News: CJ Exclusives

Court Denies Tax Break to Church

Case involved land for outdoor worship and a unique doctrine

Under North Carolina law, churches are exempt from paying property taxes on buildings and associated property they own that are used for “religious purposes.” Does the exemption also apply to land owned by churches that is used for outdoor worship services? And would it matter if a religious institution’s beliefs prohibited worshiping indoors?

The answer to both questions, according to the N.C. Court of Appeals, is “no.”

The Church Of Yahshua The Christ at Wilmington owns about 50 acres of land in Pender County. In 2000, the church filed a request to have the property declared exempt from property taxes. The county tax assessor denied the request. The church appealed, first to the Pender County Board of Equalization and Review, then to the N.C. Property Tax Commission, and finally to the Court of Appeals.

In its rejection of the church’s request, the Property Tax Commission said the church “contends that the subject property should be exempt because the property is used as a natural retreat for outdoor altar services that requires extended buffers to create such an environment.” The commission was not persuaded by the argument, noting that because the church “failed to show that the subject land qualifies for the exemption when there were no buildings of worship situated on the property that are used for a religious purpose.”

The law at issue is N.C. General Statue. §105-278.3, which provides in part that “Buildings, the land they actually occupy, and additional adjacent land reasonably necessary for the convenient use of any such building shall be exempted from taxation if wholly owned by an agency listed in subsection (c), below, and if: (1) Wholly and exclusively used by its owner for religious purposes as defined in subsection (d)(1), below…”

“The statute is unambiguous,” wrote Judge Martha Geer for the Court of Appeals. “The focus of the exemption is on ‘buildings.’ Land is exempted only to the extent necessary for convenient use of the building.” And as the church’s land had no buildings on it, it did not qualify for the exemption.

The appeals court, did, however, reject the commission’s “building of worship” definition of what constituted a religious purpose under the law. The statue, the court noted, provides for the exemption for buildings used in the “practicing, teaching, and setting forth a religion.” While most commonly such a building would be a building of worship, the law states that “the term encompasses other activities that demonstrate and further the beliefs and objectives of a given church or religious body.”

This definition, in turn, was critical in the court’s ruling on the church’s constitutional challenge to the statue. The church had argued that the statue was unconstitutional as applied to it because its belief structure did not allow for group worship in buildings. The court rejected this argument without reaching the constitutional issue.

“We need not address the constitutional issue as posed by the Church because the Church does not suggest that its beliefs preclude using buildings ‘for religious purposes’ other than worship,” the court noted.

“In fact, the record reveals that the Church advised the Commission that the Church’s ‘long-term plans include the construction of some buildings, principally on the front third of the subject property. These buildings will include an outdoor pavilion, tractor shed, workshop, storage buildings, and homes for active ministers, elderly or infirm ministers, and caretakers.’ Because the Church is not barred by its beliefs from constructing buildings to be used for non-worship related religious purposes and therefore may, without violating its religious beliefs, still qualify for the tax exemption under N.C. Gen. Stat. § 105-278.3, this case presents no constitutional issue.”

The case is In re Appeal of Church Of Yahshua The Christ at Wilmington, (02-1005)

Lowrey is a Charlotte-based associate editor at Carolina Journal.