Key point. A parachurch ministry may qualify for property tax exemption as a "house of public worship" though it is not formally affiliated with a church and does not have members.
Key point. Vacant land may be exempt from property taxation if it is primarily for religious purposes.
A Michigan court ruled that an 1,800-acre retreat owned by a parachurch ministry was exempt from property tax as a “house of public worship.” The Institute in Basic Life Principles is a religious organization founded by Rev. William Gothard in 1961. Its purpose is to "give clear instruction on how to apply God's basic principles of life as revealed it the Scriptures" through seminars, meetings, literature, and broadcasting. The Institute owns an 1,800-acre conference center that includes a lodge, a hotel with 90 rooms, an auditorium where worship services are conducted, a dining room for guests, and a gymnasium. The founder also uses the property to write religious materials for his seminars. A state tax agency determined that the entire property was subject to property tax, since it did not qualify for exemption under state law. Michigan law exempts:
Houses of public worship, with the land on which they stand, the furniture therein, and all rights in the pews, and any parsonage owned by the religious society of this state …. Houses of public worship include buildings or other facilities owned by a religious society and used predominantly for religious services or for teaching the religious truths and beliefs of the society.
The state tax agency determined that the Institute was not a religious society since it had no members and no "prescribed form of worship." Further, the agency concluded that the Institute's property did not qualify as a "house of public worship." The Institute appealed, and a state appeals court ruled that the entire property was entitled to exemption.
The court concluded that the term "religious society" includes any organization, such as the Institute, whose "predominant purpose and practice include teaching religious truths and beliefs." The court referred to the Institute's bylaws for proof that its purpose was to teach religious truths. It further noted that more than 2.5 million persons have attended seminars presented by the Institute. With regard to the Institute's lack of members, the court simply noted that state nonprofit corporation law did not require religious corporations to have members.
Finally, the court concluded that the property could be viewed as a "house of public worship," noting that "[a]lthough [the Institute] may not fall within the traditional definition of a religious society, that does not mean that it is not entitled to an exemption as a religious society under the house of public worship exemption."
The court refused to limit the property tax exemption to those portions of the 1,800 acres actually used for religious teaching and worship, since engaging in such an analysis "would unnecessarily intrude into the affairs of religious organizations." Instead, the court asked "whether the entire property was used in a manner consistent with the purposes of the owning institution."
This test "avoids undue entanglement in the province of religious entities, and more closely conforms with the requirement under the exemption statute that the property be used predominantly for reaching the religious truths of the society." The court noted that the Institute conducts religious seminars on the property and
provides its seminar attendees access to the lakes on the property and has paved seven miles of road for bicycling. The large areas of undeveloped land permit the participants to walk through the woods and think about what they have heard …. The record contains no evidence that the property was being used for purposes outside those enumerated in [the Institute's] bylaws. Because the [Institute] and its guests use the property in a manner consistent with [its] stated purposes, the property should be exempt from taxes.
What this means for churches
This case is important for the following reasons: (1) It contains a broad definition of "religious society" that will be useful to other parachurch ministries whose "religious" status is questioned by governmental agencies. (2) It contains a broad definition of "house of public worship" that will be useful to other parachurch ministries and churches when a tax assessor questions the exempt status of some or all of their property. (3) It will be useful to churches and other religious organizations that own undeveloped land in the event the tax-exempt status of the land is questioned.
According to this court, a tract of property should be viewed as a whole. The courts and tax assessors should not attempt to divide the property into those parcels that are used for religious purposes and those that are not. Any other result would impermissibly "entangle" the courts and tax assessors with questions of what is "religious". The proper question is whether the property as a whole is used for exempt purposes, and these purposes may include strolling or bicycling about on largely undeveloped property by persons who attend seminars in classrooms located on the property. Institute in Basic Life Principles, Inc. v. Watermeet Township, 551 N.W.2d 199 (Mich. App. 1996).