Church loses exemption from municipal property taxes

In British Columbia, a provincial statute provides for a mandatory exemption from property taxes for places of worship and the land on which the building itself stands. Local municipalities have the discretion to grant a permissive exemption for the land surrounding the place of worship (such as parking lots or “non-worship” space).

On August 4, 2006, the British Columbia Supreme Court released their decision in the Trustees of Westwood Congregation of Jehovah’s Witness v. City of Coquitlam dealing with Coquitlam’s change policy and refusal to grant a permissive exemption for land surrounding any places of worship.

For some 35 years four Jehovah’s Witness congregations worshiped at a Kingdom Hall located on Dewdney Trunk Road in Coquitlam. Consistent with its then policy concerning places of worship, the City of Coquitlam granted the Kingdom Hall a permissive exemption from municipal property taxes for the land surrounding the building. However, in the 1990s, due to expropriation of a portion of the parking lot, the Jehovah’s Witnesses were forced to build a new Kingdom Hall in a different location. Initially, the Jehovah’s Witnesses tried to purchase and rezone a neighbouring lot in order to remain in the same location, but the City would not agree to the rezoning. A new Kingdom Hall was built on land that permitted only the construction of a place of worship and related buildings.

However, the Coquitlam had by then adopted a new policy that it would no longer grant permissive exemptions from property taxes for land surrounding any places of worship. Since the property value of the new property was assessed before the new Kingdom Hall was constructed, the congregation were required to pay over $33,000 in property taxes for 2004, with no statutory exemption for the building and no permissive exemption for the land surrounding the building. In 2005, the Jehovah’s Witnesses benefited from the statutory exemption for the value of the Kingdom Hall, yet they still paid $19,300 in property taxes.

Attempts to change the City’s position on exemptions were unsuccessful. Since every other place of worship in Coquitlam was constructed prior to the implementation of the new policy they continued to receive the permissive exemption and the new Kingdom Hall was and is the only place of worship that did not receive a permissive exemption from property taxes. The Jehovah’s Witnesses sued Coquitlam, raising several arguments including: (1) that the City’s refusal to grant a permissive exemption was outside of the City’s jurisdiction; (2) that the City breached its duty of procedural fairness to the Jehovah’s Witnesses; (3) that the City fettered its discretion by adopting too rigid a policy that would “refuse all future requests”; and (4) that the City’s decision infringed the congregations’ (a) freedom of religion and (b) right to equality.

The Jehovah’s Witnesses won and lost on these arguments. With respect to the first argument the court found that Coquitlam had the jurisdiction to not grant a permissive exemption for land surrounding a place of worship. However, by failing to give the Jehovah’s Witnesses an opportunity to be heard, and by failing to give reasons beyond a mere recitation of the policy for their decision not to grant a permissive exemption, the City breached their duty of procedural fairness to the Jehovah’s Witnesses. The City was required to consider requests for a permissive exemption on an individual basis.

With regard to the Jehovah’s Witnesses’ freedom of religion claim, the court found the City’s decision not to grant the permissive tax exemption was an indirect burden on the practice of religion, but that it was not substantial. Additionally, since the Charter protections of religious freedom do not require the government to facilitate the practice of religion, the City’s decision to not grant a permissive tax exemption did not contravene freedom of religion under the Charter.

In conclusion, the court ordered that the Jehovah’s Witnesses’ application for a permissive exemption from taxation be reconsidered by Coquitlam in light of the court’s judgment. This means that the City must provide the Jehovah’s Witnesses with an opportunity to present their application for and exemption, and if refused reasons for the decision must be given.

This case is important as it serves as another beacon identifying the winds of change as they relate to society’s and the law’s treatment of religious organizations. While the Jehovah’s Witnesses won on their procedural arguments, this likely will have little, if any, effect on the ultimate outcome of their application for a permissive exemption. The law allows government, acting properly, to change their policy, removing tax benefits received by religious organizations; a situation likely to be repeated elsewhere.

This article was written by Robert G. Kuhn and Ian C. Moes, lawyers who practice in charity and not-for-profit law with the law firm of Kuhn LLP. It is only intended as a guide and cannot cover every situation. It is important to get legal advice for specific situations. If you have questions or comments about this case or other construction law matters, please contact us at 604-864-8877.