Key point. Church-owned land that is used for recreational activities may qualify for exemption from taxation as either a religious or charitable use.
The Ohio Supreme Court ruled that an entire 79-acre tract owned by a church qualified for exemption from property taxation. After many years of expansion, a church decided to open a second church. It acquired 79 acres on which it constructed a large church building with classrooms. The property includes two softball diamonds, a soccer field, and a jogging path that follows the circumference of the property. The church views itself as conducting a sports ministry in connection with the recreational portions of the property and conducts fourteen events, including church-sponsored soccer teams and flag football games. Most of the participants in those events are community members who are not congregants of the church. The city also has sports leagues that use the property. During the summer months, the church stages a day camp for children ages six through eighth grade with several hundred participants. The jogging path is used by the general public without restriction. An estimated 3,000 people utilize the property each year, most of whom were not congregants of the church.
The church paid all costs to develop and maintain the property but does not charge the public to use the recreational facilities. The property does not generate income for the church. The mayor of the city testified that the city itself benefited because the church developed and made the property available for public use, thereby providing public recreational facilities that the city would otherwise have to pay for itself.
The church filed an application that sought to exempt the property from taxation. The application asked for an exemption of 58 acres as land associated with a house of public worship and sought exemption for another 21 acres as land used exclusively for a charitable use. A city tax commission ruled that the 21 acres, which were used exclusively for recreational purposes, did not qualify for exemption as land devoted to a charitable use. The commission concluded that the recreational property was used by the public, not the church, and therefore it was not eligible for exemption. The church appealed.
The Ohio Supreme Court ruled that the disputed 21 acres were exempt from taxation under a state law that exempted ‘property belonging to institutions that is used exclusively for charitable purposes.’
The Ohio Supreme Court ruled that the disputed 21 acres were exempt from taxation under a state law that exempted “property belonging to institutions that is used exclusively for charitable purposes.” It rejected the commission’s argument that “merely holding the property open to the public and allowing various third parties to use it” is not a charitable use and “does not qualify [the property] for exemption.” It also rejected the argument that church-owned property cannot qualify for a charitable exemption, noting that “any institution, irrespective of its charitable or noncharitable character, may take advantage of a tax exemption if it is making exclusive charitable use of the property.”
What This Means For Churches:
This case is a useful precedent for any church that owns land that is used for recreational purposes. While not binding in any state other than Ohio, the case can be cited as persuasive authority for the proposition that land owned by a church and used for recreational purposes qualifies for exemption from taxation. The Chapel v. Testa, 950 N.E.2d 142 (Ohio 2011).
This Recent Development first appeared in Church Law and Tax Report, March/April 2012.