FFRF calls on Milwaukee to deny tax exemptions to faux churches

The Freedom From Religion Foundation is concerned that Wisconsin religious organizations are failing to confirm, as required by law, that they actually qualify for tax exemptions they're getting.

In a front-page story March 6, the Milwaukee Journal Sentinel detailed some apparently flagrant abuse of tax-exempt status by organizations claiming to be churches in Milwaukee. The story estimated that the average homeowner has to pay 20 percent in taxes — an additional $800 a year — to make up for the exemptions. (A sidebar on churches that rent out space to nonexempt businesses but don't pay tax on the income is here.

The Journal Sentinel identified nearly $500,000 worth of properties with “suspicious exemptions” from a random examination of “just a few cases from 2010 in Milwaukee.” The paper charged that Milwaukee has not been compiling exemption data and filing mandatory reports with the state Department of Revenue since 2007.

FFRF Co-President Annie Laurie Gaylor sent a letter of complaint March 11 to Milwaukee Mayor Tom Barrett and to city tax assessment officials. "Multiple churches claiming exempt status sit vacant during their advertised service hours. Those who claim tax exemption maintain their tax exemption by simply writing 'religious services' or 'no change' on their biannual exemption request forms," Gaylor said in the letter.

"Those who fail to return the form also manage to retain their tax-exempt status — according to the newspaper, that involved one-fourth of Milwaukee churches," Gaylor said. "There is no routine inspection process to verify tax-exempt claims as required. The Journal Sentinel also reports that some churches that are renting out church space and therefore no longer qualify for full property tax exemption, yet are still retaining that exemption, thereby cheating law-abiding, taxpaying neighbors who must pay significantly more when such profit-making churches are off the tax rolls."

The letter notes that the Wisconsin Property Assessment Manual clearly indicates that these organizations should not be granted tax-exempt status. The manual says, in part:

It is the duty of the assessor to determine whether the property is exempt. In deciding whether a property meets the requirements for exemption, the assessor must look to the actual activities or dominant purpose of the organization. The assessor should be more concerned with what the organization actually does than what it says it does in its constitution or by-laws.

The assessor should make a physical inspection of the property to verify that the information in the application is correct and that the property is being used for the exempt purpose. The assessor may also wish to periodically re-inspection the property to verify that it continues to be used for exempt purposes.

It is the responsibility of the party seeking exemption to show that it falls within the statutory criteria for exemption. The courts have repeatedly ruled that the assessor should base exemption decisions on a “strict but reasonable” construction of the statutes. This means that an association must clearly show that it meets the criteria for exemption. If there is any doubt, the assessor should deny the exemption.

Gaylor continued: "The continued tax exemption of 'religious' property, without any attempt to confirm that the property is actually used for religious purposes, affects the property rights of individuals and small business owners throughout the community. Though no exemption would better serve the principle of separation between church and state, at the very least the city government should ensure that exemptions are only granted to organizations that fall within the statutory requirements.

"Continuing to grant tax-exempt status to faux religious organizations suggests that the government favors institutionalized religion even when no public good is served. We understand that the city may not feel an incentive to enforce tax exemption policies when it doesn’t affect the levy, but such indifference is at the expense of Milwaukee taxpayers, homeowners and families, many of whom are struggling because of the economic downturn."

FFRF urged officials to deny tax exemption "if there is any doubt about the nature of the organization." 

Freedom From Religion Foundation

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