Q & A: How a Texas Church Navigated A Sticky Tax Situation

Navigating a sticky tax situation is a matter of patience, record-keeping, communication and above-all, due diligence.

Matt Gillum, executive pastor at Austin Baptist Church in Austin, Texas, tells Church Law & Tax how his church patiently worked with city leaders to resolve a sticky tax situation.

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Q: Describe your church’s sticky tax situation—why did it receive an unexpected property tax bill?

In 2010, our church purchased 36 acres of vacant land. The land was divided into five sections—or “plats”—but all of it was purchased in one transaction. Before we bought it, a site plan was put together and passed by the city. We constructed a building on part of the property that opened in 2012.

A few years later, the assessor visited our property and noticed two of the plats remained undeveloped. The church hadn’t developed those two plats because the city of Austin is stringent about how certain types of brush can or can’t be cleared, as well as other environmental activities. The assessor determined the two plats weren’t being used for religious purposes and didn’t qualify for property tax exemption anymore.

Q: What was most surprising about this determination?

Church staff didn’t know we need to regularly show our eligibility for a property tax exemption. Staff also didn’t know how it needed to show the ways the two unused plats remained in unity with the rest of our property for religious purposes.

To the city, it could look like the church was holding on to the two plats and keeping them vacant to potentially sell them in the future. That was never our plan.

Q: Did your church appeal the assessor’s decision?

Yes. But once that happens, the situation remains in limbo unless something moves it forward toward a decision. Unfortunately, the property tax potentially owed continues to accrue in the meantime. We hired a lawyer to help move the process forward because the amount of money we needed to set aside to pay the accruing taxes in the event the appeal was denied was becoming sizable.

Q: What was the church’s approach to this sticky tax situation?

We did full due diligence. We pulled together photos providing evidence of how we use the property for church purposes. We dug up meeting minutes describing the master site plan the church developed in 2014, and how all of it worked toward the church’s religious functions. All of this proved to be extremely important in the process because it helped show what our church did, what it planned, and what it planned to do.

Q: How did the assessor respond?

It took five years, but we reached a compromise. The church agreed to pay a portion of the property tax for the year the assessment was made. But that was significant because the assessment in full could have been for four years’ worth of property taxes.

There was criticism within the church at times because of what we were spending to deal with this. I hated the idea of an ongoing property tax dispute sapping resources that could go toward ministry. The expenses did hinder growth in our missions, staffing, and other parts of the church.

It’s an albatross similar to debt.

In the end, though, the expenses proved to be worthwhile.

Dig Deeper: Attorney and Church Law & Tax Senior Editorial Advisor Midgett Parker explains why—and how—the property tax exemption process can honor God.

Q: As you navigated the appeal, what did you and your church learn?

We learned a lot. For instance:

  • Urgent action at the very beginning—when the bill first arrived—probably would have helped. Find experts, such as lawyers and real estate developers, and call upon them right away. Some may even attend your church, and if they have the right expertise, it can be a way for them to serve, especially if they haven’t found another way to serve. We found individuals like this—that was my favorite part of this process.
  • Keep diligent records. For a proceeding like this, you have to gather numerous legal and property documents. When they’re kept organized and accessible upfront, everything works more efficiently.
  • Keep good communication going with the church’s leadership and the congregation. Leadership especially wants to know the ministry staff knows what’s happening and has a plan.
  • Be respectful in public and in private. Don’t get angry or scared—look for solutions. Don’t attack city officials—work with them. Attacking only makes officials defensive and that doesn’t help anybody. We also know we will have to work with the city in the future, whether for building codes or other issues, so we need to maintain relationships. City officials are politicians who need to serve constituents, so it’s important we understand their job. It’s also important we understand their potential need for the gospel. City leaders and officials are part of the mission field, too.

We didn’t go to the media about this, either. We didn’t want to shame anyone. We didn’t want to be viewed as adversarial. We also didn’t want to trigger community debate about whether churches should even receive property tax exemptions.

Becoming contentious only works against you—and for those in your community who are already adversarial toward you, it only adds more fuel to the fire.

  • Empty parts of your church’s property can appear to be unused or irrelevant to worship purposes. Remember that the entire property doesn’t have to have buildings to still be relevant for worship purposes.

As we examined those two plats, and the challenges we faced with environmental restrictions, we realized we could create trails, a picnic area, and a disc golf course—all of which we made available for neighboring residents to use. We still use those plats for religious purposes, too. We host outdoor events, worship services, and other gatherings.

This just goes to show what can be done when you think creatively. If we could have done that sooner, it would have maybe helped avoid all of this.

Above all, good due diligence, intentionality, and consistent communication are good ways to solve this faster.

Editor’s note: This interview was edited for length and clarity.

Matthew Branaugh is an attorney, and the content editor for Christianity Today's Church Law & Tax.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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