Matt Gillum, executive pastor at Austin Baptist Church in Austin, Texas, tells Church Law & Tax how his church patiently worked with city leaders to resolve a sticky tax situation.
Q: Describe your church’s sticky tax situation—why did it receive an unexpected property tax bill?
In 2010, our church purchased 36 acres of vacant land. The land was divided into five sections—or “plats”—but all of it was purchased in one transaction. Before we bought it, a site plan was put together and passed by the city. We constructed a building on part of the property that opened in 2012.
A few years later, the assessor visited our property and noticed two of the plats remained undeveloped. The church hadn’t developed those two plats because the city of Austin is stringent about how certain types of brush can or can’t be cleared, as well as other environmental activities. The assessor determined the two plats weren’t being used for religious purposes and didn’t qualify for property tax exemption anymore.
Q: What was most surprising about this determination?
Church staff didn’t know we need to regularly show our eligibility for a property tax exemption. Staff also didn’t know how it needed to show the ways the two unused plats remained in unity with the rest of our property for religious purposes.
To the city, it could look like the church was holding on to the two plats and keeping them vacant to potentially sell them in the future. That was never our plan.
Q: Did your church appeal the assessor’s decision?
Yes. But once that happens, the situation remains in limbo unless something moves it forward toward a decision. Unfortunately, the property tax potentially owed continues to accrue in the meantime. We hired a lawyer to help move the process forward because the amount of money we needed to set aside to pay the accruing taxes in the event the appeal was denied was becoming sizable.
Q: What was the church’s approach to this sticky tax situation?
We did full due diligence. We pulled together photos providing evidence of how we use the property for church purposes. We dug up meeting minutes describing the master site plan the church developed in 2014, and how all of it worked toward the church’s religious functions. All of this proved to be extremely important in the process because it helped show what our church did, what it planned, and what it planned to do.
Q: How did the assessor respond?
It took five years, but we reached a compromise. The church agreed to pay a portion of the property tax for the year the assessment was made. But that was significant because the assessment in full could have been for four years’ worth of property taxes.
There was criticism within the church at times because of what we were spending to deal with this. I hated the idea of an ongoing property tax dispute sapping resources that could go toward ministry. The expenses did hinder growth in our missions, staffing, and other parts of the church.
It’s an albatross similar to debt.
In the end, though, the expenses proved to be worthwhile.
