The Arizona Constitution permits taxation of all real estate, improvements to real estate, and, for that matter, all personal property—with certain exemptions determined both within the Constitution itself and in the Arizona Revised Statutes. Among the latter exemptions, as you may have already guessed, is an exemption for churches and religious organizations. But it isn’t just as simple as any property the church owns being exempted from property tax.
The Arizona Constitution determines the overarching framework of property taxation, laying out that, among other things, the right of the state to tax property is practically absolute, but may be mediated by exemptions. (In other words, unless a form of property is listed among the exemptions, it is assumed that it is subject to taxation.) The legislature has determined that among these exemptions shall be religious property, as laid out in ARS 42-11109A, which states:
“Property or buildings that are used or held primarily for religious worship, including land, improvements, furniture and equipment, are exempt from taxation if the property is not used or held for profit.”
This does require the filing of an official affidavit providing evidence that the church or organization has tax exempt status under the US internal revenue code. But a single filing of this affidavit is sufficient to maintain the property’s exemption from tax until the property is either conveyed to a new owner or is no longer used for religious worship.
Naturally, the use of the property is often a sticking point. The courts of Arizona have, in a series of decisions, made this element a bit clearer. In Kunes v. Samaritan Health Service (1979), the court emphasized this “use” element, in addition to the ownership element. In Volunteer Center of Southern Arizona v. Staples (2006), the court emphasized that the use of the property for determination of tax-exemption could fall to either the owner or the tenant of the property—that there was no automatic decision based on one or the other, but that both must be taken into account. And in Tucson Botanical Gardens, Inc. v. Pima County (2008), the court solidified the concept that the qualification of a property’s being “not used or held for profit” is not all-or-nothing; instead, so long as the property is primarily being used for the exempt purpose (which, in our scenario, is religious worship), the property is entitled to the exemption, even if it is occasionally used in other ways. “Occasionally” being the operative word.
Provident Law’s church and nonprofit attorneys can help a church or religious organization to ensure that its land uses meet the requirements for property tax exemption in Arizona, and to aid in the filing of an affidavit attesting to the tax exempt status of the organization. We also stand ready to counsel and serve charities, foundations, private schools, colleges, universities and other types of nonprofit organizations—providing broad transactional and general counsel services in Arizona and surrounding areas. Contact us to learn more.