Bureaucratic error results in $50K tax bill, possible foreclosure on rural Ariz. church

QUARTZSITE, Ariz. — Although state law and the Arizona Department of Revenue both say that a small, rural church in La Paz County should not owe any property taxes, county officials have levied a $50,000 tax bill against the church anyway simply because a property assessor sat on paperwork for three years.

The Alliance Defense Fund sent a letter to La Paz County Treasurer Leah Castro Wednesday asking her to act under a statute that gives her authority to clear up the assessor’s error by eliminating the tax liability and removing a tax lien on the church’s property. The lien could result in foreclosure even though the church should owe no tax.

“Churches shouldn’t live in fear of being punished or penalized by the government, but this church truly is in fear of losing everything because of nothing other than an unexplained three-year delay in approving paperwork,” said ADF Senior Legal Counsel Erik Stanley. “Even the Arizona Department of Revenue has provided a letter stating that the church should owe nothing in taxes, but that doesn’t seem to matter to the county assessor, who seems bent on putting this small church into financial ruin for absolutely no reason or cause.”

The church, known as the Isaiah 58 Project of Arizona, is frequently involved in feeding the needy through its food program and has provided thousands of hot meals already in 2010. In 2006, it purchased property for its worship facility in the town of Quartzsite. Under state law, the church qualified for an exemption from property taxes, so it filed the appropriate paperwork with the La Paz County property assessor. The assessor requested that the church provide a tax-exempt determination letter from the Internal Revenue Service before it would act on the application. The church correctly explained that the IRS does not require it to have one and that Arizona property tax exemption statutes do not require the letter in order to be granted a property tax exemption.

The assessor granted the tax exemption but waited three years to do so and only granted it for the years 2009 and later, leaving the church with a bill for approximately $50,000 in back taxes for the years 2006-2008 that it should not owe.

After the assessor refused to correct the error, the church contacted the Arizona Department of Revenue, which issued a letter in June clearly stating that the church is exempt from property taxes under state law and that the “tax-exempt status granted by this letter is effective from and after August 24, 2006.” Nonetheless, the assessor has not acted to correct the error. Instead, it sold the tax lien on the church to a private investor who now holds the right to foreclose on the lien in February of next year.

The ADF letter asks Castro to act within her statutory power to correct the assessor’s error:  “The assessor’s office had no basis at all to delay granting the property tax exemption until 2009 and then had no basis for granting an exemption only for the years of 2009 to the present.  The assessor also had no basis to assess property taxes for the years of 2006 through 2008. This is especially true given the Department of Revenue’s letter submitted to the assessor.”

• Pronunciation guide: La Paz (luh-PAHS’)

ADF is a legal alliance of Christian attorneys and like-minded organizations defending the right of people to freely live out their faith. Launched in 1994, ADF employs a unique combination of strategy, training, funding, and litigation to protect and preserve religious liberty, the sanctity of life, marriage, and the family.