes for which it was created or exists under an arrangement in which the owning institution receives no more rent than a reasonably allocated share of the cost of use, excluding the cost of capital improvements, debt service, depreciation and interest, as determined by the board of equalization.1

"The tax exemption statutes in Tennessee are construed liberally in favor of religious, charitable and educational institutions.2The basis for a liberal construction is a 'benefit conferred on the public by such institutions, and a consequent relief, to some extent, of the burden upon the state to care for and advance the interests of its citizens.'"3However, the mere "fact that an organization is chartered for the general welfare, or not for profit, is not sufficient to entitle its property to tax exempt status."4In order to be tax exempt, the property must be used "purely and exclusively" for one or more of the purposes for which the institution seeking a tax exemption was created. In a series of cases, the Tennessee Supreme Court has held "that the use requirement for property to be tax exempt is met where the use is 'directly incidental to or an integral part of' one of the recognized purposes of an exempt institution."5Pursuant to the application of the use requirement, employee parking lots owned by non-profit hospitals, employee lunch rooms owned by non-profit corporations, and off-campus housing facilities owned by non-profit educational institutions have been found to be exempt from property taxation.6However, property that is owned by a charitable institution but not used for any purpose but held for future development does not qualify as tax exempt property.7

The property of the institution will not be exempt from taxation if the owner, or any stockholder, officer, member or employee of the institution receives or may be lawfully entitled to receive any pecuniary profit from the operations of the property in competition with like property owned by others that is not exempt, except reasonable compensation for services in effecting one or more of such purposes, or as proper beneficiaries of its strictly religious, charitable, scientific or educational purposes.8The property of the institution will not be exempt if the organization of the institution for any avowed purpose is merely a guise or pretense for directly or indirectly making a pecuniary profit for the institution, or for any of its members or employees, or if it is not in good faith organized or conducted exclusively for one or more of the avowed purposes.9If the real property of an institution is not used exclusively for carrying out one or more of the stated purposes, but is leased or otherwise used for other purposes, it will not be exempt regardless of whether the income received is used for one or more of the avowed purposes. If a portion of any lot or building of an institution is used purely and exclusively for carrying out one or more of the stated purposes of the institution, then that lot or building will be exempt only to the extent of the value of the portion so used, and the remaining or other portion will be subject to taxation.10

No church will be granted an exemption on more than one parsonage, which may include up to three acres of land.11

Land not necessary to support exempt structures or site improvements associated with exempt structures, including land used for recreation, retreats or sanctuaries, is not eligible for exemption beyond a maximum of 100 acres per county for each religious, charitable, scientific or nonprofit educational institution qualified for exemption pursuant to T.C.A. § 67-5-212.  For purposes of applying this limit, land owned by an exempt institution is aggregated with land owned by related exempt institutions having common ownership or control. Qualifying land in excess of the limit must be classified as forest land upon application submitted pursuant to T.C.A. § 67-5-1006, or as open space land upon application submitted pursuant to T.C.A. § 67-5-1007, and the effective date of the classification will be the date the property might otherwise have qualified for exemption.12




     1T.C.A. § 67-5-212(a)(1).  See Memphis Development Foundation v. State Board of Equalization, 653 S.W.2d 266 (Tenn.Ct.App. 1983).  See 2004 Public Chapter 635 for exception for institution which owns and operates parking garage which leases spaces to a metropolitan government hospital authority.

     2Book Agents of the Methodist Episcopal Church, South v. State Board of Equalization, 513 S.W.2d 514, 521 (Tenn. 1974) citing Peabody College v. State Board of Equalization, 407 S.W.2d 443 (Tenn. 1966); Mid-State Baptist Hospital, Inc. v. Nashville, 366 S.W.2d 769 (Tenn. 1963).  See also Kopsombut-Myint Buddhist Center v. State Board of Equalization, 728 S.W.2d 327, 332 (Tenn.Ct.App. 1986).

     3Id., citing M. E. Church, South v. Hinton, 21 S.W. 321, 322 (Tenn. 1893).

     4LaManna v. Electrical Workers Local Union No. 474, 518 S.W.2d 348, 352 (Tenn. 1974) citing Memphis Chamber of Commerce v. City of Memphis, 232 S.W. 73, 74 (1921); North Gates Elks Club v. Garner, 496 S.W.2d 887, 889 (Tenn. 1973).

     5Methodist Hospitals of Memphis v. Assessment Appeals Comm'n, 669 S.W.2d 305, 307 (Tenn. 1984) .  See also Metropolitan Government of Nashville & Davidson County v. State Board of Equalization, 817 S.W.2d 953, 955 (Tenn. 1991).

     6Metropolitan Government of Nashville & Davidson County v. State Board of Equalization, 817 S.W.2d 953, 955 (Tenn. 1991) citing Vanderbilt University v. Ferguson, 554 S.W.2d 128 (Tenn.Ct.App. 1976);  Shared Hospital Services Corporation v. Ferguson, 673 S.W.2d 135 (Tenn. 1974);  George Peabody College for Teachers v. State Board of Equalization, 407 S.W.2d 443 (Tenn. 1966).

     7Oak Ridge Hospital of the Methodist Church, Inc. v. City of Oak Ridge, 420 S.W.2d 583, 586 (Tenn.Ct.App. 1967) (the occupation and use of the property must be such as to contribute presently or in the very immediate future to the operation of the charitable institution if the institution is going to enjoy a tax exempt status of the property).  See also Memphis Development Foundation v. State Board of Equalization, 653 S.W.2d 266 (Tenn.Ct.App. 1983) (Neither the Constitution nor the statute allows the ownership of unused property by a tax exempt organization to confer exemption upon the property.  It is the use and not the non-use which confers exemption.).

     81T.C.A. § 67-5-212(a)(3)(A)(i).  See Book Agents of the Methodist Episcopal Church, South v. State Board of Equalization, 513 S.W.2d 514, 523 (Tenn. 1974).

     9T.C.A. § 67-5-212(a)(3)(A)(ii).  See Summers v. Cherokee Children & Family Services, Inc., 112 S.W.3d 486, 502 (Tenn.Ct.App. 2002).

     10T.C.A. § 67-5-212(a)(3)(B).

     11T.C.A. § 67-5-212(a)(4).  See Metropolitan Government of Nashville & Davidson County v. State Board of Equalization, 817 S.W.2d 953 (Tenn. 1991); Blackwood Brothers Evangelistic Ass'n v. State Board of Equalization, 614 S.W.2d 364, 366 (Tenn.Ct.App. 1980) (Parsonages, per se, are not given exemption under the statute; only those pieces of property that are used purely and exclusively for religious, charitable, scientific or educational purposes are exempt.).  See also First Presbyterian Church of Chattanooga v. State Board of Equalization, 2003 WL 21994804 (Tenn.Ct.App. 2003).

     12T.C.A. § 67-5-212(o).