Decision on tax ruling finalized in favor of San Francisco Archdiocese

By Catholic News Service

SAN FRANCISCO (CNS) -- A Superior Court judge made final his earlier tentative decision to throw out a multimillion-dollar "delinquent" tax bill imposed on the Archdiocese of San Francisco by the San Francisco assessor-recorder.

Judge Richard A. Kramer Jan. 9 confirmed a 43-page "Tentative Statement of Decision" he issued in favor of the archdiocese Nov. 18.

For more than three years, the archdiocese fought an attempt by Phil Ting, head of the Office of the Assessor-Recorder, to impose transfer taxes totaling more than $20 million on more than 200 parish and school properties involved in an internal reorganization by the archdiocese.

The archdiocese maintained that the effort came despite the fact that the city's "documentary transfer tax" ordinance, as it is called, applies only to property "sold" in San Francisco and specifically exempts internal reorganizations of this kind.

The church also countered that state and federal law have long recognized that intra-church reorganizations are not transfers and are not subject to such taxes.

"This has been a very frustrating experience," said Jack Hammel, general counsel for the archdiocese.

He said Ting's and his chief assistant's refusal "to recognize well-established law on this subject" and the "repeated delaying tactics" church officials encountered for three and a half years have "caused a considerable disruption to the charitable activities of the archdiocese."

Hammel reiterated his earlier statements that the archdiocese undertook an internal reorganization simply "to better enshrine the centuries-old principles of church law concerning the uniqueness of parishes and schools."

"The courts in recent years have said that if you claim that your parishes and schools are unique under church law, then show it in your corporate structures and related articles and bylaws," he said. "We have done that. Each corporation is a spoke in the archdiocesan wheel and the ecclesiastical office of the archbishop is the essential 'hub' of that wheel.

"Intra-church transfers of this nature are not subject to transfer tax. It is as simple as that," he added.

In late 2008, Ting determined the archdiocese owed the transfer tax. According to Catholic San Francisco, the archdiocesan newspaper, this effort to collect the tax was supported by the city's three-member Transfer Tax Review Board, which concluded the archdiocese was not exempt from a transfer tax. In April 2010, the archdiocese filed suit against the city.

In his Nov. 18 ruling, Kramer ordered the board to set aside its finding and to issue another rejecting the determination by Ting that transfer taxes were due on the property transfers.

Kramer agreed with the archdiocese's central arguments: The transfers were not property that was sold, and the transfers were a change in the form of ownership that did not make them subject to transfer tax.

After that ruling the archdiocese issued a statement noting that the assessor-recorder's office acknowledged it had never before levied such a tax, that no other county had ever done so and that it had never taxed similar transactions even by for-profit companies.

The archdiocese also said the proposed tax had the illegal effect of charging the archdiocese a fee to exercise its constitutional right to organize according to its religious needs. In view of his other findings, Kramer found that it was not necessary to address the constitutional argument.

 

Copyright (c) 2012 Catholic News Service/U.S. Conference of Catholic Bishops