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Property Tax Exemption and Rental of Church Facilities
Church facilities are tax exempt when rented to another nonprofit corporation, court rules.
Illinois
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Does a church-owned building lose its property tax exemption when it is rented to another charitable organization? No, concluded an Illinois appeals court. A Lutheran church owned a 3-story building that no longer was used for religious purposes. The church chose to rent the building rather than sell it, since it hoped to utilize the property for religious purposes in the future. Accordingly, it rented the building to a nonprofit dance school that conducted dance lessons and performances. The church received $14,400 in rent in 1986. A tax assessor claimed that the building was no entitled to an exemption from property taxation. A trial court rejected the assessor's position, and the case was appealed. The appeals court acknowledged that the "burden of proving the right to an exemption is upon the person seeking it," and that "in determining whether property is included within the scope of an exemption, all facts are to be construed and all debatable questions resolved in favor of taxation. Nevertheless, the court concluded that the building was entitled to exemption under a state law that exempted "all property of institutions of public charity … when such property is actually and exclusively used for such charitable and beneficent purposes, and not leased or otherwise used with a view to profit." The court relied on a 6-factor test announced in an earlier decision by the Illinois Supreme Court for determining whether a particular property is entitled to a charitable exemption. The supreme court previously ruled that a property is entitled to exemption if the property owner can prove each of the following 6 factors:

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Posted: May 1, 1992
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