Taxation – Part 1

Church Property

Richard R. Hammar, Attorney, CPA

Bio

State: Indiana
Categories: Church Property

Church Law and Tax 1989-01-01 Recent Developments

Taxation – Church Property

Richard R. Hammar, J.D., LL.M., CPA

• An Indiana court ruled that an apartment building owned by a religious broadcasting organization was exempt from state property taxes if it was reasonably necessary for the exercise of the organization’s religious purposes. The apartments were used to house ordained ministers connected with the broadcasting ministry, engineers assisting with the broadcasts, carpenters and electricians engaged in building sets at the television studios, and persons who assisted in fund-raising telethons. The court concluded that such a facility was exempt from property taxation under a state law exempting “all or part of a building … owned, occupied and used by a person for … religious purposes.” The court concluded that “the evidence indicates that the apartments are used exclusively by persons working to fulfill [the organization’s] corporate purposes of religious broadcasting, the employees perform various important functions, and the hours of [the organization’s] telethons require that employees and speakers be readily available.” LeSea Broadcasting Corp. v. Board of Tax Commissioners, 525 N.E.2d 637 (Ind. T.C. 1988).

© Copyright 1989, 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 c0189

Legal Developments

Court Agreed a Member of an Unincorporated Church Cannot Sue the Church for Damages Sustained Because of the Negligence of Another Church Member

Can a member of an unincorporated church sue the church for damages sustained because of

Richard R. Hammar, Attorney, CPA

Bio

State: Indiana
Categories: Personal Injuries on Church Property or During Church Activities

Can a member of an unincorporated church sue the church for damages sustained because of the negligence of another church member? No, concluded the Indiana Supreme Court.

The member had been seriously injured while repairing a church roof when he fell off of a ladder that had been negligently positioned by another member. The injured member sued the church for damages, and the church defended itself by arguing that an unincorporated church cannot be sued by one member for injuries resulting from the negligence of another member.

The state supreme court agreed with the church's position, observing that the rule "followed by the majority of jurisdictions is that a member of an unincorporated association injured due to the conduct of another member cannot sue the association." This rule, noted the court, is based on the principle that "the members of an unincorporated association are engaged in joint enterprise. The negligence of each member in the prosecution of that enterprise is imputable to each and every other member so that the member who has suffered damages through the tortious conduct of another member of the association may not recover from the association for such damage. It would be akin to the person suing himself as each member becomes both a principal and an agent as to all other members for the actions of the group itself."

The court acknowledged that a few states had changed this rule with respect to "large unincorporated associations … having a hierarchy of structure that drastically changes the relationship of members to the association and the control that a member has in its affairs." However, such an exception to the general rule clearly did not apply to a local church. Further, the court acknowledged that the state legislature had enacted a law providing that unincorporated associations could be sued directly.

But this law, concluded the court, "did not change the general rule in Indiana, still adhered to by most jurisdictions, that members of an unincorporated association cannot sue the association for tortious acts of one or more of its members." As a result of this decision, members of unincorporated churches in Indiana cannot sue their church for injuries sustained because of the negligence of other members. In many cases, they will be left without any legal remedy at all.

This certainly is a matter that should be considered seriously by any church wishing to remain unincorporated. Such churches should apprise their members that if they are injured during any church activity because of the actions of another member, they probably will have no legal right to compensation or damages from the church or the other members.

Calvary Baptist Church v. Joseph, 522 N.E.2d 371 (Ind. 1988)

Legal Developments

Court Ruled That an Undeveloped Tract of Church-Owned Property Was Exempt from Property Taxation

The Tax Court of Indiana ruled that an undeveloped tract of church-owned property was exempt

Richard R. Hammar, Attorney, CPA

Bio

State: Indiana
Categories: Tax Exemption, Taxation - Church Property

The Tax Court of Indiana ruled that an undeveloped tract of church-owned property was exempt from property taxation under Indiana law.

The land had been purchased by the church under a "land sales contract" providing for the transfer of title to the church only after payment of the full purchase price over a term of two years. The church claimed that the property was exempt from taxation under a state law exempting "land … purchased for the purpose of erecting a building which is to be owned, occupied, and used" for exempt purposes.

The state board of tax commissioners rejected the church's claim of exemption, arguing that the church could not be considered to have "purchased" property that it held under a land sales contract. The tax court upheld the church's claim of exemption, noting that the church planned to erect a new sanctuary on the property and that it satisfied the definition of a "purchaser" when it entered into the land sales contract.

Community Christian Church, Inc. v. Board of Tax Commissioners, 523 N.E.2d 462 (Ind. T.C. 1988)

Legal Developments

Court Upheld State’s Position, Rejecting Church’s Contention That Each Exempt Building Was Entitled to an Exemption of 50 Acres of Land

An Indiana court addressed the issue of the exemption of church camps from real estate

Richard R. Hammar, Attorney, CPA

Bio

State: Indiana
Categories: Church Property, Tax Exemption, Taxation - Church Property

An Indiana court addressed the issue of the exemption of church camps from real estate taxes. The camp in question, which is owned and operated by the Indiana Association of Seventh Day Adventists, consists of 175 acres containing a staff lodge, 14 sleeping cabins, a dining hall, an assembly hall, a craft building, and a caretaker's house. It is used primarily as a summer church camp, a retreat, and a weekend meeting place for teachers, ministers, and other church personnel.

Prior to 1983, all of the camp's real estate and improvements were exempt from taxation. In 1983, however, the state denied the exemption for the caretaker's house and all land in excess of 50 acres, relying in part on the wording of the exemption statute which exempts a tract of land if a building situated on the property is exempt and if "the tract does not exceed 50 acres."

The court upheld the state's position, rejecting the church's contention that each exempt building was entitled to an exemption of 50 acres of land. It defined a "tract" as "any area of land that is under common ownership and is contained within a continuous border." Finally, the court rejected the church's claim that the exemption statute unconstitutionally exempted the property of certain organizations (e.g., YMCA, YWCA, Salvation Army, Boy Scouts, Girl Scouts) from property taxation without any acreage limitation, while imposing the acreage limitation on other organizations. Indiana Association of Seventh Day Adventists v. State Board of Tax Commissioners, 519 N.E.2d 772 (Ind. Tax Court 1988)

Legal Developments

Seventh Day Adventists Did Not Qualify for the Exemption of Parsonages under State Law

Church Property

Richard R. Hammar, Attorney, CPA

Bio

State: Indiana
Categories: Church Property, Tax Exemption

An Indiana state tax court held that a duplex owned by the state conference of the Seventh Day Adventists did not qualify for the exemption of parsonages under state law.

The exemption was available only if the parsonage is actually used to house a minister, and the evidence was not clear that this was the exclusive use of the conference-owned duplex. The court did acknowledge that the duplex might qualify for exemption under another statutory provision exempting any property used for religious purposes, and accordingly remanded the case to the trial court for further consideration. Seventh-Day Adventists v. Board of Tax Commissioners, 512 N.E.2d 936 (Ind. Tax 1987)

Legal Developments

Internal Revenue Service

Administration

Richard R. Hammar, Attorney, CPA

Bio

State: Alaska

• Your chances of being audited by the IRS are highest (2.61%) in Nevada and lowest (0.47%) in Rhode Island, according to recently released IRS data. The five states with the highest audit risk are Nevada, Alaska, Utah, Wyoming, and California. The five states with the lowest risk are Rhode Island, Kentucky, Indiana, Massachusetts, and New Hampshire. The national average in 1986 was 1.1%, down from 2.3% in 1975. The IRS plans to audit 1.23% of all individual income tax returns in 1987, and 1.32% in 1988.

Legal Developments

Churches Can Be Responsible for Injuries Suffered by a Member

On Church Property or During Church Activities

Richard R. Hammar, Attorney, CPA

Bio

State: Indiana
Categories: Personal Injuries on Church Property or During Church Activities

Can a synagogue be legally responsible for injuries suffered by a member who tripped over a plastic runner covering an aisle?

Yes, concluded an Indiana appeals court. The court noted that the liability of landowners (including churches and synagogues) for injuries suffered on their premises depends on whether the victim was a "licensee" or an "invitee."

One who enters premises for his or her own "convenience, curiosity, or entertainment" is a licensee and cannot recover for injuries caused by negligent maintenance of the premises. On the other hand, persons who are invited to enter upon premises for a purpose for which the premises are held open to the public or for business dealings with the owner of the premises are "invitees" who may recover for such injuries.

The court concluded that members who attend activities at a church or synagogue are invitees under this test, since they are invited to enter the premises for the purposes for which they are held open to the public. Accordingly, a church or synagogue has a duty to protect them against negligent conditions on the premises, including improperly maintained runners. Fleischer v. Hebrew Orthodox Congregation, 504 N.E.2d 320 (Ind. App. 1987).

Legal Developments

Church Liability for Injuries Sustained by Volunteers

A church member of an unincorporated church who was injured while volunteering his time to

Richard R. Hammar, Attorney, CPA

Bio

State: Indiana
Categories: Personal Injuries on Church Property or During Church Activities

A church member of an unincorporated church who was injured while volunteering his time to repair the church roof could sue the church for injuries he sustained, ruled an Indiana appeals court, The court acknowledged that its decision was contrary to the majority rule that unincorporated churches cannot be sued by members for negligence. Joseph v. Calvary Baptist Church, 500 N.E.2d 250 (Md. App. 1986).