COMMENT OF THE DAY: AT THE EDGE OF EXEMPTION “Churches and private education getting a pass on property taxes is just wrong wrong wrong. it opens up too many loopholes. things become clouded, like when 2nd baptist buys the adjacent shopping center. they own it, they operate a portion of it for church activities, does that take the entire property off the tax roles? That’s easily a $20MM property now not part of COH taxes, and yet using an unusually high pro-rata portion of traffic control, road maintenance since the remaining businesses there are high traffic. another example — i want to buy a piece of real estate. i start a ‘church’ and then buy it. i now have a free hold on a piece of dirt forever, don’t I? . . . private schools and universities are no different. st agnes now has taken a 4 corners hard corner off the tax roll @ bellaire/fondren so they can have athletic fields, and theoretically could continue to take in the same manner forever. who is to say a board member there wouldn’t buy/BTS a building for them, then pass on the effective tax savings through a long-term cheap rent deal??? HBU – same thing. the list goes on and on.” [HTX REZ, commenting on There Was a Church, and There Went the Steeple]
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Though the charitable or non-profit organization exemption is a huge benefit to those organizations and their members, many times to the detriment of the rest of society. In fact, practically speaking, the exemptions are often abused in broad day-light, and officials often are either improperly sympathetic to these organizations, or simply do not understand the rules themselves. The exemptions provide an ‘unfair competative advantage over other local, for-profit… facilities’. See: http://www.abpnews.com/content/view/2464/117/
There are laws that apply to the exemptions, and in some instances various jurisdictions have some leeway in how these laws are applied. For instance, the property is to serve the religious purpose, as defined in Sec. 11.20 here: http://www.cpa.state.tx.us/taxinfo/proptax/tc06/ch11b4.htm#11.20 make sure to read the notes as well.
In practice this process is an absolute farce. At worst, these ‘organizations’ are abusing these rules with the wink and nod of the taxing entity, and holding speculative property for profit, not even remotely meeting the required definition of the statutes. At best, these ‘organizations’ are not benefiting from the “free-rider” effect, in that the roads, infrastructures, utilities and services (fire, police….) are being provided to them on someone else’s dime.
This is a very good but old article discussing some of the same issues: http://www.publiceye.org/ifas/fw/9603/legal.html
not against the tax property waivers by any means, but they should be zoned and restricted to be outside of high-value development areas if they want those waivers.
While I do not think declaring yourself a church is as easy as filling out a one page form at the local tax office, I see your point and don’t have any good solutions because most people I think are fine with churches and private schools being exempt.
This is why in East Texas there are more churches than people!
As has been noted many times over, it is way more efficient/rational to tax the land portion of a property (without any loopholes) and not the building on that land.
http://en.wikipedia.org/wiki/Land_value_tax
Persuant to code, a church that occupies 50% of a retail center would only be eligible for a pro rata 50% exemption. However, it is not eligible for any exemption at all if they lease their space, even from a related entity (such as its pastor or an incorporated entity that the church controls). Schools have screwier guidelines to abide by.
However, I agree with you in principle that government entities and non-profits should be exposed to the same costs of ownership as anybody else. An undistorted market for land, goods, and services ensures that society’s scarce resources are equitably distributed to those who can put them to their highest and best use. (Where exceptions to that rule exist, there should be separate and unrelated funding mechanisms.)
And you’re also correct that there is too much room for error (unintentional or otherwise) in applying pro rata exemptions. I recall that several years ago, METRO arranged a land banking deal with a private apartment developer along the light rail. METRO would purchase the dirt, hold it, and not have to pay property taxes, and then the developer could get it back whenever he could get construction financed. Not sure whatever became of that deal, but it demonstrates your point nicely.
I think this problem applies equally to churches large and small. I live near Edloe and the 59 southbound feeder road where Lakewood Church is located. Every weekend, the orange cones come out and traffic on Edloe and the feeder road is diverted and multiple police officers are stationed in various areas to direct the traffic, which slows down to a crawl. I’m wondering who pays for all the cops overtime to direct traffic and setup the cones each and every weekend!? Not to mention the inconvenience the local residents and public at large is forced to bear as a result of this tax-exempt entity’s activities. I understand that the church is popular and many people attend the services and the officers are needed for safety. But I seriously hope that we, the city’s tax payers, are not subsidizing this. I’m sure the Osteens and the church make plenty of tax-exempt money from their books and videos and traffic control money is probably small change for them.
Oh lovely profiteering via superstition. How eternally noble.
this is a problem at the corner of Dallas and Montrose, where the Aga Khan Foundation is holding 11 acres on the corner tax free as an investment.
@ JL: Churches and other organizations pay for HPD support of that nature. Its by no means free, and police officers make a lot of their income from doing work like this. (It is inconvenient for non-churchgoers, though. Not disputing that.)
@ htownproud: A parcel of undeveloped land can only be held by a church for a three-year development period before the exemption is revoked. Aga Khan lost their exemption during 2009.
The City sold the Summit / Compaq Center to Lakewood Church for a song. They could have GIVEN the land to a developer, and HISD and the other taxing jurisdictions would have ended up with more money in fairly short order. Stupidity at it’s finest.
Non-profits and churches have to walk a very fine line with income producing events like real estate deals and leasing. While I am certainly for stronger enforcement and tighter rules, I do not see any reason to hit non-profits and churches with property taxes. Non-profits and churches get their tax-exempt status in exchange for giving up access to capital markets. That is a huge financial concession that is no way proportional to the tax-exempt status. Just imagine if Livestrong or Lakewood was publicly traded?
Muslim tolerance center my butt; would’ve rather they just left Houston’s first Sears store and the first site of Baylor College of Medicine alone. Sure beats a huge expanse of unused often overgrown lot of nothingness. I guess when they said tolerance, they meant utter apathy.
Churches and non-profits do have access to capital markets. Many of them carry a significant quantity of debt and also keep large quantities of cash in interest-bearing accounts and even portfolios of investments. For-profit activities have to be accounted for, split out, and taxed, with procedes put to an appropriate use, but such activities are not disallowed.
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Non-profits and churches are allowed to earn profits as long as the profits are related to their tax exempt activities and are not distributed to members. Thus, they cannot raise capital by offering any ownership interest to investors. That means full time begging for donations and a huge economic disadvantage over the for profit world. While some non-profits could afford the burden of property taxes, most could not. Governments should end tax deals for for porofit businesses long before they should look to take financial resources from child abuse centers and food banks.