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G-38, Tax Exemption and Refund Claims Filing for Property Leased by the UniversityOctober 1, 1982
I. REFERENCES
General Counsel Reidhaar's letter to Treasurer Hammond and Vice
President Perkins on tax exempt status of property leased by the
University, December 4, 1974.
Chief Associate Counsel Holst's letter to Assistant Vice President
Stanford on the tax exempt status of property leased by the
University, March 11, 1975.
Assistant Counsel Richard's letter to Chief Accountant Pastrone
pertaining to tax exemption on leased property, November 7, 1977.
Assistant Counsel Richard's letter to Acting Assistant Comptroller
Pastrone on Senate Bill 2006, as amended, September 26, 1978.
Acting Assistant Comptroller Pastrone's and University Materiel
Coordinator Ove's joint letter to Accounting Officers and Materiel
Managers on the need to clarify the dates of lease contract and the
University's right to claim tax exemption, March 19, 1979.
Acting Assistant Vice President Pastrone's letter to Accounting
Officers, et al., on exempt leased property procedures, December 18,
1979.
II. PURPOSE
This bulletin presents the procedures (1) for filing LESSORS' EXEMPTION
CLAIMS from property taxation on real and personal property leased by
the University, and (2) for filing CLAIMS ON THE TREASURY OF THE COUNTY
OF XXXXXXXX, STATE OF CALIFORNIA, for refund of leased property taxes
paid by the University through lessors.
III. INTRODUCTION
In November 1974, California voters passed Proposition 8, the measure
that was written into the California Constitution as, Article XIII,
Section 3(d), and the University of California as a State university
became exempt from leased property taxation. Chapter 936, Statutes of
1978 (also known as Senate Bill 2006), pertinent provisions of which
have been added to the Revenue and Taxation Code as Section 202.2,
mandates the pass-on from the lessors to the University of the
economic benefit of the property tax savings. The pass-on may be made
under the following options:
1) the lessor may claim the tax exemption at the outset and pass the
economic benefit on to the University; or
2) the lessor may pay the property tax, and then file for tax
exemption with, and on behalf of, the University. 1
The guidelines and procedures presented in this bulletin do not apply
to the Los Alamos National Scientific Laboratory or to property leased
by the University outside the jurisdiction of the State of California.
1 Under this option, the University files separately for tax refund; the
county mails the refund directly to the University.
IV PROCEDURES
A. CONTRACT LANGUAGE
Each contract entered into by the University for lease of property,
real or personal, shall include specific language, as shown below,
depending on the option the lessor has agreed to for passing on to
the University the economic benefit of the property tax exemption.
If the lessor has agreed to option 1) [see III, above], either of
the following as appropriate:
"PROPERTY TAX EXEMPTION - Lessor agrees to cooperate with
the University and do all acts reasonably necessary and
appropriate to secure and maintain tax exemption of the
property leased hereunder pursuant to Article XIII, Section
3(d) of the California Constitution. Lessor agrees to
apply the amount of any reduction of tax resulting from
such exemption as a credit against payments due to the
lessor hereunder. To the extent that the lease hereby
entered contains any cost escalation clauses for succeeding
years, taxes shall not be taken into account for purposes
of computing any increased yearly rent, as long as said tax
exemption is in effect."
"PROPERTY TAX EXEMPTION - Lessor agrees to cooperate with
the University and do all acts reasonably necessary and
appropriate to secure and maintain tax exemption of the
property leased hereunder pursuant to Article XIII, Section
3(d) of the California Constitution. Lessor agrees to apply
the amount of any reduction of tax resulting from such
exemption as an adjustment to pricing to reflect reduction
in cost corresponding to the property tax otherwise due by
the University to the lessor hereunder. To the extent
that the lease hereby entered contains any cost escalation
clauses for succeeding years, taxes shall not be taken
into account for purposes of computing any increased yearly
rent, as long as said tax exemption is in effect."
NOTE: A situation can develop when grant of tax exemption
is delayed, and termination of the lease may precede the
exemption. Since tax must continue to be included in the
lease payments pending exemption, tax refunds, when all lease
payments had been made to the lessor, become due to the University
upon grant of the exemption. To avoid future difficulty
or possible loss of refunds, it is recommended that the phrase
"or refund directly to the lessee the amount of any such
reduction of tax" be added at the end of the second sentence
of either of the foregoing provisions.
Further, the second clause above is considered less desirable
by the University. When used, the lessor must be required to
show the tax in each bill as a separate line item, and only the
amount net of tax must be entered as "amount payable". A bill
that does not show the tax as a separate line item shall not
be routinely paid.
If the lessor has agreed to option 2) [see III, above], use
instead the following in the contract:
"PROPERTY TAX EXEMPTION - Lessor agrees to cooperate with the
University and do all acts reasonably necessary and appropriate
to secure and maintain tax exemption of the property leased
hereunder pursuant to Article XIII, Section 3(d) of the
California Constitution. Lessor agrees to file for tax
exemption with, and on behalf of, the University. To the extent
that the lease hereby entered contains any cost escalation clauses for
succeeding years, taxes shall not be taken into account for
purposes of computing any increased yearly rent, as long as said
tax exemption is in effect."
B. WHERE CONTRACT CALLS FOR LESSOR TO CLAIM TAX EXEMPTION AT THE
OUTSET [SECTION III, OPTION 1)]
Paying the Property Tax
Under this option, no tax payment is made. The lessor either
sends the University a bill with the property tax deducted, or
credits the tax amount against payments due from the University if
billing includes the tax.
Filing the Lessors' Exemption Claim on Behalf of the
University-see Exhibit A
1) Prior to February 15 of each year an ample supply of Lessors'
Exemption Claim forms should be obtained from each County
Assessor's Office in counties where leased property is located.
2) On March 1, but no later than March 5, of each year, the
campus/Laboratory leased property tax exemption coordinator
should check the terms and conditions of each leased property
contract to determine the method agreed to by the lessor for
passing on to the University the economic benefit of the
property tax exemption. Once the method is verified, the
coordinator should execute the affidavit on the reverse side
of the Lessors' Exemption Claim form (3 copies each for every
item of leased property). This affidavit affirms that the
given piece of property is being used by the University for
educational purposes.
The front side of the Lessors' Exemption Claim form should
supply as much identification and information as possible.
For example, in the case of personal property, identifications
such as model number and serial number are an absolute
requirement by County offices; they should be readily supplied.
Once the affidavit is executed, the coordinator should send
the claim to the lessor by certified mail, with return receipt
requested. In mailing the claim, the coordinator should
provide the following instructions to the lessor:
a) to complete the entries on the front side of the form;
b) to file the original with the Appropriate County Assessor's
Office by March 15;
c) to return the second copy to the University; and
d) to retain the third copy for the lessor's file.
Filing for Refund-CLAIM ON THE TREASURY OF THE COUNTY OF
XXXXXXXXX, STATE OF CALIFORNIA
With respect to filing for refund, no claim is to be filed
inasmuch as no tax payment was made in the first place.
C. WHERE CONTRACT CALLS FOR LESSOR TO PAY THE PROPERTY TAX AND THEN
FILE FOR TAX EXEMPTION WITH, AND ON BEHALF OF, THE UNIVERSITY
[III, Option 2)]
Paying the Property Tax
When property tax is to be paid, payments are to be made by the
lessor on the dates indicated below:
1) Personal property. Taxes are due (100%) on August 30 of
each year.
2) Real property. Taxes are on a fiscal year basis. One-half
of the tax payment is due no later than December 10; the
remaining half is due no later than April 10.
Filing the Lessors' Exemption Claim Forms on Behalf of the
University-See Exhibit A
The procedures for filing the Lessors' Exemption Claim forms are
the same as for option 1) (see IV.B., above).
Filing for Refund-CLAIM ON THE TREASURY OF THE COUNTY OF
XXXXXXXX, STATE OF CALIFORNIA-see Exhibit A
1) On or about March 15 of each year, an ample supply of the above
described-refund claim forms should be obtained from each County
Treasurer's Office in counties where leased property is located.
2) The campus/Laboratory leased property tax exemption coordinator
should check the terms and conditions of each leased property
contract to determine the method agreed to by the lessor for
passing on to the University the economic benefit of the
property tax exemption [see IV.A., above].
Once the method has been determined, the campus/Laboratory
leased property tax exemption coordinator should complete the
refund claim form for each contract in which the pass-on
method stipulated is for the lessor to pay the property tax
and then file for tax exemption with, and on behalf of, the
University. [See III, option 2), above.) The piece of
property under the contract must be completely described,
including site or location so that it may be readily
identified.
3) The completed refund claim forms are to be filed with the Clerk
of the County Board of Supervisors. Refund claims should be
filed immediately after the tax payments have been made, but
in no case should claims be filed any later than four years
from the tax payment due date or the date the tax payment was
made, whichever occurred first.
V. RESPONSIBILITIES
A. CAMPUS/LABORATORY
Exemption and Refund
Chancellors and Laboratory Directors are responsible to designate
a fiscal or administrative unit-such as the Accounting Office or
Business Services, as appropriate-to handle the campus/Laboratory
tax exemption and refund claiming on leased property.
B. SYSTEMWIDE ADMINISTRATION
Exemption and Refund Claiming
At Systemwide Administration, tax exemption and refund claiming on
leased real property is under the responsibility of two offices:
the Office of the Vice President-Agriculture and University Services
is responsible for real property leased under Agriculture and
University Services; the Vice President-Financial and Business
Management (2) is responsible for all other real property leased for
Systemwide Administration immediate use. For personal property, tax
exemption and refund claiming is under the responsibility of the
Berkeley campus Accounting Office.
2 Effective December 1, 1982; through November 30, 1982, the Assistant Vice
President-Budget, Analysis, and Planning has the responsibility for all other
real property leased for Systemwide immediate use.
________ Exhibit A - LESSORS' EXEMPTION CLAIM (sample) Exhibit B - Refund Claim (sample)
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