Tuesday, June 20, 2006

MWCD -- Tax or Assessment?

Several Independent Baptist churches located within the Muskingum Water Conservancy District (MWCD) in Ohio contacted LLM Attorney Terry Lee Hamilton about whether the efforts of the district to tax church real estate is in violation of the state constitutional ban on real estate taxes on church property. The legal analysis is fairly straightforward:

• If the district is taxing the church property,
then the taxation is unconstitutional.
• On the other hand, if the district is merely
placing an assessment on church property
for specific services, and those assessments
are placed in a specific fund, then such an
assessment is not unconstitutional.

The current statutory language describes what the district is doing as an assessment, while earlier statutes call it a tax. On behalf of three Independent Baptist churches in Ohio, LLM recently filed a brief (see excerpts below) in support of the contention that the MWCD assessment is really a tax. In addition, LLM is working with Dan Whisner at Ohio Legislative Watch and with other preachers to seek a legislative solution, which would be far better than years of inconclusive litigation. Please be in prayer!


STATE OF OHIO, TUSCARAWAS COUNTY
IN THE COURT OF COMMON PLEAS
(CONSERVANCY DIVISION)


IN THE MATTER OF THE :
MUSKINGUM WATERSHED
CONSERVANCY DISTRICT :


EXCEPTORS' MEMORANDUM IN OPPOSITION TO
MWCD'S MOTION FOR SUMMARY JUDGMENT AS TO SPECIFIC EXCEPTIONS

NOW COMES Attorney Terry Lee Hamilton, on behalf of Exceptors First Baptist Church of Ashland, Calvary Baptist Church of Ashland, and Twin Rivers Baptist Church of Marietta, and files this Memorandum in Opposition to MWCD's Motion for Summary Judgment as to Specific Exceptions.

I. ISSUE - WHETHER THERE REMAINS A GENUINE ISSUE FOR TRIAL, WITH RESPECT TO THE TAX EXEMPT STATUS OF CHURCHES, SUCH THAT THE MOTION FOR SUMMARY JUDGMENT SHOULD NOT BE GRANTED . . .

. . . As explained below, Exceptors maintain that there is a genuine issue of material fact as to whether the maintenance assessment is truly an assessment or a tax. Accordingly, the motion for summary judgment should not be granted.

II. TAX EXEMPTION FOR CHURCHES IN THE OHIO CONSTITUTION AND OHIO REVISED CODE

From the early days of Ohio's history, churches and religion have held a special legal status.

A. Northwest Ordinance of 1787. The governing principles of this ordinance, which included the territory of Ohio, contained the following language in Article III: "Religion, morality, and knowledge, being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged."

B. Ohio Constitution. The Ohio Constitution continues to place a special legal status upon churches and religion.

1. Article I - Bill of Rights, § 7 - Rights of conscience; education; the necessity of religion and knowledge. The Ohio Bill of Rights expands upon the legal protections afforded in the Northwest Ordinance, as follows:

"Religion, morality, and knowledge, however, being essential to good government, it shall be the duty of the general assembly to pass suitable laws to protect every religious denomination in the peaceable enjoyment of its own mode of public worship, and to encourage schools and the means of instruction."

2. Article VII - Finance and Taxation, § 2 - Limitation of tax rate; exemption. With respect to taxation of real property, this section of the Ohio Constitution, cognizant of the special legal status of churches as found in Article 1, once again affords special legal protection for churches, as follows: "Without limiting the general power, subject to the provisions of Article I of this constitution, to determine the subjects and methods of taxation or exemption therefrom, general laws may be passed to exempt . . . , houses used exclusively for public worship, . . . "

As noted below, the General Assemby has passed legislation exempting "houses used exclusively for public worship."

C. Ohio Revised Code, § 5709.07 - Exemption of schools, churches, and colleges. In accordance with the above provisions of the Ohio Constitution, the General Assembly has exempted churches from real estate taxation, as follows:

" (A) The following property shall be exempt from taxation: . . .

(2) Houses used exclusively for public worship, the books and furniture in them, and the ground attached to them that is not leased or otherwise used with a view to profit and that is necessary for their proper occupancy, use, and enjoyment."

III. NATURE OF TAX VS. ASSESSMENT

Despite the special status of churches under the Ohio Constitution and statutes, resulting in their exemption from real estate tax, nonetheless churches are not exempt from special assessments. The distinction between a tax and a special assessment is addressed at 93 Oh Jur Water § 231, as follows:

"Observation: Although "tax" and "assessment" are similar concepts in that they are government-imposed financial burdens for a public or quasi-public purpose, Ohio maintains a functional distinction between the two: a tax is a burden levied on citizens for the general operation of the government, and by contrast, an assessment is a narrower burden levied on specific property owners to cover the cost of benefits bestowed on the property by public improvements.

Notice the functional distinction:
• Tax. " ... a tax is a burden levied on citizens for the general operation of the government,..."
• Assessment. "... an assessment is a narrower burden levied on specific property owners to cover the cost of benefits bestowed on the property by public improvements."

If MWCD passes a levy "on specific property owners to cover the cost of benefits bestowed on the property by public improvements," then that levy is an assessment. On the other hand, if MWCD passes a levy "for the general operation of the government," then that levy is a tax.

IV. THE PROPOSED MAINTENANCE ASSESSMENT IS REALLY A TAX

Notice again the legal conclusion made by MWCD at page 8 of its motion: "Any tax exemption provided to political subdivisions, churches, schools and other entities, does not equate to a similar exemption from a maintenance assessment." MWCD argues in support of its motion for summary judgment that churches are not exempt from maintenance assessments, thus raising the issue as to whether the maintenance assessment is an assessment or a tax.

• If the maintenance assessment meets the definition of an assessment, then churches would not be exempt from such assessments.
• However, if the maintenance assessment is truly a tax, then churches would be exempt as set forth above in the Ohio Constitution and statutes.

Is the maintenance assessment "a narrower burden levied on specific property owners to cover the cost of benefits bestowed on the property by public improvements"? MWCD's own motion belies its assertion that its purported maintenance assessment is really an assessment.

A. The Affidavit. Whereas an assessment is aimed at "specific property owners to cover the cost of benefits bestowed on the property by public improvements," according to the affidavit of Michael F. Lawrence (the only affidavit attached to MWCD's motion), the purported maintenance assessment would benefit all properties within the Muskingum Watershed, as follows:

"7. Benefits are conferred on each parcel of property situated within the Muskingum Watershed as a result of the Offical Plan of the MWCD. This is true of the parcels which are located on higher ground not subject to flooding, as well as those in low lying areas."

The affidavit clearly demonstrates that the maintenance assessment is not for specific property owners, but rather for "each parcel of property situated within the Muskingum Watershed;" therefore, as a general "burden levied on citizens for the general operation of the government," the purported maintenance assessment is really a tax.

B. Official Amended Plan. As noted on page 4 of its motion for summary judgment, the MWCD notes that "an Amended Official Plan was completed and approved by both the Board of Directors of the Conservancy District and the Conservancy Court in 2005." The Amended Official Plan is clearly aimed at all parcels of land in the MWCD, not specific property owners, as follows:

• Page 3 -- "Based on preliminary estimates, it is expected that the amended Official Plan will result in a total yearly assessment cost of approximately $12 per parcel for residential and agricultural property located in the jurisdiction of the MWCD. . ."
• Page 17 -- "The cost of the work to be performed as described in this plan will be assessed to the benefited owners of real property located within the jurisdictional boundaries of the MWCD as determined by the Board of Appraisers . . ."

If the maintenance assessment is really a tax on real estate, then clearly churches would be exempt from such taxation.

V. CHANGING THE NAME DOESN'T CHANGE THE NATURE. MWCD's first argument with respect to tax exemption of churches is stated again (see page 8 of its motion): "Any tax exemption provided to political subdivisions, churches, schools and other entities, does not equate to a similar exemption from a maintenance assessment." Certainly, relevant provisions of the Ohio Revised Code in Chapter 6101 specifically referenced assessments, not taxes.

However, it musts be noted that HB 617, passed in 2000, amended out the word "tax" or "taxes" in numerous sections. For most of the history of MWCD, it was authorized to levy both taxes and assessments, depending on whether the project was for specific property owners (assessment) or for the general operation of MWCD (tax). Changing the name from tax to assessment, or deleting the name tax, does not change the nature of the levy.

VI. CONCLUSION

There remains a genuine issue of material fact -- whether the maintenance assessment is really an assessment, in which case churches are not exempt, or whether the maintenance assessment is really a tax, in which case churches would be exempt. Accordingly, MWCD's motion for summary judgment with respect to churches should not be granted.



Terry Lee Hamilton (0030755)
1813 East 45th Street
Ashtabula, OH 44004
Telephone: (440) 964-0236
Attorney for Exceptors

0 Comments:

Post a Comment

<< Home