Union County churches fight to keep ‘tax exempt’ status

Posted May 9, 2013 at 5:00 am

By Julie Ann Madden

Two Union County church properties faced losing their property “tax exempt” status because the people living in their parsonages are not clergy.

Officials for Nathanael Lutheran Church of Alcester, S.D., and Roseni Lutheran Church of rural Beresford had received notices that Union County Director of Equalization Dawn Steckelberg was planning to recommend revoking their tax exemptions per South Dakota Codified Law 10-4-9, which states church properties should be used exclusively for religious purposes.

At the April 30 Board of Equalization, which is another hat the Union County Commissioners wear, church officials argued to keep their parsonages’ tax exemption.

Nathanael Lutheran

Nathanael Lutheran Church’s representatives were Rev. Kevin Jensen and Attorney Chuck Haugland, who is also a member of the congregation.

Haugland agreed it wasn’t the pastor living in the parsonage but it was the church’s music director who lives there rent free in exchange for providing music services. No money exchanges hands.

He is “intrinsically-involved in the ministry” directing the church’s choirs, praise band, and adult and youth hand bell choirs, he said.

It was noted the music director is also employed as a school music teacher.

Referencing S.D. Supreme Court case Lutherans Outdoors of South Dakota vs. Board of Equalization in Custer County, S.D., Haugland stated, “The court looked at what was meant by exclusively and that it needed to be construed in a reasonable manner. The test needed to be primarily and predominately used for religious purposes.”

“We feel our use of this because the music is such an integral part of our worship, that the parsonage is involved in it, that the parsonage doesn’t have to be used for worship itself but that our parsonage is still being ‘exclusively’ utilized for religious purposes,” he said. Furthermore, the parsonage would be needed by future clergy.

Noting music directors are now considered integral parts of ministries and no rent is being paid, Commissioner Ross Jordan made the motion to allow the tax exemption to remain on the parsonage’s property and Commissioner Marvin Schempp seconded it. The vote was unanimous.

“This is the first time this has happened in the county,” said Commissioner Milton Ustad.

“As long as it’s in the service of the church’s worship, then I’m okay with it,” said Jordan. “As long as they are part of the worship project of the church or the purposes of the church, I don’t think it’s a problem. But if they are renting to a member of the church who has nothing to do with the support of the worship services, then I think you have a different issue.”

Jordan also requested if the parsonage rental situation changes, church officials notify county officials.

Haugland explained the church will continue to submit the proper tax exempt application forms annually.

Roseni Lutheran

Roseni representatives were Church Vice-President Sandra Inberg and President Candice Spurlin.

Their pastor had decided to buy a house instead of live in the parsonage, they explained. The parsonage was being rented to a family.

The women explained they pay the pastor a $700-a-month housing allowance and receive $600 a month in rent for the parsonage. So the money received is used for religious purposes.

“Religious purposes just doesn’t have to be in worship,” they argued, noting a code section allows the property to be rented to church members, and the family’s infant is a baptized member. However, the parents are not members but are considering membership.

There is also a rental lease agreement between church officials and the parents renting the parsonage.

States Attorney Jerry Miller noted the baby is not the parsonage’s signed lessee; therefore, they are renting the building to a nonmember.

“The operative language in here is ‘a building or structure used to house cleric or religious society,’” said Miller. “The word cleric only appears in this statute. It’s not defined anywhere (in state law) but a common Google search indicates cleric is a pastor-type of generic term, minister or such.”

“The rental status is something we’re addressing just on the parsonage, not the entire church property,” he said. “It would seem appropriate under what they are doing, they don’t qualify under this statute.”

“At some point in time if they get a pastor back in there, we can easily grant them (a tax exemption),” said Miller.

Steckelberg explained she and/or her employees would go assess the property, talk with church officials who would then need to complete a tax-exempt long form application at that point in time.

“As far as I’m concerned, we really stretched it before (for Nathanael),” said Ustad. “If we’re going to stretch that one, we need to do this one, too.”

“I don’t see religious purposes here,” said Jordan, asking if there was a charity aspect of community outreach or charity work allowance for the tax exemption.

“The problem is money is exchanging hands,” said Chairman Doyle Karpen. “(They) have a lease.”

When the women asked if they could just terminate the rental lease and have the renters put the money in the church’s offering plate, Karpen acknowledged “99 percent is the signed lease.”

“At this point, I can’t see a way around it,” said Jordan, making the motion to revoke the tax exemption, and Commissioner Dale Neely seconded it. The vote was 3-2 with Schempp and Ustad dissenting.

Editor’s Note: Rev. Kevin Jensen is the husband of Rev. Carla Nelson, who is the pastor at Roseni.

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