Property Tax Exemptions for Religious and Nonprofit Organizations
| Jurisdiction | Colorado,United States |
| Citation | Vol. 10 No. 1989 Pg. 1939 |
| Pages | 1939 |
| Publication year | 1989 |
1989, October, Pg. 1939. Property Tax Exemptions for Religious And Nonprofit Organizations
Since the days when Joseph administered Pharaoh's lands, states have crafted elaborate rules for taxing some properties while exempting others.(fn1) In 1989, Colorado's own rules regarding property tax exemption were reorganized and significantly changed when the General Assembly passed two different tax exemption bills.(fn2) This article reviews those bills and generally discusses the Colorado property tax exemptions of greatest significance to schools and to religious and charitable and other nonprofit organizations.
The earliest property tax exemptions applied to state property which, in the past, included property of the established church. The American Colonies exempted church, school and college property.(fn3) Ecclesiastical and school property typically retained its tax-exempt status in the American Colonies and states even after they had disestablished their churches.
Apart from the exemption furnished for government property,(fn4) Colorado's most significant property tax exemptions are provided for property owned and used "solely and exclusively" for religious purposes,(fn5) charitable purposes(fn6) and schools.(fn7) However, not all such property is tax exempt, and practitioners must be familiar with the pertinent facts, the applicable statutory provisions and the interpretive case law in order to predict reliably whether a given property will be exempt from taxation.
During the 1980s, the Colorado General Assembly has expanded the charitable use exemption expressly to include certain residences under construction(fn8) and certain properties owned and used by nonprofit domestic water companies,(fn9) child care centers,(fn10) and fraternal and veterans' organizations.(fn11) During the 1980s, the General Assembly has also lessened the constraints of the "sole and exclusive use" requirement, by creating safe harbors for incidental uses and for multi-purpose property.(fn12) Moreover, the General Assembly has somewhat relaxed the previously unqualified requirement that the owner of tax exempt property must also use and occupy it in order to receive the tax exemption.(fn13)
House Bill ("H.B.") 1098, the first of the two tax exemption bills passed in 1989, reorganized Colorado's tax exemption statutes, codified certain case law requirements for the charitable purposes exemption and provided a new statutory definition of the term "school."(fn14) Senate Bill ("S.B.") 237, the second of the two bills, replaced the religious worship exemption with a more expansive religious purposes exemption, which dramatically reduces the possibility of improper governmental entanglement with religion by preventing the Property Tax Administrator from inquiring whether particular activities of a religious organization truly constitute religious worship.(fn15) S.B. 237 also creates a safe harbor for incidental nonexempt uses of religious purposes property.(fn16)
To summarize, during the 1980s the General Assembly has expanded the availability of the property tax exemptions addressed in this article. In part, this legislative expansion seems to be designed to reverse a judicial trend, evident since the Depression, toward more restrictive interpretation of these exemptions.(fn17)
The Colorado Constitution identifies the four uses of property which provide the tax exemptions mentioned in this article: that for religious worship, schools, strictly charitable purposes and cemeteries.(fn18) Because of certain qualifying language contained in the Colorado Constitution, the General Assembly has absolute authority to limit, modify or even abolish these tax exemptions.(fn19) Moreover, property tax exemptions for religious use generally violate neither the establishment clause nor the equal protection clause of the U.S. Constitution.(fn20)
As previously noted, S.B. 237 replaced the religious worship exemption with a religious purposes exemption. For tax years commencing on or after January 1, 1990, property "owned and used solely and exclusively for religious purposes and not for private gain or corporate profit" shall be tax exempt.(fn21)
By creating the new religious purposes test, the General Assembly sought to avoid the constitutional problems which arise when state agencies require religious organizations to prove the religious nature of their activities.(fn22) The General Assembly revealed the intended significance of the new religious purposes...
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