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House stalls new tax exemptions for churches

Posted: Mar 7, 2013 6:42 PM by Associated Press

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PHOENIX (AP) - An effort to broaden tax exemptions for religious organizations is facing bipartisan opposition in the Arizona House of Representatives.

House leaders moved to stall a vote Thursday on the measure that would allow properties not used for religious worship to avoid taxation. Under the expansion, student dormitories, staff housing and shelters would be spared from taxation.

Critics complained the measure would allow a group posing as a religious organization to expand its land holdings on the cheap. Under the measure, any group that calls itself religious could sit on undeveloped lots for years without paying taxes.

"It's opening it up for tax fraud," said Rep. Ruben Gallego, D-Phoenix. "It is not your local church. This is not St. Matthews church or the local Episcopalian church. This is religious organizations, a very far-reaching category that could encompass anything."

The bill specifies that an organization must annually inform the local county assessor of its intent to retain the protected property for its religious mission. It forbids holding property to later sell for profit, but critics argue proving the property owner's true motives would be difficult. The powerful, conservative-leaning Center for Arizona Policy has thrown its support behind the overhaul, citing religious rights.

Republican Rep. Justin Olson, the bill's sponsor, said the current religious exemption law is too ambiguous, resulting in lawsuits against county property assessors who lack clear guidance on which organizations qualify for the exemptions. Olson said he is working with county property assessors to make the bill more palatable and expects it to return to the House floor for a vote Tuesday.

"It's a delicate issue when the government has to determine whether a church is a church," Olson said recently in a House committee meeting. "It's a situation that I don't think any county assessor wants to find themselves in when it's a tough call."

The bill would protect congregations like Christ Lutheran Vail near Tucson. The Rev. David Hook said his church bought roughly 40 acres when the housing market was upside-down in 2010 and has since had to pay property taxes on the lot - money that the church would prefer to use to construct a new home for its 200-member congregation. Hook said the church might use the large lot to also build a private Christian school, a park and an elderly home.

"We do intend to use this land for providing services for the Vail community," Hook said. "The plan at this point is not to sell it."

Other counties have allowed churches to avoid taxes on vacant lots, and the proposed law would encourage uniformity, Hook said.

Maricopa County Assessor Keith Russell, who oversees the state's largest local property assessment office, has urged lawmakers to oppose the measure.

"We are basically putting all of the scrutiny into the financial aspects of the church," he told lawmakers recently. "And, quite frankly, I don't want to go to churches and ask them to open up their books to me."

Some Republican lawmakers also warned that the law doesn't do enough to guard against tax fraud.

"One thing you would not want to see is a church purchasing properties, selling these properties, getting a tax exemption, and they don't have the intent to build a church there," said Rep. Warren Petersen, R-Gilbert. "I would really want to make sure that concern would be addressed in this bill."

Josh Kredit, legislative council for the Center for Arizona Policy, recently told lawmakers that churches shouldn't have to pay taxes on vacant land or prove that tax exempt land is used for worship.

"The goal is to minimize interference in the churches' activities by governmental entities," he said.

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