In 2018, nearly 500 churches hosting homeschool groups in all 50 states, specifically those hosting Classical Conversations communities, received letters informing pastors that they were breaking the law. By accommodating these homeschool groups, the letter-writer accused the churches of violating the IRS’s 501(c)(3) income tax exemption, thereby jeopardizing not only their nonprofit status but also making them vulnerable to property tax liability.
In response to this threat, many churches no longer permit any outside groups to utilize their facilities. However, some state lawmakers are beginning to take action in response, passing legislation to clarify that churches can host homeschool groups without jeopardizing their tax exempt status. That’s what lawmakers in Oklahoma did in 2020. Their counterparts in other state legislatures should follow suit in 2021.
The issue at hand is not whether a group using the property is a for-profit or nonprofit organization. The issue is whether the use of the property by the group is an exempt or nonexempt purpose.
In order to avoid unnecessary restrictions on facilities that can be used by homeschooling groups, state lawmakers should amend their tax codes to clarify that the use of exempt church property may be utilized by for-profit organizations for educational purposes. Existing state laws generally support such usage, but some laws have more ambiguous language that could cause tax assessors to make inconsistent or incorrect evaluations.
Clarification legislation here would provide property tax assessors more guidance as they do their work and significantly reduce the possibility that a church could lose its property tax exempt status under state law for allowing a homeschool group to use its property.
State lawmakers in Oklahoma have already successfully amended their tax codes with such clarifying language. The clarification bill in Oklahoma, HB 2504, was enacted in May 2020. This clarification has brought peace of mind and confidence to several Oklahoma church leaders who now allow homeschool groups to use their church buildings again.
Americans for Tax Reform encourages governors and lawmakers in other states to follow Oklahoma’s lead by enacting similar clarification legislation protecting churches and other places of worship from unjust and incorrect property tax assessments.