January 18, 2008

Bill to prohibit taxing Churches on legislative table

By Brigid Curtis Ayer

The Indiana General Assembly began meeting on Jan. 8, and lawmakers are already making a mad dash to accomplish meaningful property tax reform before the March 14 adjournment deadline.

With property tax reform at the top of Hoosier lawmakers’ agenda this session, nothing is sacred.

Legislators, who are looking for ways to ease the property tax burden on constituents as a result of higher taxes on their homes, may be taking a second look at organizations currently exempt from Indiana property taxes, such as non-profit ­organizations including Churches and Church property.

At least two legislators, Rep. Tom Saunders (R-Lewisville) and Rep. Bill Crawford (D-Indianapolis), are working on legislation which would allow some

non-profits to be taxed. The details of this legislation are not yet available.

While the likelihood of taxing Church property this year remains remote, to prevent this from happening in the future Sen. Patricia L. Miller (R-Indianapolis) has authored a proposal which would amend Indiana’s Constitution to prohibit the state from taxing Church property.

Senate Joint Resolution 2 would change Indiana’s Constitution to guarantee a property tax exemption for buildings and personal property which is regularly used for worship, and for property being used for a religious purpose.

Current law exempts all or part of these buildings from property taxes if the buildings are used for educational, literary, scientific, religious, fraternal or charitable purposes. Also exempt from property taxes are government properties used for similar purposes.

Glenn Tebbe, Indiana Catholic Conference executive director, who testified in support of Senate Joint Resolution 2 before the Senate Judiciary Committee in December, said the proposal to amend Indiana’s Constitution to prohibit taxing Church property is a “pre-emptive strike” against a change in Indiana’s property tax law.

In other words, if the Indiana Constitution prohibits the taxation of Church property, it provides more protection against the Church being taxed than is provided under current law.

Yet, Tebbe explained, making Senate Joint Resolution 2 reflect the intent of protecting religious congregations from taxation without providing tax exemptions for unrelated entities is a challenge facing lawmakers who are trying to draft the right language for the resolution.

“For example, if a church has a Starbucks coffee shop on its property, the Starbucks coffee shop could be exempt from property taxes under Senate Joint Resolution 2, but it really shouldn’t be exempt because it is not a ministry of the Church,” Tebbe said.

Kevin Armstrong, a former executive with Lilly Endowment, who also testified in support of Senate Joint Resolution 2, told committee members that a study conducted by Lilly showed the amount of taxes collected from Churches would be negligible compared to the amount of good that Churches do, but it is hard to quantify the good work of Churches.

“I brought this legislation forward because the media and others have discussed the idea of going to Churches and other

non-profits for property taxes,” Sen. Miller said. “State law currently exempts Churches, schools and other charitable organizations from paying property taxes.

“I don’t think the General Assembly will tax Churches or non-profits this year. The members are not of the mood to do so but, having said that, there will be a bill by some members in the House to consider this,” Sen. Miller added.

If Senate Joint Resolution 2 doesn’t pass this year, Sen. Miller said she plans to pursue the constitutional amendment in the future. But by her estimate, the soonest it could happen would be 2011.

“The members of the Senate Judiciary Committee support Senate Joint Resolution 2, but coming up with suitable language for the constitutional amendment this year has been much more complicated than was originally thought, and we are really struggling to come up with language to do so,” Sen. Miller said.

Sen. Richard Bray ­(R-Martinsville), chairman of the Senate Judiciary Committee, who heard testimony on Senate Joint Resolution 2 in December, said, “No one on the Senate Judiciary Committee is interested in taxing Churches or Church property.”

Before this bill came to his committee for consideration, Sen. Bray said he thought it already was unconstitutional to tax Churches. But he added that when he went back to read the Indiana Constitution, it says the state “may” exempt Churches, not that it “shall” exempt them.

Senate Joint Resolution 2 was scheduled for a second hearing before the Senate Judiciary panel on Jan. 9, but was removed from the schedule.

When asked why this was done, Sen. Bray said, “In working with the Legislative Services Agency attorney, we realized it would be very difficult to nearly impossible to come up with a definition of religion or what a Church is without making it inflexible, or creating unintended consequences or even problems.

“When we change Indiana’s Constitution, it is set in concrete,” he added. “The general consensus of the Senate Judiciary Committee was ‘it doesn’t seem to be broken, so let’s not fix it.’ ” †

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