Friday, July 18, 2008

Church properly

A wealthy resident of Lake Bluff, Illinois declared his $3 million mansion overlooking Lake Michigan to be a church and received an $80,000 property tax break from the state of Illinois. In Illinois, properties owned by churches are exempt from property taxes, which are similar to rates in New Zealand.

In this case, the Village of Lake Bluff doubted the “conversion” was real, and officials notified the man that if he really is running a church, he'll need to pay more than $115,000 in fines for failing to get the village's permission to violate zoning.

The man obtained an online ordination and used that to form his church. He claims he did the conversion to a church so his disabled wife and daughter could attend services, and his lawyer (you knew there had to be one somewhere) said the man “believes he has a constitutional right to practice his faith, that he violated no zoning codes and that he properly received a property tax exemption for his church.”

Of course they have a human right—not just a Constitutional right—to practice their faith, but there’s no constitutional issue here: A property tax break is not a necessary requirement for religious services.

Which, actually, is one of the reasons I’ve always opposed exempting churches from paying property taxes. Beyond that, states and churches ought to be separate, not deeply intertwined as this arrangement mandates. States ought not be in the business of determining what’s a “real” church and what isn’t, and churches shouldn’t be seeking official sanction from government. Mostly, I never could understand why churches should get property tax exemptions not available to non-religious groups working for the betterment of the community.

As a preacher’s kid, I personally benefitted from this situation, especially since we lived for free in church-owned houses (a practice that many churches have abandoned so their ministers can own their own houses and build equity for the future). The property tax exemption my dad’s churches got freed up money for the church to spend elsewhere, and not necessarily on the betterment of the community.

The system needs to be changed to make it fair for everyone, religious and not. This story illustrates why.


Anonymous said...


d said...

I agree. Perhaps he will be audited by the IRS? They tend to look at substance over form...(and churches receive tax breaks).

Roger Owen Green said...

seems that if the guy is claiming he's running a religious entity, he ought to file as a not-for-profit corporation, which churches and other charitable organizations have to do, I believe. The state shouldn't have to determine the legitimacy of faith but CAN rule on the legitimacy of structure.

Arthur Schenck said...

Mark: Well, that was my first reaction, actually...

D: This story is far from over. The Chicago Tribune published a follow-up reporting that the fellow has other legal problems, including criminal. The IRS investigators can't be far away.

Dennis: You're right that in order to own real estate, the church would have to be a legal formation, but if memory serves, in Illinois it's not as strict as for a non-profit corporation (though I may be wrong about that, I do know that Illinois is one of the easiest states in the US to form a non-profit corporation).

In any case, the man formed a church then issued a quit claim deed to transfer ownership of his mansion to the church he formed, which has as its board himself, an employee and another family member.

He set up an altar in his house, took a photo of it, and sent that and church bulletins (and his online ordination) to the Illinois Department of Revenue to get the tax exemption. No one from the Department ever actually checks out a church in person, as far as I can tell, so they take the documents as prima facie evidence that the church is real.

What all of that means is that, in practical terms, a church exists whenever its members say it does. Proving otherwise takes time and money, and that falls to local bodies like the Village in this case, and they may not have the resources to pursue the case.

If we did away with property tax exemptions for churches, then this whole thing could be transferred to the state and federal governments who would deal with taxing churches income in the same way they do other non-profit groups. Churches would benefit by having only two tax authorities to deal with, and the people would benefit by having enforcement transferred to government authorities who have the financial means to prosecute fraud.

But in the US the federal government and most state governments have a "hands-off" policy toward churches (unless they have a liberal theology), and that makes it hard to root out the frauds. Simplifying the way churches are taxed would help.

Roger Owen Green said...


Arthur Schenck said...

Doh! Sorry about that Roger! I'd just read something by a fellow named Dennis and, well, at 11:17pm the day after a busy weekend, a few neurons were clearly misfiring. The lesson for the day, then, is don't comment without adequate rest....