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Earlier this month, in Grace Cathedral, Inc. v. Testa, the Ohio Supreme Court concluded that Grace Cathedral, Inc. was entitled to a tax exemption for 2010 for providing temporary housing free of charge to visitors participating in worship services, reversing the decision of the Board of Tax Appeals (BTA). The court relied, in part, on an Ohio statute that exempts “[h]ouses used exclusively for public worship, the books and furniture in them, and the ground attached to them” from taxation.

BACKGROUND

Grace Ministries, Inc. is well known in and beyond Ohio. The congregation’s leader, the Rev. Ernest Angley, travels and conducts a television ministry, and Grace Cathedral has members and supporters throughout the country and around the world. Worshippers often go to Akron to attend live services.

The dormitory building at issue is used approximately 40 to 50 percent of the weekends during a year to provide lodging. The rest of the time, religious services and related study classes are held there.

In order for the dorm, or any housing used exclusively for public worship, to qualify for the statutory exemption, the building must be used “in a principal, primary, and essential way to facilitate the public worship,” a standard which the Ohio Supreme Court previously established.

THE CHARACTER OF THE DORM'S USE

When the BTA denied Grace Ministries the desired tax exemption, it determined that Grace Ministries failed to satisfy its burden of proof. In presenting its case, Grace Ministries argued, among other things, that the dorm “directly and primarily provides for the proper occupancy, use, and enjoyment of the church for public worship,” comparing it to a church parking lot.

However, the BTA disagreed, largely because the testimony revealed that the dorm was vacant 50 to 60 percent of the time, and that very little public worship occurs on the property. By characterizing the use as “merely supportive of public worship,” it could not trigger the used-exclusively-for-public-worship exemption required by the statute.

THE SUPREME COURT'S RATIONALE

Instead of evaluating the percent of time the dorm was used for worship, as the BTA did, the Supreme Court considered the dorm’s actual use, even if incidental. The Supreme Court ultimately concluded that the dorm facilitates public worship in a principal, primary, and essential way. The Supreme Court reasoned that Grace Ministries’ dorm does so “by affording congregants proximity to attend church services and an opportunity for fellowship following services” in the same way that on-site church parking lots do. The court reasoned that parking lots also “facilitate public worship and are used only at times of worship and which routinely qualify for exemption.”

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