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Vol. 3 No. 1 - Pascha 2008

A Taxing Proposition:
Some Reflections on the Taxation of Church Properties

Across North America, numerous municipal, provincial, and state governments are examining the concept of applying taxation to the properties and buildings owned by churches and other religious groups. Such a prospect has a number of serious implications for churches. The following article explores some of the rationale behind such a move.

In the province of Ontario, municipal government is financed largely by property taxes. These taxes are levied on property owners by applying a flat rate to the "value" of a property (as assessed for the purposes of the tax). The resulting bill must be paid by the owner. Different rates are applied to different types of property; for example, properties used for business purposes are almost always subject to higher rates. Unlike income taxes, property taxes are levied regardless of ability to pay.

The Assessment Act (Ontario) governs how municipalities set and administer property taxes. Subsection 3(1) of the Act provides that "all real property in Ontario is liable to assessment and taxation". The subsection, however, proceeds to list numerous exemptions to this general rule. For example, the Act exempts from taxation Crown land, cemeteries, school property, hospital lands, "battle sites" and "land used as a theatre that contains fewer than 1,000 seats and that, when it is used in the taxation year, is used predominantly to present live performances of drama, comedy, music or dance". The Act also contains an exemption for "land that is owned by a church or religious organization or leased to it by another church or religious organization and that is ... a place of worship".

What is a "place of worship"? In the court case of Holy Theotokos Convent v. The Town of Whitchurch-Stouffville, the Holy Orthodox Church in North America appealed from an assessment imposed on about 20 acres of land used by the church for a convent. Five Sisters lived on the property. The property had three buildings on it: a residence for the Sisters, a guest house and a utility building. The first two buildings had chapels in them. The land contained gardens and orchards that the Sisters used to support themselves. Icons were scattered throughout the property at little shrines, and the Sisters routinely venerated them.

The Town did not dispute that the two buildings included places of worship that should be exempt from taxation. The Town, however, maintained that the buildings, or portions of them, and the 20 acres of land should not be exempt. The judge agreed with the Town. Her reasons are worth quoting at length:

... I am satisfied that the exemption from property taxation afforded under ... the Assessment Act for "places of worship", does not apply to the worship activities confined solely to the devotional life of members of a religious order whether that includes group or individual worship or prayers for the convent members. The exemption does apply to places of worship inside the convent grounds open to members of the public for some formal worship service. For public policy reasons the exemption for a "place of worship" should be strictly construed. I do not find however that the grounds where the icons are placed are places of worship within the meaning of the legislation because there is no evidence that any formal religious services are conducted at these icon sites by the Bishop who I understand is the only person authorized to conduct public religious services at the convent. Even if members of the public frequent the sites where the icons are located on the convent grounds, this is not in my view a place for formal public worship, anymore than the other portions of the property, whether inside or outside the buildings, where no formal public worship is conducted. The distinction between the worship activities of the cloistered members of the religious order as a part of their devotional life and worship by members of the public has been decided by the court and should in my view be maintained. [1]

In conclusion, only those portions that MPAC concedes are portions of the property used as 'places of worship', namely: the chapel, sanctuary and sacristy in the sister's residence, the chapel and the baptistery in the visitor's house are exempt under section 3(1) of the Assessment Act, for purposes of property taxation.

For churches, this decision could be a portent. For many years now, the enemies of religion have complained loudly that churches should not be exempt from paying property taxes. Fewer and fewer town-dwellers attend worship services on any given Sunday. Meanwhile, Ontario cities complain constantly that they don't have enough money to spend or "invest". City politicians, then, may be starting to pay more attention to the complaints of the anti-religious. Churches would do well to sit up and take notice, and the case of the Convent of the Holy Theotokos shows why.

First, it is evident from the decision that municipalities need not wait for a change in the law to begin attempting to collect more taxes from churches. Based on Holy Theotokos's narrow reading of the meaning of "place of worship", it would appear that a church hall, for example, might not qualify for the property tax exemption.

In addition, churches must be prepared for the fact that the definition to be accorded to "worship" will ultimately be determined by secular courts. A judge who hasn't attended a worship service since childhood may be the one to decide the meaning of the term.

Finally, churches should take note of the judge's comment in the case of the Convent of the Holy Theotokos that "for public policy reasons the exemption for a 'place of worship' should be strictly construed." What is the warrant for such a comment? Among lawyers, it seems to be generally accepted that the various exemptions accorded religious institutions represent a subsidy granted by the State because religion is thought to be a public good. In this view, the State has a prior right to tax all income or all property. If an exemption is granted, it is because the State believes that the beneficiary of the exemption is a worthy object of subsidy. Historically, churches were regarded as important moral bulwarks. By granting subsidies to churches in the form of property and income tax exemptions, the State was improving the moral fibre of its citizens.

What a different world we live in today! Among Canada's elites, the view seems to be that religion is a necessary evil that should be confined as much as possible to the "private" sphere. Given this attitude, and given that fewer and fewer Canadians regularly attend "places of worship", is it any wonder that the property tax exemption "should be strictly construed"? More importantly, how much longer can we expect public "subsidies" to continue for churches and church property?

This brief article is not a detailed discussion of how one province's property tax regime applies to churches. Rather, this article merely highlights some disturbing trends in our politics and law for churches and their liability for taxes. Of course, churches themselves should not be too surprised by these trends. Many inner-city church buildings have become little more than community centers where only a tiny remnant worship. Given these external and internal realities, churches will need to think of other, different ways to fulfill their true purposes, which are not only about maintaining bricks and mortar, after all.

[1] See: Soeurs de la Visitation d’Ottawa v. City of Ottawa, [1952] O.R.61 (S.C.O.), aff’d. [1952] O.W.N. 280 (C.A.).

John Loukidelis is an Orthodox Christian, a parish warden, and a lawyer practising in Ontario
(Pascha, 2008)

© All Saints of North America Orthodox Church
Orthodox Church in America, 2008.