Recent Developments in Colorado Regarding the Taxation of Church Property

A Colorado court ruled that two vacant lots owned by a church were exempt from property tax because they were used one day each year for religious purposes.

Church Law and Tax1999-07-01

Taxation-Church Property

Key point. Church-owned vacant land may be exempt from taxation if it is used at least occasionally for religious purposes.

A Colorado court ruled that two vacant lots owned by a church were exempt from property tax because they were used one day each year for religious purposes. This ruling will be of relevance to any church that is paying property taxes on vacant land. The church in question owned two vacant lots-one near the church, and the second some distance away. The church was the only user of the two lots, and used each lot one day each year for activities that it claimed were in furtherance of its religious mission. The church hoped to construct structures on each lot for church use, but it lacked the funds to do so. A local tax assessor ruled that the lots did not qualify for exemption because the quantity and extent of the church’s use was insufficient. A board of tax appeals reversed the assessor’s ruling, noting that the church actually used the lots “on a limited basis” and was “the only user” of the properties, and that the limited funding available to the church to improve the properties should not “keep the properties from being tax exempt.” The tax assessor appealed, and a state appeals court upheld the exemption of the two lots.

The court began its opinion by quoting the Colorado property tax exemption statute, which grants a property tax exemption to property “which is owned and used solely and exclusively for religious purposes.” The court concluded:

Under [the exemption statute] the test for exemption depends upon the character of the use to which the property is put …. Further, property tax exemptions based on religious use should not be narrowly construed …. We note that property tax exemptions are determined on an annual basis … based on the use of the property in each tax year. Implicit in this scheme is the requirement that, in order for the property to qualify for tax exemption for that tax year, there be at least some actual use of the property for tax exempt purposes in that tax year. Apart from this minimal implicit requirement, however, we decline to hold … that any particular frequency or quantity of use religious in character is required to satisfy the foregoing … standards for exemption based on religious use.

The court noted that while the tax assessor considered the church’s use of the lots just one day each year to be insufficient for exemption, he “was unable to quantify the frequency or amount of such use that would be considered sufficient.”

Application. Does your church own one or more vacant lots? If so, are you paying property taxes? If you are, you should consider the potential application of this case. By conducting religious or educational activities on the property, at least occasionally, you may be able to qualify the property for exemption from tax. Obviously, the success of such efforts will depend upon the wording of your state property tax exemption statute, and the nature and frequency of your use of the property. The more frequent the use, the more probable the exemption. Consider the following kinds of uses-softball games and other sports activities for both children and adults; outdoor religious services; camping; and astronomy and other “nature study” activities. Pilgrim Rest Baptist Church v. PTA, 971 P.2d 270 (Colo. App. 1998). [State Taxes]

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