Promised land: State has few restrictions on religious property tax exemptions

Courtesy realtor.com

A seven bedroom, five-and-a-half bathroom, 7,030 square-foot home on 10 acres purchased in February 2018 for $1.7 million by Bixby church Blue Flame 47.

Just west of Bixby in south Tulsa County, an opulent 7,030-square-foot, two-story brick and stone mansion rises above the surrounding hay meadows and pastures.

Valued at $1.7 million, the Mounds luxury home sits on 10 acres of land, includes seven bedrooms, five bathrooms, a salt water pool, a pool house, a four-car garage, five fireplaces, a gated driveway and three large metal shops on the property.

Down the street, less than a mile east on 171st Street South, sits a 912-square foot house built in 1972 situated on a one-acre lot valued at just $43,400.

Yet, when it comes time to pay property taxes, the owner of the small house will owe the county more for that residence than the other owner will for the mansion and the 50 acres of land surrounding it, which are fully exempted from property taxes.

That's because the mansion's owner is a church.

Blue Flame 47 bought the mansion and the 50 acres nearby for $2.5 million in February 2018, property records show. The Bixby-based church applied for and was granted a religious exemption from property taxes for the properties last summer. Since it bought the mansion, the church has purchased an additional 20 acres around the mansion for $578,000, and an additional hundred acres nearby for $1.6 million, though those properties do not yet have a property tax exemption.

The Frontier reviewed hundreds of religious exempt properties using data from Tulsa, Oklahoma, Wagoner, Cleveland, Canadian, Osage, Washington, Craig and Garfield counties to find the state's most expensive parsonages, as well as unusual cases of other properties that have been granted a religious property tax exemption. Rogers County Assessor Scott Marsh did not respond to an open records request from The Frontier seeking parsonage data from that county.

In addition to several relatively expensive houses and properties, the review of data also turned up religious exempt properties that included cattle ranches, airplane hangars, radio broadcast towers, religious organizations with multiple parsonages and hundreds of acres of land in south Tulsa County belonging to one church and exempted from taxes.

The data reviewed by The Frontier also showed that several churches and religious organizations have multiple parsonages. The Salvation Army claimed 12 different parsonages in Tulsa and Oklahoma counties worth an average of around $208,000, while St. John Building Corp., a title holding company for St. John Health System in Tulsa, owns nine parsonages around the hospital, worth an average of around $145,000.

State law grants tax exemption to properties "used exclusively and directly for fraternal or religious purposes," but the process for determining whether a property is eligible for tax exemption is a patchwork of policies and practices formed by each county's tax assessor and local district attorney determinations, said Paula Ross, director of communications for the Oklahoma Tax Commission.

State law contains no standard for what kind of property qualifies for a religious tax exemption. The law doesn't even require a property to be owned by a church or a religious group to qualify for a tax-exempt status. The pastor of a church can own a home in his or her name and have it declared a parsonage, which allows for a property tax exemption of up to $250,000 of its fair cash value.

"Anytime you do it long enough you see it go both ways. I've seen counties deny exemptions I thought were pretty clear religious uses for various reasons," Carter said. "Sometimes, it's a valuable piece of property and they wanted the tax revenue, sometimes they just saw it differently or didn't think it was a religious use. I've seen some people try to take advantage of the system. Sometimes, you have bad actors who try exempt property that's questionable."

In Oklahoma, property taxes are used to fund city and county governments, roads and streets, police and fire protection and school districts. Though Oklahoma has one of the lowest overall property tax rates in the nation, it is still the state's biggest source of revenue for local services.

Most of the ministry and church leaders and tax experts who spoke to The Frontier said the exempt properties are legitimately used for exempt purposes. However, what constitutes a religious use can vary between Oklahoma's 77 counties.

"What is a religious use? It's a hard standard to put a definition on. If I open it up for a polling place, is that a religious use?" said Wes Carter, an attorney who specializes in nonprofit law at the Winters King law firm in Tulsa.

The rules for exempting property under religious use also varies between states, said Philip Haney, a Tulsa-based attorney who specializes in nonprofit law. Oklahoma has few restrictions on the size or value of the property that can be exempted, Haney said, or the number of parsonages a church can have.

"In Oklahoma if a church or para-church organization (such as a ministry) can show it owns the property and that property is lived in… then the property is usually taken off the tax rolls," Haney said. "It's almost a presumption that that property is being properly used by a church or religious ministry and can be taken off the rolls."

The driving philosophy behind why religious and charitable-owned properties are often exempted from property and other taxes is essentially that the organization is providing a service that would otherwise fall to the government, said John A. Wright, Tulsa County Assessor.

And because those types of organizations are given special tax breaks that would otherwise go toward public coffers, it is important that any application for tax exemption go through a thorough vetting process, Wright said.

"In order for the community to have any sense of support for anybody being exempt, there has to be a confidence on the part of the public that our office is being thorough in the vetting and review of the exemption process," Wright said. "If there is a perception on the part of the public that our office has not been thorough or complete in determining who is not lawfully qualified, it will undermine the public support for anyone getting an exemption."

The Frontier is a nonprofit, independent news source based in Tulsa. Frontier content is republished in the Transcript through a special content agreement. For more information on The Frontier, visit readfrontier.org.

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