Page 204 - Washington Nonprofit Handbook 2018 Edition

c. Uses of Exempt Property

Once exempt, the property must be exclusively used for its exempt purpose.

As a general rule, the loan or rental of all or a portion of the exempt property does
not subject the property to property taxes if:

• The rents or donations received for the use of the property are
reasonable and do not exceed the maintenance and operation
expenses attributable to the portion of the property loaned or rented;
and

• The property would be exempt from tax if owned by the organization
to which it is loaned or rented.

If exempt property is loaned or rented, the tax-exempt status of the property

will not be affected if:

• The property is loaned or rented for a period of 15 consecutive days or
less;

• The property is loaned or rented to another nonprofit organization,
association, or corporation that would qualify for exemption if it
owned the loaned or rented property; and

• All income received from the rental is devoted exclusively to the
exempt purpose of the nonprofit organization that receives the tax
exemption.

If the property is loaned or rented and the lessor or lessee intends to
produce revenue from the loan or rental, the property loses its exemption.
Property loaned or rented, and intended to produce revenue, must be segregated
and taxed whether or not the revenue is devoted to exempt purposes.

Over the last few years, a standardized exception was created for nonprofit
organizations to rent or loan their property to the public. Nonprofits can now loan
or rent their exempt property to individuals and organization for non-exempt
purposes up to 50 days in a year, as long as the rent or donation received for the
use does not exceed the maintenance and operations costs attributable to the
property. Of the 50 days, a maximum of 15 days can be spent for profit or to
promote business purposes, with no limitation on the amount of rent or donation
received. Days that immediately precede or follow an event do not count towards
the 50 or 15 day allowances, if only used for set-up or take down activities. (Rental

WASHINGTON NONPROFIT HANDBOOK -193- 2018