Denial of Church's Property Tax Exemption Did Not Violate RLUIPA

In Sandstrom v. Wendell, (WD NY, March 22, 2024), a New York federal district court rejected RLUIPA challenges to local tax officials' denial of a tax exemptions for two properties owned and converted to religious use by the Church of the Holy Redemption. Plaintiff, pastor of the church, argued that his religious exercise was substantially burdened by the denial. Tax officials contended that the Church did not qualify for a tax exemption. The court held in part:

[D]espite Plaintiff’s attempts to recharacterize his claims as amounting to a zoning challenge, ... Plaintiff has not plausibly alleged any burden on his religious beliefs apart from having to apply for tax-exempt status or being required to pay taxes.  At its core, Plaintiff is seeking a federal court ruling on a local tax matter, which is specifically circumscribed by the Tax Injunction Act and principles of comity....

Here, Plaintiff has not alleged that he submitted a meaningful application to challenge the controversy or gave Defendants an opportunity to commit to a position intended to be “final.”  Plaintiff does not allege that he completed the necessary requirements to challenge the properties’ status, commenced any appeal of the determination, or that such efforts would be futile, weighing against a finding that the claims are ripe....

Canadian Court Upholds Denial of Tax Exemption for Island Owned by Shinto Organization

In Matsuri Foundation of Canada v. British Columbia (Assessor of Area #01 - Capital), (BC Sup. Ct., February 2, 2024), the Supreme Court of the Canadian province of British Columbia upheld the denial of a property tax exemption sought by the Matsuri Foundation of Canada.  The court summarized its decision as follows:

Matsuri sought, and the Board denied, a property tax exemption for the lands and improvements that comprise Knapp Island, British Columbia, as a “place of public worship” pursuant to s. 15(1)(d) of the Taxation (Rural Area) Act, R.S.B.C. 1996, c. 448 [Rural Area Taxation Act].

Knapp Island is a 31-acre island located just off Vancouver Island’s Saanich Peninsula near Swartz Bay. Matsuri is a registered Canadian charity with the purpose of the advancement of the Shinto religion. Matsuri owns Knapp Island.

With respect to the 2022 taxation year, the [Property Assessment Appeal] Board found that the “place of public worship” exemption was not applicable to Knapp Island because Matsuri had not established that the public were invited to, and had access to, Knapp Island, and that its principal use was therefore not for public worship. The Board found that to the extent that Knapp Island was used for worship, that worship was private, and not public.

Matsuri accepts the Board’s factual finding on this issue. However, Matsuri argues that the Board should nevertheless have found that Knapp Island was entitled to an exemption on fairness and equity grounds, when compared to other similar properties in British Columbia.

The Assessor argues that the Board’s decision should be upheld, and that the evidence does not support a tax exemption on equity grounds.

I find that the Board’s analysis fully addressed the equity issue in this case, and properly denied the requested exemption, and I would therefore dismiss the appeal.

CTV News reports on the decision.

Church Sues Challenging Fee for Water Connection

Suit was filed this week in a Texas state trial court by a church challenging a Houston-area utility district's insistence that the church pay a capital recovery fee of $83,780 rather than the actual cost of $24,900 to connect its new office building and auditorium to the district's water system. The district insists that the added fee "prevents taxpayers from bearing the burden of paying taxes on the bonds issued to construct water, sewer, and drainage facilities that also serve the Church." The complaint (full text) in Grace Community Church- The Woodlands, Inc. v. Southern Montgomery County Municipal Utility District, (TX Dist. Ct., filed 11/15/2023), alleges that the fee in excess of the actual cost of the connection amounts to an unlawful tax on a tax-exempt organization.  It also contends that the fee violates the Texas Religious Freedom Restoration Act and the First Amendment's free exercise clause. First Liberty issued a press release announcing the filing of the lawsuit.

Application For Tax Exemption Does Not Violate Organization's Free Exercise Rights

In Children of the Kingdon v. Central Appraisal District of Taylor County, (TX App, Aug. 3, 2023), a Texas state appeals court affirmed a $32,000 property tax assessment against a religious organization that had not filed an application for a tax exemption. Responding to the organization's free exercise claim, the court said in part:

[W]e construe Appellants’ ... argument to be that the Free Exercise Clause of the First Amendment protects their religious belief to not enter into written agreements with the government; thus, they would not be required to file an application for a property tax exemption in order to not be held liable for the payment of property taxes....

Here, Appellant asserts that the requirement that one must file an application for a property tax exemption violates their rights guaranteed by the Free Exercise Clause, because it is their religious belief to be governed separately from secularism and thus not enter into any agreement or accept any privilege from secular governments. We disagree with Appellants assertion and hold that this requirement does not violate their First Amendment rights. 

First, the exemption application requirement is neutral. It is not specifically directed at or to a religious practice; instead, the requirement is a means of protecting the equality and uniformity of the property tax scheme as guaranteed by the Texas constitution. Second, the requirement is generally applicable....

European Court Says Jehovah's Witnesses Were Wrongly Denied Tax Exemption

In Affaire Assemblée chrétienne des Témoins de Jéhovah d’Anderlecht et autres c. Belgique, (ECHR, April 5, 2022), the European Court of Human Rights ruled in favor of a Jehovah's Witnesses congregation in Belgium that was denied a property tax exemption for property they used for religious worship. The regional tax law gave exemptions only to "recognized religions".  Jehovah's Witnesses were not recognized. According to the Court's press release:

The Court held that since the tax exemption in question was contingent on prior recognition, governed by rules that did not afford sufficient safeguards against discrimination, the difference in treatment to which the applicant congregations had been subjected had no reasonable and objective justification. It noted, among other points, that recognition was only possible on the initiative of the Minister of Justice and depended thereafter on the purely discretionary decision of the legislature. A system of this kind entailed an inherent risk of arbitrariness, and religious communities could not reasonably be expected, in order to claim entitlement to the tax exemption in issue, to submit to a process that was not based on minimum guarantees of fairness and did not guarantee an objective assessment of their claims.

Certiorari Denied In Virginia Ministerial Residence Tax Exemption Dispute

The U.S. Supreme Court today denied review in Trustees of New Life In Christ Church v. City of Fredericksburg, Virginia,  (certiorari  denied, 1/18/2022), over the dissenting opinion of Justice Gorsuch. In the case, a Virginia state court denied the state's "ministerial residence" tax exemption to a local Presbyterian church because the Youth Ministers living in the home at issue were not ordained clergy and were not listed by the church as one of its primary pastors. (See prior related posting.) The city claimed that this meant they did not qualify as "ministers" under the Presbyterian Church's Book of Church Order, despite the local church's insistence that they do qualify.  Justice Gorsuch, in his opinion dissenting from the denial of certiorari, said in part:

[T]he City continues to insist that a church’s religious rules are “subject to verification” by government officials....

I would grant the petition and summarily reverse. The First Amendment does not permit bureaucrats or judges to “subject” religious beliefs “to verification.”...

This case may be a small one, and one can hope that the error here is so obvious it is unlikely to be repeated anytime soon. But I would correct it....

Courthouse News Service reports on the case.

Tai Chi Class Sites Are Not Places of Worship For Tax Exemption Law In Ontario

In Fung Loy Kok Institute of Taoism v. Municipal Property Assessment Corporation, (ON Super. Ct., Jan. 6, 2022), an Ontario (Canada) appellate court held that a Taoist organization was not entitled to a municipal property tax exemption for its satellite sites at which Tai Chi classes are held. The court concluded that these sites are not "places of worship" as that term is used in Ontario's Assessment Act. The court said in part:

Use of a property as a place of worship is different than other uses to which religious organizations can put property.  Evangelization efforts for example....

MPAC argues that the application judge accepted that religious expression and activities occur at the Satellite Sites.  However, in order to create an exemption for those properties, those activities must constitute acts of worship, a more narrow form of activity than the simple act of conducting a practice that has religious connotation.

CTV News reports on the decision.

Canadian Court Says Tai Chi Institute Is A Religious Institution

In Fung Loy Kok Taoism Institute v. City of Montreal, (Quebec Super. Ct., Sept. 20, 2021), a Canadian trial court in Quebec held that a Taoist Tai chi Institute is entitled to an exemption from property, municipal and school taxes. The court's 50-page opinion includes a lengthy discussion of what constitutes a "religion". Summarizing its ultimate conclusion on the tax issues, the court says in part:

These ... requests ... raise two major questions: what is a religion? What is a religious institution?....

... [S]hould Taoist Tai chi , as practiced, taught and disseminated in Canada by the Chinese monk Moy Lin-Shin ("master Moy"), be regarded as a religion in its own right rather than for proper gymnastics to promote internal balance and health?

... The Fung Loy Kok Institute of Taoism ... which offers classes or sessions of tai chi for a monetary contribution from the participants, does it qualify as a religious institution within the meaning of the law allowing it to benefit in Quebec from an exemption from property taxes? ...

At the end of its analysis, the Tribunal comes to the conclusion that both the first and the second of these two questions must be answered in the affirmative.

Windsor Star reports on the decision.

Supreme Court Review Sought In Dispute Over Virginia Property Tax Exemption

A petition for certorari (full text) was filed with the U.S. Supreme Court yesterday in Trustees of the New Life In Christ Church v. City of Fredericksburg, Virginia, (cert. filed 8/2/2021).  The decisions below are an unreported decision from a Virginia state trial court and a Virginia Supreme Court order refusing to grant review. The petition for review filed with the U.S. Supreme Court describes the case:

New Life In Christ Church claimed the tax exemption for a property occupied by Josh and Anacari Storms. The Church explained that the Stormses are “ministers” under the Presbyterian Church in America’s Book of Church Order because they were hired to teach and spread the faith to college students in the community. The City of Fredericksburg agreed that eligibility for the exemption turned on whether the Presbyterian Church in America considered the Stormses to be ministers, but it denied the exemption because, under its reading of the Book of Church Order, only ordained persons with specific duties are ministers of that church.

One of the issues presented is whether a civil court may substitute its own interpretation of church doctrine for that of church officials. First Liberty Institute issued a press release announcing the filing of the cert. petition.

California Church Not Exempt From Property Tax Assessed On Basis of Square Footage

In Valley Baptist Church v. City of San Rafael, (CA App., Feb. 26, 2021), a California state appellate court held that the "property taxation" exemption for property used exclusively for religious worship (California Constitution Art. XII, §3(f)) applies only to ad valorem taxes. Therefore plaintiff church was not exempt from the San Rafael's Paramedic Tax which is assessed on the basis of property square footage, not property value.

Religious Residential Program Gets Property Tax Exemption

In Aish Hatorah New York v. Passaic City, (NJ Tax Ct., July 10, 2019), the New Jersey Tax Court held that two properties used by the Orthodox Jewish organization Aish Hatorah for its Aish Woman's House are entitled to a property tax exemption as buildings used for "religious purposes" and for "the moral and mental improvement of men, women and children." Aish House is described by the court as "a residential setting for adult unmarried Jewish women to nurture and develop their understanding of, and faith in Orthodox Judaism .... under the supervision and guidance of the 'rabbi-in-residence'...." The city had argued that the two properties were merely a student dormitory and a rabbi's residence, and therefore not exempt from taxation.

Synagogue Loses Challenge To Storm Water Remediation Fee

In Shaarei Tfiloh Congregation v. Mayor and City Council of Baltimore, (MD App., April 27, 2018), in a suit by a synagogue the Maryland Court of Special Appeals held that Baltimore's Storm Water Remediation Fee is an excise tax, not a property tax.  Thus the tax exemption for property used for public religious worship does not apply.  The court also held that RLUIPA is not applicable because the Storm Water Fee is not a land use regulation.

Unordained Music Minister May Claim NJ Parsonage Exemption

In Clover Hill Reformed Church v. Township of Hillsborough, (NJ Tax Ct., March 23, 2018), the New Jersey Tax court held that, even though he is not ordained, a church's Minister of Music qualifies as an "officiating clergyman" so that he may claim the parsonage exemption from state property tax for the home furnished to him by the church. The court said in part:

Where adherents to a faith have a sincerely held belief that a person is a leader in providing worship services to a congregation, and that belief is corroborated by objective evidence of that person's training, experience, and responsibilities, the courts should hesitate to discount those beliefs because of the absence of an act, such as ordination, the court believes is necessary to impart the status of clergyman. It is not for the judiciary to impose on a religious congregation its view of who is or is not a clergyman in that congregation. The court's only role is to determine whether the legislative objectives expressed in the exemption statute have been met. 

Christian Leaders Close Church of Holy Sepulcher In Protest of Israeli Tax and Land Policies

Greek Orthodox, Roman Catholic and Armenian church leaders have closed the Church of the Holy Sepulcher (believed to be the site of Jesus' crucifixion and burial) in Jerusalem in protest of two legal moves by Israeli government officials. YNet News today describes the disputed actions:

As part of a battle with Finance Ministry over budgets to the capital, the Jerusalem Municipality informed the Finance, Interior and Foreign ministry and the Prime Minister's Office that it had started collecting property tax debts of more than NIS 650 million from some 887 properties across the city which belong to churches and United Nations institutions.

Municipality officials said these properties did not include houses of worship, which are exempt from paying property taxes by law, but rather properties used for non-prayer activities, including commercial activities.

Churches are exempt from paying property taxes as part of an agreement with the state, but the Jerusalem Municipality says it is not being compensated by the state for the money it is losing by not collecting these taxes.

Later on Sunday, an Israeli cabinet committee is due to consider a bill that would allow the state to expropriate land in Jerusalem sold by churches to private real estate firms in recent years.

The stated aim of the bill is to protect homeowners against the possibility that private companies will not extend their leases. The churches, major landowners in the city, say such a law would make it harder for them to find buyers for their land.

A statement from church leaders calls the moves a "systematic and unprecedented attack against Christians in the Holy Land."

Mosque's Property Tax Challenge Barred By Tax Injunction Act

In Islamic Center of Nashville v. Sate of Tennessee, (6th Cir., Sept. 20, 2017), the U.S. 6th Circuit court of Appeals held that the federal Tax Injunction Act (TIA) bars suit in federal court challenging Tennessee's application of its property tax exemption rules to property of an Islamic Center.  To finance construction of a new school, the Islamic Center entered a 5-year ijara agreement-- an Islamic financing method that relies on a temporary sale and lease-back arrangement with a bank to avoid borrowing at interest.  The county removed the property's tax exemption for the period that title was technically held in the bank's name.  The court held that because state law provides a plain, speedy, and efficient
alternative to federal court review of the county's assessment of taxes on the Islamic Center, that is the route that plaintiff must take. There is no special exception to the TIA for First Amendment claims.

NJ Tax Court Says Church Had Not Stopped Using Area For Religious Purposes

In Holy Trinity Baptist Church v. City of Trenton Block 26802, Lot 4, (NJ Tax Ct., Feb. 7, 2017), the New Jersey Tax Court held that the County Board of Taxation was wrong in concluding the the second floor of a church building was no longer being used for religious or charitable purposes. The court said in part:

the evidence as a whole shows that the second floor was being used for the Church's youth and member meetings albeit on a declining level due to the plaintiff's acquisition of another property. The declining frequency of such events or the undisputed fact that the Subject was being offered for sale, and the second floor was being prepared for such sale, do not establish non-use or abandonment of use of the second floor for plaintiff's tax exempt purposes.

JD Supra Business Advisor has analysis of the decision.

Bible-Based Daycare Denied Property Tax Exemption

In Hamilton County Assessor v. Duke, (IN Tax Ct., Feb. 3, 2017), the Indiana Tax Court denied a property tax exemption to the owner of property in which Little Lamb Daycare, a for-profit daycare that offers a Bible-based curriculum, operates.  The court found that the failure to provide a comparison of the amount of time the property was used for exempt purposes in relation to the overall time it was used for all purposes prevents the granting of either an educational use or a religious use exemption. Indiana Lawyer reports on the decision.

New York's Tax Exemptions For Religious Property Are Growing

The Lower Hudson Journal News this week is running a series on New York's tax exemption policy. An overview of the series reports in part:

Statewide: Thirty-one percent of New York's land value is tax exempt. Of its $2.8 trillion in land value, about $866 billion of it never gets billed.

Religious groups: The value of religious groups' land bypassed for taxation has nearly doubled from $14 billion to $26 billion between 1999 and 2015. Rochester (568 properties worth $141 million) and Ramapo (523 properties worth $265 million) are among the top five communities with the highest number of tax-exempt religious nonprofit properties in the state.

Yesterday's installment titled New York religious property tax breaks soar heavenward reports in greater detail on the increased amount of property receiving tax exemptions because of use by non-profit religious institutions.

Does Sharia-Compliant Financing By Non-Profit Cause Loss of Property Tax Exemption?

In what may well be a case of first impression, the Islamic Center of Nashville on Monday filed suit in a Tennessee federal district court challenging its inability to maintain its property tax exemption after it financed new building construction employing a well-recognized Sharia-compliant technique that uses a legal fiction to avoid borrowing at interest. The Islamic Center of Nashville has continuously operated the Nashville International Academy, a grade K-8 school, at the same site since 1995.  In 2008 it constructed a new school building on the site, financing the construction through a 5-year Ijara agreement.  The agreement involved transfer of title to an entity owned by the bank in exchange for construction funds, repayment captioned as rent, and a return of title once the required number of "rent" payments had been made.

Tennessee Code Sec. 43-610.7 exempts from property tax:

real and personal property owned by religious, charitable, scientific or non-profit educational institutions which is occupied and used by such institutions purely and exclusively to carry out one or more of its purposes....

In May 2016, the Tennessee State Board of Equalization Appeals Commission concluded (full text of opinion) that, while it was sympathetic with the Islamic Center's sincere desire to comply with its religious principles, the formal transfer of title to an entity owned by the bank meant that the property was not exempt from taxation from 2008 to 2013 (when the Islamic Center regained formal title). The Islamic Center then sued for a declaratory judgment and damages.  The complaint (full text) in Islamic Center of Nashville v. State of Tennessee, (MD TN, filed 9/19/2016) argues:

Here, ICN was ironically denied the religious exemption from property taxes by Defendant specifically because of its adherence to its religious tenets.

The suit claims violations of state and federal RFRAs, RLUIPA, the Elementary and Secondary Education Act, and the Establishment Clause. The Tennessean reports on the lawsuit.

Colorado Appeals Court Interprets Religious Purpose Property Tax Exemption

In Grand County Board of Commissioners v. Colorado Property Tax Administrator, (CO App., Jan. 14, 2016), a Colorado appeals court held that in applying the state's tax exemption for property used in furtherance of religious purposes, the critical question is not whether the property is being used for inherently religious activities. Instead it it whether the use of the property furthers the landowner's religious mission an purpose.