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Tax Legislation—State

§ 5.01.04
Key point 5-01.04. The term "church" is used in a number of state tax laws, including property tax exemption statutes. State courts have struggled to provide an adequate definition.

Several state courts have attempted to define the term church in the process of interpreting state tax exemptions.[77] Id. To illustrate, in one case a religious radio station argued that it was exempt from state sales and use taxes since it was a church.[78] Maumee Valley Broadcasting Assoc. v. Porterfield, 279 N.E.2d 863 (Ohio 1972). But see G.C.M. 38982. The radio station's corporate purpose was "to exalt the Lord Jesus Christ and to maintain facilities for the worship of God and for the teaching and preaching of the Gospel." The station actively engaged in religious activities, including broadcasting of predominantly religious programming, missions promotion, child evangelism, establishment of Bible study groups, and personal counseling. In addition, the station owned an auditorium that was used frequently for interdenominational worship services and related programs.

The state tax commissioner challenged the station's exemption on the ground that it was not a church. In particular, the commissioner argued that the radio station could not be a church since it did not have a body of communicants gathered together in an order, or united under one form of government." The court, acknowledging that the term church "is not susceptible to a precise definition," summarily concluded that the radio station was entitled to the exemption since it "exhibited the essential qualities of a church," despite the fact that it did not have a definite congregation.

In another case,[79] Ideal Life Church v. County of Washington, 304 N.W.2d 308 (Minn. 1981). a county tax assessor determined that a private residence was not a church, despite the homeowners' contention that monthly meetings of the eleven-member Ideal Life Church were held in the home and the church had received a charter from the mail-order Universal Life Church. The tax assessor's determination was upheld by the state supreme court, which quoted with approval the reasoning of a lower court in the same case:

[T]he proper test for determination of a "church" depends upon an analysis of all the facts and circumstances of each particular case. In the present action the following factors … lead to the clear conclusion that Petitioner is not a "church". …
1. In substance, the preconceived and primary, if not the sole motive behind petitioner's organization and operation was tax avoidance in favor of the private individuals who control the corporation. …
2. Petitioner's doctrine and beliefs, such as they are, are intentionally vague and non-binding upon its members.
3. Petitioner's members freely continue to practice other religions.
4. Petitioner has no formally trained or ordained ministry.
5. Petitioner has no sacraments, rituals, education courses or literature of its own.
6. Petitioner has no liturgy, other than simple meetings which resemble mere social gatherings or discussion groups rather than religious worship.
7. Petitioner is not an institution which advances religion (as that term is commonly understood) as a way of life for all men.
8. Petitioner does not require a belief in any Supreme Being or beings.[80] Id. at 315. But see State v. American Fundamentalist Church, 530 N.W.2d 200 (Minn. 1995), in which the Minnesota Supreme Court, while not overruling its 8-factor test, noted that it should be applied together with a "subjective" test that looks to the sincerity of an organization's religious belief to be sure that it is not "cloaking a secular enterprise with the legal protections of religion." The 8-factor test was rejected by the Wisconsin Supreme Court in Waushara County v. Graf, 480 N.W.2d 16 (Wis. 1992).

Another court upheld the property tax exemption of a 65-acre tract of land containing a religious hermitage and retreat center. While noting that the property was "not a church in the narrow sense," the court concluded that a church is more than merely an edifice affording people the opportunity to worship God. … To limit a church to being merely a house of prayer and sacrifice would, in a large degree, be depriving the church of the opportunity of enlarging, perpetuating and strengthening itself and the congregation."[81] Order of Conventuals v. Lee, 409 N.Y.S.2d 667, 669 (1978).

One court ruled that an evangelistic association was not a church and so was not exempt from unemployment insurance payroll taxes.[82] Vic Coburn Evangelistic Assoc. v. Employment Division, 582 P.2d 51 (Ore. 1978). See also Alton Newton Evangelistic Assoc., Inc. v. South Carolina Employment Security Commission, 326 S.E.2d 165 (S.C. 1985). The court noted that the evangelistic association was exempt from federal income tax, was established for avowedly religious purposes, conducted worship services in cities throughout the country, had a mailing list in excess of 25,000 persons, and relied upon contributions for its support. However, the association could not be deemed a church since "there was no group of believers who had voluntarily bound themselves together in an organized association for the purpose of shared and regular worship." Another court ruled that an interdenominational Christian youth organization that conducted religious services and administered sacraments was a church and thus was exempt from payment of unemployment taxes.[83] Young Life Campaign v. Patino, 176 Cal. Rptr. 23 (1981). The court concluded that a comprehensive definition of the term church was not possible. Instead, the court opted for a functional approach—if an organization performs church functions, such as the conduct of worship and the promulgation of a creed, it will be deemed a church.

Case studies
The Georgia Supreme Court ruled that a state property tax exemption for "all places of religious worship" applied to a church-owned vacant lot that was used for parking. The court concluded: "The words 'religious worship' import a concept of a congregation assembling in a place open to the public to honor the Deity through reverence and homage. [The lot in question] is the site of the church's auxiliary parking lot, not its actual sanctuary. However [the statute] is phrased in inclusive general terms of 'all places of religious worship,' and does not employ the terms 'house' or 'church' of religious worship, which, arguably, might have limited it to a building. If the presence of the omnipotent and omnipresent God cannot be restricted to a mere man made edifice, surely it was not intended to limit the worship of such a God to a building."[84] Marathon Inv. Corp. v. Spinkston, 644 S.E.2d 133 (Ga. 2007).
The Supreme Court of Ohio, in concluding that a religious organization was exempt from state sales tax as a church, observed: "It has adherents. It adopts the Bible as the main source of its dogma, it propagates a comprehensive set of religious objectives and beliefs which attempt to answer its adherents' religious concerns, and it conducts services. … It employs ministers who preside at sacramental ceremonies, operates schools to train ministers, and sends forth missionaries to spread its beliefs."[85] The Way International v. Limbach, 552 N.E.2d 908 (Ohio 1990).
• The Pennsylvania Supreme Court ruled that a church's parking lots were exempt from property taxation under a state law exempting "all churches, meeting-houses, or other actual places of regularly stated religious worship, with the ground thereto annexed necessary for the occupancy and enjoyment of the same." The court concluded: "In this day and age, parking lots may be a necessity for a church, rather than just a convenience. People and churches have both moved away from towns, and many people are no longer living within walking distance of their church. To attend, they are required to drive and park a vehicle. With no available parking, church-goers may be forced to seek religious expression elsewhere, causing a decrease in membership and impeding the ability of the church to exist. … The church has established its parking lot is entitled to an exemption because it is necessary for the occupancy and enjoyment of [the church]. … We do not hold all church parking lots are entitled to tax-exempt status. However, if a church proves its parking lots are a reasonable necessity to the existence of the church itself, those lots are entitled to such status." [86] Wesley United Methodist Church v. Dauphin County Bd. of Assessment Appeals, 889 A.2d 1180 (Pa. 2005).

Other state courts have ruled that (1) a separately incorporated religious school operated by a group of local churches was not a church for purposes of unemployment law;[87] Nampa Christian Schools Foundation v. State Department of Employment, 719 P.2d 1178 (Ida. 1986). The court concluded that the school was exempt under another provision of the unemployment law which exempted an organization operated primarily for religious purposes and which is operated or principally supported by a church or group of churches. and (2) a Christian foundation that propagated its beliefs through written publications and radio broadcasts rather than through face-to-face communications, and that was not affiliated with any church or denomination, were "churches" for purposes of a state unemployment law.[88] Christian Jew Foundation v. State, 653 S.W.2d 607 (Tex. App. 1983).

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