Generally speaking, “[a]ll land within this state, all buildings and fixtures on the land, and all appurtenances to the land” are subject to ad valorem taxes based on its assessed value under Michigan’s General Property Tax Act, “except as expressly exempted by law.” MCL 211.2. Michigan law provides various exemptions to taxation based on the type of use or ownership of the land. For example, land owned by the federal government or the State of Michigan is exempt from property taxation. In addition, land that is owned and used by a nonprofit charitable institution for a charitable purpose, cemeteries, veteran’s organizations and even campground property owned and used by boy scouts or girl scouts may be exempt from taxation.
Another important exemption applies to religious organizations. MCL 211.7s states the following:
- “Houses of public worship, with the land on which they stand, the furniture therein and all rights in the pews, and any parsonage owned by a religious society of this state and occupied as a parsonage are exempt from taxation under this act. Houses of public worship includes buildings or other facilities owned by a religious society and used predominantly for religious services or for teaching the religious truths and beliefs of the society.”
The general rule to exempt churches and other religious organizations is consistent with the First Amendment principles of separating church and state and protecting the free exercise of religion. Chief Justice John Marshall famously noted in his decision in McCulloch v Maryland, 17 U.S. 316 (1819) that “the power to tax involves the power to destroy”. Likewise, the ability to tax a church can lead to the ability to destroy the church since the facility could be seized by the government if property taxes cannot be paid annually. Article 9, Section 4 of the 1963 Michigan Constitution provides that “[p]roperty owned and occupied by non-profit religious or educational organizations and used exclusively for religious or educational purposes, as defined by law, shall be exempt from real and personal property taxes.” Religious organizations can apply for a property tax exemption from the local assessing unit in Michigan claiming use a house of worship or a parsonage to avoid paying real and personal property tax assessments.
However, cities and townships can and do reject these requests for exemption if they suspect that the claimed religious use is illegitimate. One cannot simply claim that they are starting a church and declare their personal residence to be the parsonage to avoid paying property taxes. Likewise, one claiming that their business is a “house of worship” while running several for-profit activities from that establishment will also raise serious questions. There is a slight advantage to the tax assessing authority to make these determinations. A petitioner must prove it is entitled to an existing tax exemption by a preponderance of the evidence. ProMed Healthcare v Kalamazoo, 249 Mich App 490, 495; 644 NW2d 47 (2002). Statutes that exempt taxation are narrowly construed by the courts in favor of the taxing authority. Moshier v Whitewater Twp, 277 Mich App 403, 409; 745 NW2d 523 (2007).
An association or organization qualifies as a religious society under MCL 211.7s “if its predominant purpose and practice include teaching religious truths and beliefs.” Institute in Basic Life Principles, Inc v Watersmeet Twp, 217 Mich App 7, 14; 551 NW2d 199 (1996). In that case, the township challenged the house of worship exemption for a non-profit organization that “was designed to explain, primarily to young people, how the Bible can provide guidance” and later “expanded its work to include adults.” Some seminars were held at the property in the township. The property was also used “to write religious materials for its seminars and for its home-schooling program” in which six thousand Michigan families participated. However, the organization “is not a church and does not represent a religious denomination.” The township denied the exemption because it believed the organization was not a “religious society” because it had no members and prescribed no form of worship. However, the Michigan Court of Appeals determined that nothing in MCL 211.7s requires a religious society to have members and nothing requires that the organization exercise superintendence over the discipline of its members. The statute requires that the property is “used predominantly for religious services or for teaching the religious truths and beliefs of the society”, but not necessarily both. Since the teaching requirement was satisfied, it qualified as a “religious society”.
What about a parsonage? In St. Joseph’s Church v Detroit, 189 Mich. 408; 155 N.W. 588 (1915), the Michigan Supreme Court said a parsonage “may be defined as a house in which a minister of the gospel resides.” More specifically, the tax exemption would then apply to a church-owned house that is occupied by a minister ordained in that church. St Matthew Lutheran Church v Dehli Twp, 76 Mich App 597, 599; 257 NW2d 183 (1977). The ordained parson must be responsible for the religious needs of the congregation in which he is ordained to qualify for the parsonage exemption. Congregation B’nai Jacob v Oak Park, 102 Mich App 724; 302 NW2d 296 (1981). There can be more than one “parsonage” per congregation or church if there are multiple ordained persons (in this case, rabbis) who are equally responsible for the religious needs of the congregation. Id. A parsonage exemption can also apply to a residence of the pastor or his assistants who are ordained teaching ministers for a particular congregation provided they are tending to the religious needs of the congregation. St. John’s Evangelical Lutheran Church v City of Bay City, 114 Mich App 616; 319 NW2d 378 (1982).
In Congregation Yagdil Torah v City of Southfield, unpublished per curiam opinion of the Court of Appeals decided July 22, 2014 (Docket No. 314745), an Orthodox Jewish congregation was denied the MCL 211.7s exemption by the city for the single family residence used as a dormitory for female seminary students. The Michigan Tax Tribunal and the Michigan agreed. They found that the house of worship exemption did not apply because the property was “not used predominantly for religious services or for the teaching of the religious truths and beliefs of” the organization. While the house was used for functions akin to those of a house of worship, those functions were ancillary to the residential function rather than vice-versa. In addition, the vast majority of the student’s classes and religious services actually took place at the off-site synagogue which further affects the “predominantly” test. Further, the parsonage exemption did not apply because the property was “not a residence for the Rabbi or his assistants.” Despite the religious purpose, the use did not fit the plain language of MCL 211.7s and was denied.
Losing a property tax exemption can be financially devastating for the religious organization if the strict legal definitions are not met. When you find yourself fighting for this valuable exemption against the resources of a government entity, you need a skilled lawyer in your corner to help carry your cause. If you have questions about Michigan property tax law or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.
