Land Use Matter Taxing for Church
Nearly two millennia ago, Jesus of Nazareth sagely taught his followers to “render to Caesar the things that are Caesar’s”. In the 21st century it appears that the Commonwealth Court of Pennsylvania had similar advice for a Cheltenham congregation of the First Korean Church of New York, Inc. (hereinafter “the Church”) in the recent matter of First Korean Church of New York, Inc. v. Montgomery County Board of Assessment Appeals, Cheltenham Township, Cheltenham Township School District, Montgomery County, and Montgomery County Board of Commissioners (1551 CD 2010) (hereinafter “the Case”).
Montgomery County Board of Assessment Appeals, Cheltenham Township, Cheltenham Township School District, Montgomery County, and Montgomery County Board of Commissioners (hereinafter “the Government”) sought to collect property taxes on the real estate used by the Church. The Church, of course, argued that it was entitled to a tax exemption as a principal place of religious worship. The issue of whether the Church was entitled to an exemption to the taxes the Government sought forms the dispute addressed by the Court in the Case.
The Case’s procedural history is rather long and tangled, including stops at the Montgomery County Board of Assessment Appeals, Township of Cheltenham Zoning Hearing Board, the Court of Common Pleas (hereinafter “the Trial Court”), the Supreme Court of Pennsylvania, and one previous stop at the Commonwealth Court. Ultimately, the Government was granted Summary Judgment by the Trial Court which was appealed to theCommonwealth Court. TheCommonwealth Courtremanded to the Trial Court on the issue of whether the property was entitled to a tax exemption. Upon remand, the Trial Court conducted a two-day non-jury hearing resulting in a decision adverse to the Church, specifically that the Church was not entitled to a tax exemption as an actual place of regularly stated religious worship. The Church appealed to theCommonwealth Courtonce again, and it is the opinion issued from this appeal that is discussed herein. The central issue discussed in the Case was whether the property-at-issue (hereinafter “the Property”) the Church claimed it was using, was an actual place of regularly stated religious worship; if it was, the tax exemption applies, if not, the Church would not receive the exemption. In making its analysis, the Court focused squarely on the evidence presented by the parties at the aforesaid trial.
The Church initially alleged that it was a Korean Presbyterian denomination and that its pastor resides at the Property. The Property is large, with multiple buildings surrounded by a chain link fence with a couple of locked gates as the only entrances. Only one of the locked entrance gates was used and could be controlled by remote control from within the buildings at the Property. The Church further alleged that a more senior cleric visits the Property once per month to preside over services and those services occurred each Sunday from4:30pmto6:00pm, which is followed by a congregational dinner. The pastor testified at trial and admitted that the Church’s services are frequently attended only by his family and he controls the remote controlled security gate. Additionally, while there is no sign at the Property identifying it as a church, the Church asserted that the lack of a sign was due to a zoning restriction.
The Government countered the Church’s allegations by asserting that the Property was in extraordinary disrepair and its grounds were overgrown and unkept. Indeed, the Trial Court found that the Property requires more than $10,000,000 in repairs to make it usable. In addition to “keep out” signs and other forms of security (such as the aforementioned remote controlled security gate restricting access to the Property), the only rooms on the Property which were heated were those used as the pastor’s residence. The Government called a local police officer as a witness who conducted surveillance on the Property on seven (7) different occasions. The police officer testified that he never saw anyone enter or exit the Property when services were alleged to have occurred, however he did see the pastor travel from one building to another within the Property to where services occur each Sunday. Indeed, the Government implied that the Property was primarily the pastor’s residence as opposed to a church.
The Court determined that much of the Church’s evidence was not credible. For example, the photographs presented by the Church were from before 1998, and the Church presented no recent photographs or recent church bulletins to demonstrate current religious use. Ultimately, in view of the above evidence, the Court ruled that the Property was not used primarily as a church and, therefore, was ineligible for a tax exemption.
On appeal to the Commonwealth Court, the Church argued that that was no evidence that the Property was used for any other purpose aside from a church, that it has rooms which are clearly designed for a church to use, and that the Government repeatedly admitted the Church was what it claimed to be through various pieces of correspondence and such. The Church also attacked the surveillance evidence by indicating that the police officer never interviewed anyone at the Church, that half of the surveillance reports were incomplete, and that, per the aforesaid reports, the lights were on in the building when the Church claimed to have services occurring. Significantly, the Church pointed out that despite the claims for tax exemption made by the Church, and the allegedly extensive investigation and surveillance by the Government into the same demonstrating that the Church’s claims were allegedly bogus, the Government never pressed any charges when it allegedly discovered that the Church made spurious tax claims. The Church asserted that the Government’s failure to act with regard to the crime of tax fraud allegedly committed by the Church was evidence that there was nothing illicit or false in the Church’s claim for a tax exemption and that the surveillance conducted on the Church was simply for the purpose of creating trial evidence.
Upon a full review of the evidence below, the Court ruled that the Trial Court did not commit abuse of discretion or an error of law in finding against the Church. The Court found that there was sufficient evidence presented by the Government to prove that the Property was not primarily used as a Church. The Court found that the Trial Court conducted an accurate and rather thorough analysis of the facts and issues presented and did not abuse its discretion or commit an error of law. The Court found that there was simply insufficient evidence to prove that the Property was used by the Church primarily for religious purposes.
In the final analysis, when seeking a tax exemption, a Church must ensure that the Property it uses is primarily used for religious purposes; otherwise Caesar must receive what is his from it.
Originally published on January 10, 2012 in the Pennsylvania Law Weekly section of The Legal Intelligencer and can be found here.