Religious Use Real Estate Tax Exemptions for Religious Property Only

A recent case, Franciscan Communities v. Hamer, 2012 IL App (2d) 110431 (August 28, 2012) clarified that only the religious portion of a property, the owners of which are seeking to reduce taxes based on the religious use real estate tax exemption, qualifies for such an exemption.  

The plaintiff in this case, Franciscan Communities, owns a retirement home in Lindenhurst, Lake County, Illinois.  To live at this retirement community, an individual must pay an entrance fee (90% of which is refundable), coupled with a monthly service fee.  In 2007, the entrance fees ranged from $127,596 to $332,608.  The monthly fees ranged from $1,248 to $4,741. In 2007, the retirement home earned gross revenues of $17.4 million.  The retirement home has a dedicated chapel.  The plaintiff requested a religious use tax exemption in 2007and was denied. The denial eventually brought this matter before the appellate court. 

The court found that while the retirement home certainly had a religious component, advancing religion was not the home’s fundamental goal.  Evidence showed that the retirement home engaged in marketing activities to induce more seniors to move in at market rates, thereby increasing revenues.  The court affirmed that the Lake County Board of Review, the Illinois Department of Revenue, and the administrative law judge who heard the appeal were all correct in denying the religious use tax exemption, and that only the portion of the property actually used for religious purposes — in this case, the chapel — could benefit from the exemption.