Church paying taxes??

Question

The church I attend to currently has a dilemma:

The church has a non-for-profit restaurant, and with that money the pay the church's utility bills, etc. The thing is ... the county wants us to pay property taxes on the restaurant. It was clearly overvalued by the "inspector" that the county sent to value it.

Do you know a way to resolve this... we know that the church that owns the cemetary in this town doesn't pay taxes on that property.. and they sell to the public (like we do). {thats the argument that the county has for charging...that we sell to the public}. We feel we are being discriminated against because what they are charging is ridiculous.

Please, any serious ideas are welcome. Thank you.

Answer 1

I believe, but am not totally sure, that the restaurant is taxed because it is not related to the primary purpose of the church.

The cemetery's primary purpose is to provide a final resting place for the deceased. Selling plots is its primary function.

Answer 2

If you feel that the assessment is too high, you can appeal it.  Compare its assessment to that of other similar restaurants in the area - that's all public information and you can get it at the county assessor's office - some but not all areas have it online.

But a business unrelated to the primary purpose of a charitable organization is taxable.  A restaurant is unrelated - the cemetary is related to their primary purpose though.

Another example - I work with a public library, and the library owns some rental apartments.  We pay no real estate tax on the library building itself, but do pay regular real estate taxes on the rental properties.  And same deal - the income from the rental properties is used to pay things like utility bills.  This is in PA - I believe, but don't know for sure, that tax exempt organizations are treated similarly in other states.

The link given by the other responder is a great guide to federal laws for religious organizations, but since property taxes aren't federal, doesn't really apply to your question.

Answer 3

A church operated restaurant is an unrelated business enterprise.  Yours is operated by a church that uses the profits to help pay its bills and should be taxed the same as any other restaurant by the county and IRS. Mine operates a nursery school that is operated as a ministry and public service with no intention of producing profits to help pay bills.  Cemeteries are a very different operation and many are operated not for profit.

Answer 4

Taxation of churches and church property is a complex issue.  Try this document as a start.

http://www.irs.gov/pub/irs-pdf/p1828.pdf

After that you might contact other churches in your area to determine how they have been treated in similar situations.  I have had some success at reversing issues of a similar nature with a little good old fashion political pressure.  A couple hundred people at a City Council meeting has an impact.