By Richard R. Hammar, J.D., LL.M., CPA
© Copyright 2001 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m70 c0103
A New York court ruled that a church-owned residence occupied by a non-ordained choir director was exempt from property taxes, not because it qualified as a "parsonage" but because of the many religious functions that occurred there. For many years, two homes owned by a church were exempt from property taxes on the ground that they qualified as "parsonages." The church's senior pastor occupied one of the homes, and the church's music director occupied the second home. After many years, a local tax assessor questioned the exemption of the home occupied by the choir director. The choir director was a non-ordained layman with special liturgical music training who used the home as a residence in exchange for his services. The choir director was considered part of the church's liturgical staff, and he participated in all worship services. In addition, he participated in various sacramental needs, including baptisms, marriages, and funerals. The choir director had a secular job in addition to his church duties. The home occupied by the choir director also was used for choir rehearsals, weekly Bible studies, youth retreats, and as occasional housing for visiting clergy. A state court ruled that the church-owned home occupied by the choir director qualified for exemption. However, the court concluded that the home was exempt not as a parsonage, but as property used for religious purposes. It did not qualify as an exempt parsonage since it was not occupied by an "officiating clergyman" as required by state law. The court concluded that while the choir director had numerous religious duties, and often assisted in the administration of the sacraments, he "could not officiate at weddings or funerals and his responsibility was to provide liturgical music for these ceremonies." On the other hand, the property qualified as exempt on the basis of the many religious uses that occurred there. Holy Trinity Orthodox Church v. O'Shea, 720 N.Y.S.2d 904 (2001).
The Maryland Court of Appeals ruled that 16 acres of undeveloped land owned by a church was exempt from property taxation. Maryland law exempts from taxation property that is "owned by a religious group or organization" if the property "is actually used exclusively for (1) public religious worship; (2) a parsonage or convent; or (3) educational purposes." A church purchased a 27-acre tract of property in order to construct a sanctuary. A local zoning board limited construction on the property to a 7.5-acre "envelope" except that "the construction of driveways, road improvement, storm water management, utilities or other such improvements" could take place outside of the development envelope. A tax assessor determined that only 11 acres were exempt from property tax (the 7.5-acre envelope plus 3.5 acres that were used for storm water management and a septic system). The assessor concluded that the remaining 16 acres, consisting of undeveloped land, were subject to tax. The church appealed this decision to the Maryland Court of Appeals (the highest state court in Maryland). The court concluded that the entire 27 acres was entitled to exemption from property tax, including the undeveloped 16 acres. It observed, “The 16 acres are part of the land on which the church sits and that parcel is not subject to another, non-church use. The applicable covenants and zoning restrictions prohibit that property from being put to other than open space use; there simply can be no commercial, residential, or other non-worship related development on that property. The land, then, may be used only for church purposes, either in tangible, such as the construction of a prayer garden, or in non-tangible, i.e. reflective or spiritual, ways. . . . A church is more than four walls built of stone, marble or concrete . . . . In the present case, it does not follow that, merely because the church has been required, or decided, to leave a large portion of the church property undeveloped, the property is not being used--it clearly is as the site of the church--or that the congregation will not use the property in its natural state to enrich its worship experience. . . . Nor is there any merit to the argument that the use of the 16-acre tract is not related to the furtherance of public worship. . . . The primary purpose of the non-developed land is to preserve the environmental aesthetics of the neighboring community and present the primary structure in a visually pleasing and understated manner. The development envelope is balanced by the open space, non-use area, much as a garden, lawn, or yard balances many residential parcels. . . . In this case the 16 acres provide a natural setting for the church and, thus, the religious worship use. As such, they are being actively used by the church for religious worship.” Supervisor of Assessments v. Keeler, 764 A.2d 821 (Md. 2001).
The New Hampshire Supreme Court ruled that a church-operated campground did not qualify for exemption from property tax, except for a small chapel. A regional denominational organization (the "church") owns and operates a campground and conference center that contains lodging, dining, chapel, meeting, and recreational facilities. The lodging includes "condominium-type townhouse units with kitchens" and free standing cabins. There are campsite areas that accommodate up to 100 trailers or recreational vehicles, with water supply hook-ups and bathroom facilities for all sites, and electricity for one half of the sites. There is also a dining hall, where meals are prepared and served to guests. Recreational amenities including tennis courts, a golf course, a basketball court, a swimming beach, boating and fishing access and cross-country skiing trails. The property also includes staff quarters, maintenance buildings, a preschool, administrative office space and tracts of undeveloped land. During the summer months the camp is host to weeklong "camp programs" for families and adults. These programs have Christian-based themes and are run by pastors. The programs include worship services, Bible study groups and recreation opportunities. Guests are informed that they are expected to participate in the services. Guest registration check-in forms require indication of church affiliation, and approximately 60% of guests are members of the regional church. During non-summer months, the camp is rented to church-approved groups. Renters include a variety of church groups (from other denominations) and non-religious groups. The local tax assessor determined that the entire camp, except the chapel, was subject to property tax. The church appealed. The state supreme court ruled that the campground did not qualify for exemption from property tax (other than the chapel). It based this conclusion on the fact that the operation of the campground did not benefit "the general public or a substantial and indefinite segment of the general public" because of the following factors: (1) the church's organizational documents state that the camp was to be used for members of the church; (2) the camp's own rules specify that "our programs and facilities are primarily reserved for the members of our [church]”; (3) no advertisements for the camp are sent to those outside of the church's membership; (4) while the camp is used by secular groups, this use is only "occasional and infrequent"; (5) people who stay at the camp, even those associated with "secular" groups, must agree with the basic beliefs of the church. The court concluded, "Where an organization makes efforts to limit its services, and targets its benefits only to its members, that organization is not obligated to serve an indefinite segment of the population . . . and is not eligible for a charitable tax exemption." The court also ruled that the camp did not qualify for exemption based on its religious nature, except for the chapel and "those portions of the administrative offices, maintenance center, barn and workshop that are reasonably related to the function of the chapel." The court concluded that for property to qualify for exemption on the basis of religious use, "the land must be directly used for religious purposes," and that the lodging and dining facilities and other camp facilities and property not exempt because they were "not specially adapted to religious uses or purposes nor was the property so used." East Coast Conference of the Evangelical Covenant Church of America v. Town of Swanzey, 786 A.2d 88 (N.H. 2001).