Memo From the Legal Department: Church Property is NOT Always Tax Exempt

Frederick Square Apartments formerly located on top parcel right where I used to carpool!

Got a memo from some legal eagles who directed me to the Texas Property Code, Sec. 11.18. CHARITABLE ORGANIZATIONS.

(a) An organization that qualifies as a charitable organization as provided by this section is entitled to an exemption from taxation of:

(1) the buildings and tangible personal property that:

(A) are owned by the charitable organization; and

(B) except as permitted by Subsection (b), are used exclusively by qualified charitable organizations; and

(2) the real property owned by the charitable organization consisting of:

(A) an incomplete improvement that:

(i) is under active construction or other physical preparation; and

(ii) is designed and intended to be used exclusively by qualified charitable organizations; and

(B) the land on which the incomplete improvement is located that will be reasonably necessary for the use of the improvement by qualified charitable organizations.

Note to self: ask my lawyer if there are Cliff Notes on the Texas Property Code.

What this means is that if a church could argue exemption from property taxes on every single property, they would have an unfair advantage over other non-religious developers.

Think of it this way: most buildings’ largest expenses are the mortgage note, then property taxes, and finally maintenance/utilities. Eliminating the property taxes would have every church in town buying investment property. Plus, the work of the church will not be 100% happening in that new building. Legal says that it does get more interesting when the building is attached to the church.  An aggressive church could argue that it is all exempt, especially if the property is used by the church on the weekend, but that is a hard argument to make.  It is possible that St. Michaels could try to make this argument, but it would be presumptuous to assume that they would.