Is property acquired by a church after the "tax assessment date," and used exclusively for religious purposes, subject to local property taxes?That was the question before a New Jersey state appeals court.
Under New Jersey law, the taxable or exempt status of any tract of property is determined as of the tax assessment date (October 1 of the preceding calendar year). A church purchased property on December 12, 1983, and used it immediately for exclusively religious purposes. The church applied for a tax exemption, but was informed that no exemption would be available for calendar year 1984 since the property was not owned by the church as of October 1, 1983.
The church claimed that it was doctrinally opposed, on the basis of biblical passages, to paying taxes with funds obtained from tithes and contributions, and accordingly, that requiring the church to pay property taxes for 1984 would violate the constitutional guaranty of religious freedom. The court acknowledged that "the free exercise of religious beliefs can be crushed and closed out by the sheer weight of the tribute which is exacted." However, it also noted that "it is equally well-settled that religious groups are not free from all financial burdens of government" and that "not all burdens on religion are unconstitutional."
A state may "justify a limitation on religious liberty by showing that it is essential to accomplish an overriding governmental interest" and there exists "no less restrictive means" of achieving the state's interest. The court emphasized that the issue was not the tax-exempt status of church property—since New Jersey law clearly exempted such properties from tax. Rather, the issue was whether or not the constitutional guaranty of religious freedom requires church-owned property to be exempt from taxation the moment it is acquired.
The court concluded that the church's religious freedom claim was outweighed by a compelling state interest—the "broad public interest in maintaining a sound tax system." Specifically, the court observed that "mid-year cancellation of tax liability by reason of a property so listed becoming exempt during the year would result in major dislocation and an unfair burden to the remaining taxpayers." Further, "a requirement imposed by the [courts] mandating that property acquired by an exempt owner must receive an exemption at the exact time of its acquisition would severely impair the ability of the tax authorities to predict revenues for the tax year."
In conclusion, the court observed that the maintenance of "an organized society that guarantees religious freedom to a great variety of faiths requires that some religious practices yield to the common good."
Bethany Baptist Church v. Deptford Township, 542 A.2d 505 (N.J. Super. 1988)