Wednesday, March 5, 2014

Discerning “religious” as a purpose for tax-exempt status

Last year, the Porter County Tax Assessment Board of Appeals brought up the religious exemption of Preachit for examination. Preachit is an Indiana organization whose website describes it as providing “resources for ministers by ministers.” The website further describes itself as “an Apostolic/Pentecostal resource web site with over 3900 manuscript and outlined sermons of various topics.” Preachit’s 2012 Form 990 lists its mission as “Scriptural/Ministry Evangelization.”

In 2009, Preachit received a religious exemption for part of its property and has not been paying taxes on any part of it since that time. The property is a facility with a “two-story home, several outbuildings, a pond, and more.” Additionally, the head of Preachit, Rev. James Smith, uses the building as his home along with his wife. However, Smith also uses it as the location for Preachit offices, meeting spaces, and a space to produce materials.

Porter County’s property tax exemption law mandates that the property owner be exempt from the federal income tax by section 501(c)(3) as an essential element of obtaining county property tax exemption.  While § 501(c)(3) explicitly names religious purposes as one of the permissible purposes, neither § 501(c)(3) nor Treas. Reg. §1.501 defines the term “religious.” Instead, much of the law on this issue has been developed from case law.

Should Preachit qualify for tax-exempt status? What arguments can be made in support of and against granting Preachit tax-exempt status?


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