State Tax Snapshot: Property Tax Exemptions for Churches, Temples, and….Yoga Studios?

 All 50 states and the District of Columbia offer some form of property tax exemption for properties used for religious worship and education. While many aspects of these exemptions are common across all of the states, we will discuss some of the individual state quirks in anticipation of the upcoming launch of BBNA’s Property Tax Navigator.

While the religious property exemption generally applies broadly to cover churches, temples, and other houses of worship, certain states disagree over how far the exemption should go. For example, California allows the exemption for organizations that further spiritual faith and codes of ethics, without necessarily requiring a theistic or divine belief, and Texas states that the property can be used for promoting spiritual development or well-being. On the other hand, Missouri has specifically rejected California’s scheme, instead narrowly viewing its exemption as requiring a divine belief in a “Supreme Being.”

However, those who see California’s exemption as being too broad will take solace in a newsworthy ruling out of the San Diego Superior Court last week, which held that yoga is not sufficiently religious as to violate the Constitution when taught in public schools. Had the court gone the other way, there may have been a flood of yoga studios seeking property tax exemptions on the grounds that they are providing religious worship or education.

Although there still may be some attempts by yoga practitioners to seek an exemption. After all, Judge John Meyer’s decision highlighted the fact that the school district “had stripped [its] classes of all cultural references, including the Sanskrit language. The lotus position was renamed the ‘crisscross applesauce’ pose,” writes Elliott Spagat of the Associated Press. Perhaps a yoga studio that maintains traditional cultural references and terminology would have a stronger argument, at least in a state like California that takes a broad approach.

In other religious property tax exemption highlights:

-New York extends its exemption to include nonprofit organizations that operate interdenominational centers to promote cooperation among various religious denominations.

-In Texas, a church or temple can be exempt before it’s even a church or temple—the state offers an exemption for incomplete structures under active construction that are designed and intended to be used as a place of worship.

-Oregon’s religious property exemption covers religious cemeteries, while in some other states, religious cemeteries are treated the same as non-denominational cemeteries, which are often exempt anyways.

-In Illinois, parking lots owned by nonprofit religious organizations are exempt, unless used for profit. But even then, they are exempt if they are leased to a mass transportation entity for commuters.

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