Failure to Pay Property Taxes

Churches that fail to pay taxes may lose property in a tax sale.

Church Law and Tax 1991-03-01 Recent Developments

Church Property

Can a church lose a portion of its property in a tax sale because of its failure to pay property taxes? Yes, said a Maryland state appeals court. A church received a parcel of vacant land as a gift. Church officials did not believe that the church was required to pay property taxes on the land. They assumed that the land had tax-exempt status, and they had no knowledge of taxes assessed against the property by the county. Tax bills were sent to the title insurance company that provided the church with an insurance policy on the donated land, since its address was the only address listed on the deed to the property. The tax collector assumed that this was the church’s address. The legal name of the church that appeared on the deed and in the recorder’s office was different from the name the church used in the telephone directory and on its church sign, and so the collector had no way of knowing that the address on the deed was not the church’s address. Eventually, the tax collector sold the property at a tax sale. The church was unaware that the tax sale was occurring, since it never received notice of the sale. The only notice of the sale appeared in a newspaper. The church challenged the sale of its property on the grounds that it had innocently assumed that the property was tax-exempt, that it never received a tax bill, and that it never received actual notice of the tax sale. All of these grounds were rejected by the state appeals court, which upheld the sale of the church’s property. In rejecting the church’s claims that it was unaware of the property’s tax status, or of the tax sale, the court observed that vacant land is not tax-exempt under Maryland law and therefore the church’s assumptions regarding the donated property’s tax status were unreasonable. Further, the church had been “less than diligent in failing to ascertain that taxes were in default [and] that the sale had been made ….” The court emphasized that the notice in the newspaper was sufficient since there were no other reasonable means of contacting the church under the circumstances. In short, “the church enjoys no special status in relation to the property at issue because of the religious nature of its organization.” What is the significance of this case to local churches? Simply this—when acquiring real estate (whether by purchase or gift), be certain of two things. First, that the address of the church listed on the deed is correct. And second, if the legal name of the church as it appears on the deed is different from the name commonly used by the church (in the telephone directory, on the church sign, etc.), be sure to list both names. For example, if the legal name of a church is First Baptist Church and the commonly used name is “Baptist Temple,” then the deed should recite the church’s name as “First Baptist Church, also known as Baptist Temple.” Be sure to make the attorneys handling any acquisition of church property aware of both points. St. George Antiochian Orthodox Christian Church v. Aggarwal, 576 A.2d 224 (Md. App. 1990).

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