Rent Does Not Always Make Church Property Taxable

Illinois court makes favorable ruling for churches renting to charities.

Church Finance Today

Rent Does Not Always Make Church Property Taxable

Illinois court makes favorable ruling for churches renting to charities.

Rental income does not necessarily render church property taxable. So ruled an Illinois appeals court. A church leased a portion of its property to another charity that sold donated furniture, clothing, and household goods. While the rental fee charged by the church was minimal, a local tax assessor determined that it was enough to prevent the property from being exempt from taxation under a state law exempting “all property used exclusively for religious purposes … and not leased or otherwise used with a view to profit.” The court disagreed. It noted that the property was used exclusively for religious purposes since one of the missions of the church is caring for the needy. It also concluded that the property was “not leased or otherwise used with a view to profit” despite the fact that the church charged nominal rent for the charity’s use of the property. It conceded that the property was “leased” by the church, but it concluded that a lease calling for minimal rental payments does not have “a view toward profit.” First Presbyterian Church v. Zehnder, 715 N.E.2d 1209 (Ill. App. 1999).

Key point. Many churches charge fees for the use of their property. This case suggests that such fees may not jeopardize a church’s property tax exemption if (1) the rental fee is minimal, or intended only to recover actual costs, and (2) the applicable property tax exemption law, like the one in Illinois, taxes property that is rented “with a view toward profit.”

This content originally appeared in Church Treasurer Alert, February 2001.

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.

ajax-loader-largecaret-downcloseHamburger Menuicon_amazonApple PodcastsBio Iconicon_cards_grid_caretChild Abuse Reporting Laws by State IconChurchSalary Iconicon_facebookGoogle Podcastsicon_instagramLegal Library IconLegal Library Iconicon_linkedinLock IconMegaphone IconOnline Learning IconPodcast IconRecent Legal Developments IconRecommended Reading IconRSS IconSubmiticon_select-arrowSpotify IconAlaska State MapAlabama State MapArkansas State MapArizona State MapCalifornia State MapColorado State MapConnecticut State MapWashington DC State MapDelaware State MapFederal MapFlorida State MapGeorgia State MapHawaii State MapIowa State MapIdaho State MapIllinois State MapIndiana State MapKansas State MapKentucky State MapLouisiana State MapMassachusetts State MapMaryland State MapMaine State MapMichigan State MapMinnesota State MapMissouri State MapMississippi State MapMontana State MapMulti State MapNorth Carolina State MapNorth Dakota State MapNebraska State MapNew Hampshire State MapNew Jersey State MapNew Mexico IconNevada State MapNew York State MapOhio State MapOklahoma State MapOregon State MapPennsylvania State MapRhode Island State MapSouth Carolina State MapSouth Dakota State MapTennessee State MapTexas State MapUtah State MapVirginia State MapVermont State MapWashington State MapWisconsin State MapWest Virginia State MapWyoming State IconShopping Cart IconTax Calendar Iconicon_twitteryoutubepauseplay
caret-downclosefacebook-squarehamburgerinstagram-squarelinkedin-squarepauseplaytwitter-square