Oregon Tax Court Approves Taxation Of Church Rectory

This post was originally published on Forbes Jun 2, 2015

As a kid I remember being fascinated by a door in the side of the sanctuary at St. John's Church in Fairview, NJ. It was very mysterious. Only the priests ever used it.  The explanation was pretty mundane.  There was an enclosed walkway over the driveway between the church and the rectory.

Father John Tran of St. Mary Star of the Sea Catholic Church in Astoria Oregon doesn't have a sweet deal like that.  His rectory is about a mile and a half from the church.  And that arrangement may be what had the parish in the Oregon Tax Court facing the Clatsop County Assessor.  Following what I have come to believe is the assessor's code "When in doubt, tax it", the parish had not been granted a property tax exemption for the rectory.

What Makes A Rectory A Rectory?

There is  little that shocks me and I can't say that this case is an exception, but I do find it rather surprising. The Oregon Tax Court ended up approving the assessor's denial of the exemption.

Father Todd Molinari , Vicar for Clergy of the Archdiocese of Portland testified about rectories.

Molinari testified that there has been Canon Law regarding rectories for centuries. Canon Law 533 requires priests to reside in a rectory near the church they serve.  According to that law, “[a] pastor is obliged to reside in a rectory near the church.” Molinari testified that that requirement is interpreted as requiring a rectory “within the territory of the church parish.” Molinari testified that a priest is given an endowment for an entire territory; the rectory enables the priest to faithfully execute his ministry duties within his assigned territory. Molinari testified that the rectory has to be within a “reasonable distance” to the church so the priest can facilitate his ministry, but because the priest has to be available to his parishioners, the rectory must be within a reasonable distance to the parishioners as well. 

He began by explaining that the Church operates under the concept of “sustenance,” which means the local parish has to provide for the basic necessities of its priest. The particular requirements within a given archdiocese are usually spelled out in the policies of that archdiocese. The rectory must be within a reasonable distance to the church facilities, and provide a place for the priest to sleep, cook his meals, do his laundry, and have an area for study. The rectory must also have space for an assistant priest in the event there is one, and for seminarians studying for the priesthood who would be given a temporary assignment at a rectory. The rectory must also have space for visiting priests. The rectory is to be used for the purposes of the priest's ministry.

St. Mary's Star Of The Sea And Father Tran

Apparently the Parish covers rather a large area - over 360 square miles. I guess Catholics are thinner on the ground out there than they were in Bergen County in the sixties. St. John's covered less than two square miles and had three full time priests supplemented by a Dominican who did the late masses on Sunday.  Besides the regular parish church St. Mary's has  a "mission" where services are held to make it easier on people who live too far from the main parish.

The property in dispute is the third rectory that has been owned by the parish.  The original rectory, next to the church, was converted to administrative space and one within walking distance had been sold due to problems with heating and being too small to host guests.

Father Tran also testified.

The testimony seems to indicate that he was pretty much using the rectory, like, you know, a rectory.

Tran testified that the subject rectory in Astoria is a two story structure with a kitchen, a dining room, a study room, and a space on the other side of the kitchen area where Tran can visit with guests; it also has a master bedroom upstairs, two guest bedrooms, and a bonus room over the garage where Tran works on all church decorations needed for children to attend school mass. Tran testified on cross-examination that he uses the rectory as his full-time personal residence. Tran sleeps in the master bedroom. Tran testified that one of the guest bedrooms is used by visiting priests. He did not provide any specifics about such visits; how often they occur, how long a visiting priest stays, etc.
Tran testified that he prepares his own meals in the kitchen, and prepares meals for other church related visitors when they stay at the rectory. Tran later described the study as his library, explaining that he has a desk and bookcases in that room. Tran testified that he prepares sermons and homilies at the rectory. Tran testified that it takes him less than five minutes to get from the rectory to the parish by car.

The Decision

It probably has to do with my upbringing, but that assessor would not have done that well if I was the judge.  Of course, Magistrate Dan Robinson had to consider the actual law and everything, while I'm just looking at how this could be an updated version of Going My Way

The exemption for property owned by religious organization covers

houses of public worship and other additional buildings and property used solely for administrative, education, literary, benevolent, charitable, entertainment and recreational purposes by religious organizations, the lots on which they are situated, and the pews, slips and furniture therein. However, any part of any house of public worship or other additional buildings or property which is kept or used ***** for any purpose other than those stated in this section shall be assessed and taxed the same as other taxable property

When it comes to residences for clergy case law has evolved a two-prong test.  The official living in the residence must be required to live there by either church doctrine or practical necessity and the proximity of the residence to the house of worship must be necessary to further religious objectives.

The Oregon Tax Court saw the proximity as not being necessary to further religious objectives.

Although Tran does write sermons and homilies at the rectory, those duties do not require close physical proximity to the church. Tran could prepare those messages anywhere in Astoria, including the church, where he has at least one office. The other uses of the rectory have no direct connection to the church; they certainly do not require a rectory in close proximity to the church. There was generalized testimony about the availability of guest bedrooms for visiting priests, deacons, and seminarians, but no specific testimony or other evidence that such officials have stayed at the subject property and, if so, how many and how often they were there. Assuming such church officials did in fact visit and stay overnight at the rectory, they could have slept in a residence anywhere in Astoria, regardless of its location with respect to the church. 

Tran testified he teaches members of the Domus Dei Order at the rectory on a monthly basis. That presents several questions. The Domus Dei Order is in Washougal, Washington, and there is no evidence it is part of the Portland archdiocese territory. If it is not, Plaintiff has not established how their visitations to the rectory in Astoria further the religious aims of St. Mary Church. Tran's duties, according to his supervisor Molinari, are to his parishioners. The relationship between the parishioners and members of Domus Dei is unclear. In any event, Tran could teach the members of the Domus Dei Order at the church or any residence, regardless of its location with respect to the church. There is simply no evidence that the proximity of the rectory to the church is necessary to further the church's religious objectives with regard to Tran's involvement with Domus Dei, or that such involvement directly benefits the parishioners in any way. Tran does meet with his parishioners, but those meetings are all scheduled to take place at the church.

More Property Tax Coming For Oregon Catholic Parishes?

The decision closes with a somewhat ominous note.

Plaintiff argued in closing that all Catholic rectories in the Portland archdiocese are exempt. That may be true, but there is not a specific statutory grant of exemption for Catholic rectories. They are exempt if they meet the applicable legal standards, which is the reason actual use of the property must be examined in each case.

It would seem that many church rectories or parsonages, to use the homey American term, would flunk the test laid out by the Oregon Tax Court.  It will be interesting to see whether this becomes a trend. Parsonages have fallen out of favor with many Protestant denominations where the big tax subsidy is the federal income tax break that exempts cash paid for housing allowances from income tax.  The dubious constitutionality of that provision has avoided scrutiny thanks to rulings on nobody having standing to object to it.

Update

The last time this former altar boy tax blogger looked at a tax case involving a Catholic parish was back in 2012, when I wrote about Saint Frances X. Cabrini parish in Scituate, Mass.  The Archdiocese lost the property tax exemption for the property because the parish was being closed and parishioners have been occupying it, which is not an exempt purpose. According to Reuters, the parishioners have been ordered by the Norfolk County Superior Court to vacate by June 5.  The vigil has been going on for over a decade, so there may be some drama if it really does end this week.

 Correction

The original version of this post contained a link to the biography of a different Father Tran.  See comments.