Buying or Renting Commercial Real Estate as a 501(c)3

If you are trying to buy or rent commercial real estate as a 501(c)3, you may be wondering how your status will impact the transaction. Several things will be important in determining whether you should purchase or lease property. Your organizations history and financial stability are important considerations.

Exemptions from Property Taxes

Depending on the use of the property in question, your organization may be eligible for a property tax exemption, meaning your organization would not have to pay property tax on purchased property as long as the purpose continued to stay the same and the proper paperwork was filed each year. Nonprofits are operated for a charitable purpose. The government recognizes the value they provide to society by offsetting taxes in several areas. Depending on the particular use of the property, the following agencies generally are able to claim a property tax exemption:

• Churches;
• Museums
• Schools;
• Hospitals; and
• Social service agencies.

Agencies working in the arts, history, preservation, and education are also often able to claim this exemption depending on the use of the property.

Exemptions from Paying Income Taxes

Having a 501(c)3 status means that profits realized often go untaxed. This may be counter intuitive because of the title "nonprofit"; however, the if profits are used to sustain programs that help society, the government, in many cases, offers substantial tax breaks. Consult a tax attorney to discuss how this law applies to your nonprofit structure.

Federal Vs. State Taxes

Tax laws vary by state and property use, so you will need to consult your local law to verify any impact on your commercial real estate property. Federal laws are easier to verify because the apply to all states. While your organization may be exempt under federal law, your states law may not provide the same types of exemptions. Make sure you abide the law and seek the advice of an attorney if there is any question because unpaid taxes can impact your nonprofit status, meaning any federal tax exemptions could be in jeopardy if you fail to pay the proper taxes.

Getting Legal Advice

An attorney is in the best position to give you advice about how the law in your state will impact any commercial real estate transactions. An attorney can help you with drafting legal agreements and dealing with the complexities of the commercial real estate market. While hiring an attorney will cost your organization a little money up front, it can save your 501(c)3 in the long run from paying unnecessary fees or dealing with time consuming and expensive litigation.