Indiana Board of Tax Review denies property tax exemption for residential property rented by Church as part of its ministry

Indiana Board of Tax Review denies property tax exemption for residential property rented by Church as part of its ministry

In Living Word of God Ministries v. Allen County Assessor, Pet. No. 02-074-11-2-8-00002 (October 8, 2013) (March 1, 2011 assessment), a Church claimed that properties which it acquired, cleaned up and planned to build homes on should be 100% exempt.  According to the Church:  “The [Church] will sell the properties to people in the church and make homeowners out of people who would not otherwise qualify for traditional loans. The properties are sold on a rent-to-own lease and require no down payment and no deposit.”  (Page 3, ¶ 11.)  Here, the property when purchased had an improvement “in very bad shape.”  (Page 3, ¶ 12.)  The property was rented to people within the Church’s ministry.  Because the property was rented, the Assessor deemed it taxable.

The party requesting a charitable or religious exemption must show that the property is owned, occupied and predominantly used for an exempt purpose.  (Page 6, ¶ 23.)  The Indiana Board first noted that, while the Church claimed that it was a 501(c)(3) tax exempt entity, the offered IRS determination letter referenced a different entity.  The Church provided no explanation as to the relationship, if any, between it and the other entity.  Regardless, “the grant of a federal or state income tax exemption does not necessarily entitle a taxpayer to a property tax exemption.”  (Page 5, ¶ 21.)  In deciding whether to apply an exemption, the Board must look to how the subject property is used.  (Page 5, ¶ 22.)  Church claimed the property was a “tool” of its ministry, but it “failed to provide substantial evidence or even explain how renting the subject property to people within its ministry constitutes a charitable or religious purpose.”  (Pages 5-6, ¶ 22.)  Consequently, the exemption was denied.  (Page 6, ¶ 24.)

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