Wednesday, June 2, 2010
This story in the Boston Globe details how nine cities and towns in the Boston area are forcing the Roman Catholic Church to pay property tax on closed church and school buildings, under the theory that these properties are no longer being used for exempt religious purposes. Although the Church is fighting these communities in some cases, the law in Massachusetts seems to be on the side of the tax assessors.
Indeed in most states, property tax exemption is based on two separate, though related requirements. First, the owner of the property must be a charity, and second, the property must actually be used for charitable purposes. Mere ownership by a charity generally is not enough for property tax exemption in most states - for example, in Illinois, at one time the thrift stores operated by the Salvation Army were considered taxable property because the courts had held that the stores were commercial enterprises, not used for charitable purposes. Another common example of this doctrine in applications is that tax-exempt hospitals often pay property taxes on office buildings rented to doctors, again under the theory that the use of such property is commercial, not charitable.
While property owned by charities but used for commercial purposes is not exempt in most (perhaps all, though I haven't done a 50-state survey lately) states, it is less clear whether property that is unused would fail the charitable use test. For example, it is unclear how most states would treat a vacant lot owned by a Church that was adjacent to the church building and essentially held for future expansion. Given the reality of the demands on local taxing bodies, however, I expect to see more examples of the "unused property is taxable" approach in other jurisdictions.