Key point. Church property may be exempt from taxation though it is only used infrequently for religious purposes, so long as it is not used for any other purpose.
A New York court ruled that two churches that had been closed by a Catholic Diocese remained exempt from property taxes even though regular worship services no longer were conducted, since the properties were occasionally used for religious purposes (including monthly religious services) and this was their only use. A Catholic Diocese announced plans to permanently close two churches (the "petitioners"). Thereafter, canonical "decrees of suppression" were issued for the two churches that in effect transferred the property and care of the two churches to other parishes. The local tax assessor informed the diocese that the closed churches no longer qualified for exemption from property tax, and that both church properties had been placed on the tax rolls.
The petitioners asked a court to reinstate the exempt status of both properties. The court noted that "while the burden of proof in tax exemption matters ordinarily lies with the party seeking an exemption, a municipality seeking to withdraw an existing exemption bears the burden of proving that the real property in question has become subject to taxation."
[The assessor] contends that the properties are not entitled to tax exemptions because they are no longer "used primarily for the furtherance of [religious] purposes." To meet their burden in this regard, respondents contend that statements made by the Diocese establish that the properties no longer function as churches, that regular worship services and religious activities that were formerly conducted on the properties now take place elsewhere, and that the parcels are now investment properties being marketed for sale for the non-exempt purpose of generating income.
In rebuttal, petitioners submitted the affidavit of a Roman Catholic priest and canon lawyer stating that the canonical decree of suppression did not preclude the continued use of the properties for religious purposes, and that both properties continue to be "sacred space" within the meaning of the Code of Canon Law. Petitioners further submitted affidavits from church officials stating that both properties continue to be used for religious services conducted to serve the spiritual needs of the parish faithful, in the form of monthly morning prayers on one of the properties and periodic prayer services that include scripture readings and communion services on the other. The court concluded:
Contrary to [the assessor's] contention that such occasional or periodic use cannot be deemed to be primary, it is the actual or physical use of the property that determines whether it is exempt from real property taxation. Here, the record reveals that petitioners' only actual or physical use of their properties is for religious purposes. Absent any showing by [the assessor] that the properties are used for anything other than the religious purposes for which petitioners were organized, the mere fact that this use is now less frequent does not alter the properties' tax-exempt status. Further [the assessor] did not show that petitioners currently derive rental income or any other such financial benefit from the properties, and we find no basis upon which to conclude that the efforts to sell the properties renders use that is otherwise exclusively religious insufficient to meet the requirements of [exemption]. Accordingly, [the assessor] did not meet his burden to prove that the properties were subject to taxation, and … petitioners are entitled to summary judgment restoring the properties to tax-exempt status.
The court also noted that the properties were used to store religious artifacts and fixtures.
What This Means For Churches:
This case is important because it demonstrates a church property may qualify for exemption from tax even it is only used infrequently for religious purposes, so long as it is not used for any other purposes. This conclusion is reinforced by a 2012 ruling by the United States Supreme Court. Hosanna-Tabor Evangelical Lutheran Church and School v. E.E.O.C., 132 S.Ct. 694 (2012). In a ringing endorsement of religious liberty, the Supreme Court unanimously affirmed the so-called "ministerial exception" barring civil court review of employment disputes between churches and ministers. The case involved a claim by a "called" teacher at a church-related school in Michigan that the school committed unlawful disability discrimination in terminating her employment. The Court concluded that the ministerial exception applied to a called teacher in a parochial school despite the fact that she only devoted a few minutes each school day to religious activities. The Court concluded that a finding of ministerial status cannot be based solely on the amount of time a person spends on religious functions.
In rejecting a federal appeals court's conclusion that the ministerial exception did not apply because of the limited time the teacher devoted to religious tasks, the Court observed: "The issue before us, however, is not one that can be resolved by a stopwatch. The amount of time an employee spends on particular activities is relevant in assessing that employee's status, but that factor cannot be considered in isolation, without regard to the nature of the religious functions performed."
The Court acknowledged that the teacher's religious duties "consumed only 45 minutes of each workday, and that the rest of her day was devoted to teaching secular subjects." However, the Court noted that it was unsure whether any church employees devoted all their time to religious tasks: "The heads of congregations themselves often have a mix of duties, including secular ones such as helping to manage the congregation's finances, supervising purely secular personnel, and overseeing the upkeep of facilities."
The Court's ruling has potential significance to church property tax exemptions, since it suggests that church property may be entitled to exemption based on exclusive use, even though only used infrequently for overtly religious purposes. St. William's Church of Troy, N.Y. v. Dimitriadis, 981 N.Y.S.2d 837 (N.Y.A.D. 2014).
