Recovering “Lost Profits” in an Eminent Domain Proceeding

Court rules church is not a business and cannot ask for payment for “lost profits.”

Richard R. Hammar, Attorney, CPA
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Church Finance Today

Recovering “Lost Profits” in an Eminent Domain Proceeding

Court rules church is not a business and cannot ask for payment for “lost profits.”

Richard R. Hammar

Assume that a government agency informs you that it is going to take a portion of your property as part of a street expansion project. Can it do so? And if so, what if anything should the church receive in return? Church treasurers should be familiar with the answers to these questions.

Let’s begin with the basic principle that government can take private property for a public purpose without the owner’s consent—so long as it pays the owner “just compensation.” This is known as “eminent domain” or “condemnation.” Churches are subject to eminent domain like any other private property owner. But what is “just compensation” when a government agency “takes” part or all of a church’s property? That was the issue before a Florida court in a recent case. A county government exercised the power of eminent domain to take a portion of a church’s parking lot. The county agreed to pay the church for the value of the land it took. The church wanted more. It insisted that the county pay it “business damages.” Under many state laws the government must pay business owners “business damages” in addition to the value of the property that is taken. Business damages recognize that a business does not receive “just compensation” when the government reimburses it only for the value of property taken by eminent domain. Such a taking may also adversely affect the business’s profits, at least in the near future.

The church argued that it was entitled to business damages because of the county’s taking of its property. It noted that the county had taken a portion of its parking lot which would result in “lost profits” because fewer donors would be able to attend services. A state appeals court disagreed. It noted that business damages are available only for “businesses,” and that the church was not a business. It observed: “Because the promotion of religion, not its own livelihood, is the primary purpose of a church … we conclude that a church is not a business as that term is used [in the statute].” Trinity Temple Church of God in Christ v. Orange County, 681 So.2d 765 (Fla. App. 1996).

This article originally appeared in Church Treasurer Alert, April 1998.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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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