Church Receives Retroactive Property Tax Bill

Over the years I have assisted church clients subleasing their property. Most Pastors do this as a way to help their revenues. But, as I have counseled, churches have to be very careful because of Unrelated Business Income Tax (UBIT), running afoul of Public Accommodation laws and also risking the church Property Tax Exemption.  A recent Miami church case illustrates this latter risk.

The First Presbyterian Church of Miami received a $7,100,000 tax bill for allegedly leasing a portion of its church grounds to a for- profit school with food trucks.  Their use spanned over several years. The Miami-Dade Property Appraisers Office retroactively taxed a portion of the church property for this use. This resulted in the church receiving a very large tax.

The lesson here is clear. Remember only property that is predominantly used for “charitable, religious, scientific or literary purposes” can be deemed exempt from real property taxation. Allowing for-profit entities to use your property can result in loss of this valuable right and a large and unexpected tax bill in the mail.