Key Point In many states, church property is exempt from taxation only if it is regularly used for church purposes. Other states define the exemption more narrowly to cover only those church-owned properties that are regularly used for religious worship.

The Minnesota Tax Court ruled that there was insufficient support for the exemption of three church-owned wooded lots from property taxation to grant the church’s motion for summary judgment in its favor. A church owned three unimproved wooded lots that were close, but not contiguous to, the church building. A legal dispute arose over the tax status of these lots. A county tax assessor determined that they were subject to property taxation, while the church insisted that they were exempt. The church asked the court to summarily rule in its favor.

The Minnesota Constitution states that “churches, church property, [and] houses of worship … shall be exempt from taxation.” The Tax Court noted that “when determining whether church property is tax exempt, Minnesota courts consider whether the property is devoted to and reasonably necessary to the accomplishment of church purposes. In other words, exemption depends upon ownership by a church and use of the property for church purposes.”

The Court noted that since ownership was not at issue in this case, the central question was on the church’s use of the property. The church claimed that the lots were entitled to exemption as a matter of law because they were devoted to, and reasonably necessary to, the accomplishment of church purposes. It pointed out that the lots were used for prayer, reflection, and Christian education including a Vacation Bible School. The county argued that it was unclear whether and how the lots were used to further church goals, and as a result it would be inappropriate for the Court to summarily rule in the church’s favor.

The Court, in agreeing with the county’s position, observed:

Here, very little, if any, factual information has been provided about the use of the lots …. The church asserts that the lots are used for Vacation Bible School and nature walks, among other things. However, its self-serving statements are not enough to overcome the presumption that the land is taxable and to carry the burden of proof that it is exempt. The closest Petitioner has come to providing any specific information is that the church conducted a Vacation Bible School in 2007, and the participants went on nature walks through the church’s property. We do not know which parcel(s) the Vacation Bible School used or whether the walk “through” referred to a walk on the public right-of-way, which is next to the non-contiguous lots. Moreover [the evidence] indicates that the lots may be accessed only by means of an unimproved public road, and that there are no paths, clearings, amenities, improvements or visual evidence of active use of or entry upon any of those parcels. The evidence does not corroborate the church’s statements that there is any active use of those parcels.

Application. Every state exempts church property from taxation. Some states limit the exemption to church-owned property that is regularly used for worship. Other states more broadly exempt church-owned property that is regularly used for church purposes. While this exemption is broad, it has limits. To be exempt, property must be actively used for the accomplishment of the church’s purposes. Vague and self-serving statements will not suffice. A church must be able to present proof that the property is regularly used for activities in furtherance of its purposes. Advent Evangelical Lutheran Church v. County of Ramsey, 2008 WL 3892374 (Minn. Tax Court 2008).

Resource. For the text of the property tax exemption laws of all 50 states, see Table 12-4 in Richard Hammar’s 2009 Church & Clergy Tax Guide, available from the publisher of this newsletter by calling 1-800-222-1840 or by visiting our website, www.ChurchLawandTax.com.

This Recent Development first appeared in Church Law & Tax Report, July/August 2009.