• Key point. A church may lose its property tax exemption if it does not file a timely appeal of a tax assessor’s decision to place it on the tax rolls-even if the property has been exempt for many years and clearly qualifies for exemption.

• Key point. This case is of extraordinary importance to church leaders, and should be reviewed carefully.

An Oregon court ruled that a church’s property was subject to tax because the church failed to timely appeal an assessor’s decision to place it on the tax roll. Church leaders should carefully study this case to be sure that they do not inadvertently expose their church property to taxation. The facts of this case are unfortunate. A church for over fifty years owned property that was exempt from property taxation. Its 1.747 acres of land contains a church, parsonage, and parking lot. From 1963 to 1983 only the .23 acres containing the parsonage was taxable. In 1983 the tax assessor added 1.42 acres of the church’s property to the tax rolls, resulting in a total of 1.65 acres on the tax rolls. The assessor did not give the church notice of this action and the church did not become aware of it until 1994. In 1995, the assessor added another .10 acre to the tax roll, again without giving the church notice. The church alleged that this raised the total taxable acreage to 1.75 acres-which was more than it owned! The church insisted that there had been no change in the use or ownership of the property during the years in question, so the property should have remained exempt. When the church discovered that most of its exempt property had been placed on the tax roll, it attempted to bring this matter to the attention of the assessor. The church also filed a new application for exemption. The assessor granted the exemption as to .63 acres of land and the church for the 1995—96 tax year, but denied exemption for the parsonage and 1.12 acres of land. The assessor also refused relief for any tax years prior to 1995—96. The church appealed this decision to the department of revenue, which dismissed the appeal with regard to the 1983—84 through 1994—95 tax years on the ground that the church’s appeal was not timely. Also, the department found it had no jurisdiction because those years were beyond its supervisory authority. The church appealed this ruling to a state court.

The church’s primary argument was that the assessor’s failure to give notice of intent to place the church’s exempt property on the tax roll “suspended” the statute of limitations on appeals. A state appeals court disagreed. It noted that the only written notice required to be given to the church of the assessor’s actions was “the usual tax statement issued in October of every year.” The court added that “the law presumes taxpayers carefully read their tax statements and will appeal from any action of the assessor which is not correct.”

The church insisted that this was not a dispute about procedures. It emphasized that its property had been exempt for over 50 years and the issue was whether it continued to be exempt, not whether it had filed a timely appeal. The court disagreed:

[The church] errs in this respect. If an assessor places exempt property on the tax roll, the owner is obligated to appeal from that action within the time period allowed. If the owner fails to timely appeal, the property will be subjected to taxation. Where the owner is late in filing an appeal, as here, it becomes a procedural issue. The department dismissed taxpayer’s administrative appeal on procedural grounds and therefore the issue before this court is procedural …. If the assessor does not give the notice or perform any other act required by statute, the time limits on appeals under ORS 305.280(1) control. [The church] did not establish good reason for its failure to appeal within that appeal period, therefore the department correctly denied [its] appeal.

The court concluded its opinion with the following advice:

This situation highlights the need for property owners to audit the government’s property tax records. Most taxpayers are familiar with our income tax systems under which taxpayers keep the records and assess the tax, and the government audits for accuracy and correctness. In contrast, the property tax system requires the government to keep the records and assess the tax, and the taxpayer audits for accuracy and correctness. Both systems impose time limits on the right to audit. A failure to audit and challenge the assessment within the time limit will result in a loss by the party responsible for the audit.

Application. The importance of this case to church leaders cannot be overstated. As incredible as it may seem, a church’s property that was exempt from tax for over 50 years was put on the tax rolls by an overly aggressive tax assessor. The church, by failing to discover this development and pursue a timely appeal, lost its legal right to challenge it. How about your church? Could the same result occur? What steps have you taken to prevent it? As the court cautioned, the property tax system “requires the government to keep the records and assess the tax, and the taxpayer audits for accuracy and correctness.” Church leaders must recognize that they have a duty to ensure that the actions of tax assessors are correct, and to promptly appeal any decision they consider to be inappropriate. One way that this can be done is to retain an attorney to inspect the tax status of all church properties once each year. Such a review is easy to accomplish, and some church leaders may want to do it themselves. This “annual update” will protect the church against actions by a local tax assessor that for whatever reason were not properly communicated or understood. Taft Church v. Department of Revenue, 14 Or. Tax 119 (1997). [ State Property Taxes]

© Copyright 1998 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 m21 c0298