Property Tax Exemption Does Not Apply to Municipal Special Assessment

Key point. Churches are exempt from property or ad valorem taxes in every state, but this exemption does not necessarily apply to special assessments that require landowners to pay for improvements that directly benefit them.

A Minnesota appeals court ruled that a city's imposition of a special assessment on abutting landowners to cover the costs of street resurfacing could be applied to churches.

In 2016, a city imposed a special assessment of $31,191.30 against a church related to a street resurfacing project. The church was informed that it was required to pay off the amount in five annual principal installments beginning in 2017. The church challenged the assessment, claiming that it violated a provision in the state constitution exempting from taxation "public burying grounds, public school houses, public hospitals, academies, colleges, universities, all seminaries of learning, all churches, church property, houses of worship, institutions of purely public charity, and public property used exclusively for any public purpose … except as provided in this section." The constitution goes on to provide that "the legislature may authorize municipal corporations to levy and collect assessments for local improvements upon property benefited thereby without regard to cash valuation."

A state appeals court ruled that the exemption of church property from taxation did not bar cities from requiring churches to share in the costs of public improvements, such as street resurfacing, that directly benefited them:

A municipality's taxing authority is conferred by the legislature. Entities exempt from taxation under … the Minnesota Constitution (such as all churches, church property, and houses of worship) must still pay special assessments for local improvements. This is because the underlying idea of all such assessments is that the payers of the assessment constitute a portion of the community … specially benefited in the enhancement of property peculiarly situated… .

What this means for churches

This case demonstrates that while church property is exempt from taxation in every state, this exemption does not necessarily apply to municipal special assessments that apportion the cost of improvements to those property owners, including churches, that are directly benefited by them. Bryant Avenue Church v. City of Minneapolis, 892 N.W.2d 852 (Minn. App. 2017).