Property Taxes, the First Amendment, and Your Church

Property Taxes, the First Amendment, and Your Church

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We frequently receive inquiries from churches about property taxation of church real estate. However, a recent ruling by the Massachusetts Supreme Judicial Court (SJC) may spark more interest in this subject from church leaders concerned about upholding First Amendment rights and keeping their tax liability as low as possible.

Towns have long had the authority to tax church property other than its house of worship and parsonage, as well as the right to tax such things as pro-rated taxes on classrooms rented to day care centers, steeples housing cell phone antennae, and parish halls leased to community organizations.  However, with pressures on town budgets, more local tax assessors may look to church properties as potential sources of increased tax revenue. 

Last year, the Shrine of Our Lady of LaSalette appealed to the SJC regarding the decision by the town of Attleboro to charge property tax on portions of the Shrine tax assessors felt were not used for its primary purpose – worship or religious education.  This March, the SJC ruled that Attleboro could not tax the Shrine’s gift shop, cafeteria, restaurant, maintenance building, and other ancillary structures, deeming these necessary to support the Shrine’s mission.  This was a victory for those of us concerned about the government’s expanded taxation of churches through an attempt to define what is religious and what is non-religious about our houses of worship and, therefore, a threat to our First Amendment right to determine our religious practices for ourselves. 

Despite this overall favorable ruling, there are some lessons here for churches. The court did find that Attleboro tax assessors could tax a safe house and wildlife sanctuary leased to unrelated nonprofits. While this property could have been exempt from tax on the grounds that the tenants are charitable organizations, the required filings had not been made for this exemption.

We strongly recommend that churches renting property to an outside entity have a written lease that includes a provision making the tenant responsible for all real estate and personal property taxes associated with their operations.  If the tenant is a nonprofit charitable organization, a clause in the lease should say that the tenant will either claim and file for the charitable tax exemption or pay the taxes if it fails to do so. Moreover, if the tenant is a for-profit organization or individual, the clause should require that the tenant pay the taxes.  More information about property taxation of church real estate, as well as information on rentals and Unrelated Business Income Tax (UBIT) can be found here

The Massachusetts Conference joined in an amicus brief with the Massachusetts Council of Churches last year in support of the Shrine’s appeal. (Follow this link for more information about the SJC’s ruling and our support of the Shrine’s appeal.) Its success is yet another example of how we’re better together than we are on our own. Our Conference is committed to that endeavor, by joining together as local churches, reaching out to our siblings in Christ ecumenically, and through inter-faith engagement. 
 

Author

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Jonathan New

The Rev. Dr. Jonathan New is Associate Conference Minister for Stewardship and Financial Development for the Massachusetts Conference, United Church of Christ.

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