In Featured, Research Article

Parcel taxes are used for a variety of reasons in many communities. There has been confusion in the past as to whether religious organizations are subject to certain types of these non-ad valorem (i.e., not value-based) property taxes. This confusion stems from the fact that religious organizations are generally exempt from ad valorem property taxes under Article XIII of the California Constitution. Despite this, subsequent legislation and court deliberation has confirmed that these types of organizations may still be subject to special parcel taxes being levied by local agencies.

In 2021, a Supreme Court case (Valley Baptist Church v. City of San Rafael) concerning the constitutionality of special taxes applied to religious organizations provided definitive input regarding the application of these exemptions in practice. In summary, the City of San Rafael has levied a Paramedic Services Tax (“Paramedic Tax”) since it was initially approved in 2010. In Fiscal Year 2015-16, the City conducted an audit of the Paramedic Tax and found that many non-residential properties were incorrectly excluded from this tax.

As such, the City began levying the additional non-residential properties in 2016 and notified affected property owners about the prior year amounts to be collected. One property owner affected by this was Valley Baptist Church, who proceeded to file suit, challenging the constitutionality of the Paramedic Tax as applied to a place of worship.

While the trial court initially agreed that the property owner should be exempt from the Paramedic Tax, the case was reviewed by the Supreme Court which concluded that Valley Baptist Church is not exempt from the Paramedic Tax levied by the City of San Rafael. While religious organizations would be exempt from the collection of ad valorem property taxes, those organizations may still be responsible for the payment of special taxes levied by a local agency. The Supreme Court referenced several key past cases, court opinions, and pieces of legislation to reach this conclusion.

With these details in mind, local agencies levying special taxes must be readily aware of the exemption criteria associated with those special taxes and should apply this exemption criteria on a consistent basis in practice.

NBS recommends that a local agency should develop a policy that addresses the treatment of properties with religious uses. Such a policy must take into account the tax methodology (or formula) and be reviewed by legal counsel.

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