N.H. Property Tax Exemption for Houses of Worship Applies Only to Portions of Property Actually Used for Religious Purposes

The New Hampshire Supreme Court affirmed a determination of the state Board of Tax and Land Appeals that the City of Concord properly granted to an Assembly of God church an ad valorem property tax exemption on only sixty percent of the church’s property, on the ground that forty percent of the property was not used and occupied for religious training or other religious purposes, and was therefore taxable. Appeal of Liberty Assembly of God, No. 2011-368 (N.H. May 22, 2012).

The New Hampshire property tax statute, RSA 72:23, III, contains the following exemption for certain property owned by certain religious bodies:

The following real estate and personal property shall, unless otherwise provided by statute, be exempt from taxation: . . . Houses of public worship, parish houses, church parsonages occupied by their pastors, convents, monasteries, buildings and the lands appertaining to them owned, used and occupied directly for religious training or for other religious purposes by any regularly recognized and constituted denomination, creed or sect, organized, incorporated or legally doing business in this state and the personal property used by them for the purposes for which they are established.

In the instant case, the City reached the 60% exempt/40% taxable ratio based upon how the church used various areas of the combined square footage of both floors of the main church building. In particular, the City determined that 1,472 square feet on the first floor of the building, consisting of an apartment and an additional room available for missionaries on furlough, was taxable because the rooms were not used by furloughed missionaries at any time during 2008, and only three or four times during the preceding four-year period. The City also City determined that the entire second floor of the main building (6,916 square feet) was taxable because it was not being used for religious purposes. This space included: (1) an apartment and two storage rooms occupied or utilized by a part-time caretaker and his family; (2) a room occupied by the grandson of Assembly’s then-secretary/treasurer; (3) vacant apartments; (4) “dorm” rooms minimally used for storage; and (5) a men’s restroom, auxiliary to the restrooms on the first floor.

After the Board of Tax and Land Appeals upheld the City’s assessment, the church appealed to the New Hampshire Supreme Court. Making the following rulings, the court affirmed the tax board’s judgment:

  • The court dismissed the church’s argument that the following phrase in the tax exemption statute–“owned, used and occupied directly for religious training or for other religious purposes”– applies only to “buildings and the lands appertaining to” houses of worship, parsonages, monasteries and the like, and that the statute fully exempts from taxation houses of worship, regardless of how much of the structure is actually used for religious purposes. According to the court, the tax exemption applies only to those portions of a house of worship that are used for religious purposes and does not apply to those portions that are used for secular purposes.
  • The court found that apportioning between taxable and tax-exempt space in a house of worship does not unconstitutionally entangle the government in the religious affairs of a church in violation of the Establishment Clause of the First Amendment of the U.S. Constitution.
  • The court deferred to the factual findings of the Board of Tax and Land Appeals and found no error in its determinations as to whether the uses to which the church put the property in in the taxable year were religious uses.
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