Closed Churches Face Loss of Property Tax Exemption

A report in the Morning Call notes that property tax officials in Pennsylvania are moving to withdraw property tax exemption for churches that have been closed by the Roman Catholic Diocese of Allentown. According to the story,

Carbon County has notified the diocese that it will add eight closed churches to the tax rolls. That will bring about $105,000 a year in new taxes to the county, the Weatherly and Panther Valley school districts and five municipalities.

The story also notes that the cases almost certainly will end up in court. The main legal argument will deal with “charitable use.” Most state property tax laws exempt property only if two conditions are met: (1) the property is owned by an exempt organization (e.g., a religious organization or other charity) and (2) the property is actually used primarily for charitable purposes. For example, Illinois courts once ruled that the thrift stores operated by the Salvation Army were not tax-exempt because they were commercial businesses, and thus not used for charitable purposes (a decision later overturned by statute). The argument that the tax authorities will make concerning closed churches is that the property in question is no longer used primarily for charitable/religious purposes.

There is precedent for the Pennsylvania action. In 2004, the Roman Catholic Diocese of Manchester, New Hampshire, closed two parish churches and the city of Nashua put the now-unused buildings and land back on the property tax rolls. The Diocese appealed, and won its case before the Board of Tax and Land Appeals, but the New Hampshire Supreme Court reversed (from Findlaw – free registration required) and held that the property was no longer tax exempt because it was not being “used” for religious purposes. The Diocese had argued that the empty churches were being used to store religious items, but that didn’t sway the court, which essentially held that storage was not a “religious use” within the meaning of New Hampshire law.

Major religious denominations are closing facilities all over the country, so it will be interesting to see if a state law trend develops here.

JDC