San Francisco Tax Assessor Claims Archdiocese Owes Taxes On Property Transfers

The San Francisco Chronicle reports that the city of San Francisco will try to collect up to $15 million in taxes from the Archdiocese of San Francisco, which is refusing to pay certain taxes on properties the church is transferring from one Catholic nonprofit organization to another. The tax assessment would apply to hundreds of properties, most of them empty lots or commercial land but a few that are high-profile, including Mission Dolores, Old St. Mary’s Cathedral and St. Francis of Assisi Church. The assessor’s office has not yet determined the exact amount of the entire tax bill, but depending on the value of the properties, it would range from $3 million to $15 million. That tax bill would be the second largest of its kind in San Francisco history. However, the archdiocese has appealed the charge, saying the church should be exempt from property transfer taxes for a variety of reasons – primarily because the properties are being moved among groups that all are a part of the same overarching organization: the Archdiocese of San Francisco. The written appeal, which will be heard before a review board in the coming weeks, claims that the assessor’s office is unfairly targeting the archdiocese by applying taxes to property transfers that have been tax-free for other religious nonprofit groups.

San Francisco Assessor-Recorder Phil Ting said his office spent months investigating the archdiocese’s case and considering all of the reasons the church might be exempt from the tax. “Because we knew the accusations (of unfair treatment) could be out there, we worked to look at every single document so we could totally and completely understand their argument. We looked at all the various exemptions that could have been applied, and we felt that none of them were applicable in this case. That meant it was our determination that this was a taxable event.”

The archdiocese is not actually selling any properties, but even if the properties are moved from one owner to another without payment, the tax still applies. The archdiocese first notified city officials of the ownership changes in May 2008 and the archdiocese has transferred a total of 232 properties. The church is transferring the properties as part of a restructuring of the archdiocese, which includes dissolving one nonprofit group and creating a new one to hold properties for Catholic schools and parishes. The archdiocese is moving 111 parcels from the now-defunct nonprofit Roman Catholic Welfare Corp. to the Roman Catholic Archbishop of San Francisco, a nonprofit corporation. The archdiocese is then transferring those 111 parcels, plus another 121 owned by the archbishop, to a third nonprofit corporation called the Archdiocese of San Francisco Parish and School Juridic Persons Real Property Support Corp.

The disagreement comes over the nature of the three nonprofit corporations. The archdiocese argues that the Roman Catholic Welfare Corp. and the Real Property Support Corp. are essentially subsidiaries of the Roman Catholic Archbishop of San Francisco – that what belongs to them also belongs to the archbishop. “San Francisco Recorder Phil Ting has taken a step that is unprecedented in the history of the state of California. He has determined that an internal reorganization of church property, within the family of corporations of the Archdiocese of San Francisco, constitutes a ‘sale’ and is subject to a property transfer tax,” said archdiocese spokesman Maurice Healy in an e-mail. “The law is overwhelmingly in favor of the archdiocese in holding that church property transfers of this nature are exempt from transfer taxes.” In the written appeal, the archdiocese states that “the archbishop … operates the parishes and schools, and has long directly owned all parish real property in San Francisco.” But Ting says months of investigation by his office show that the three nonprofits are separate entities, with separate leaders and separate bylaws. Most important, he says: Properties owned by the smaller nonprofits are not owned by the archbishop. “These are separate legal entities, and the reorganizations were not just a cosmetic, simple reorganization,” Ting said.

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