Ask Dr. P.B. 5: Permissive Tax Exemptions

By Scott Douglas Jacobsen

Dr. Teale Phelps Bondaroff has been a community organizer for more than 15 years. He has been active in Saanich municipal politics. He earned a PhD in Politics and International Studies from the University of Cambridge and two BAs from the University of Calgary in Political Science and International Relations, respectively. He is a Board Member of the Greater Victoria Placemaking Network. He owns and operates a research consultancy called The Idea Tree. He is a New Democrat, politically, and is the President of the Saanich-Gulf Islands NDP riding association. He founded OceansAsia as a marine conservation organization devoted to combating illegal fishing and wildlife crime. Here we talk about taxation and its context around places of worship and permissive tax exemptions.

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Scott Douglas Jacobsen: The first issue: Why do people need to care about taxes more than they are at the moment?

Dr. Teale Phelps Bondaroff: That’s an interesting question. I think the theme that underlies our entire report [A Public Good? Property Tax Exemptions for Places of Worship in British Columbia] is that it is important that government be responsible with our taxes. So, we always care about governments having equitable, fair, reasonable, and responsible policies that pertain to our taxes.

This is one of the issues that exists around the topic covered in the report – specifically tax exemptions being granted to places of worship.  For every penny that’s not collected by the government as a result of such exemptions, represents money that the government needs to find elsewhere, and that vey often falls on the taxpayers. So, if you have municipalities giving out hundreds of thousands of dollars in tax exemptions, they need money to balance their books. It needs to come from somewhere else, and that somewhere else tends to be the pockets of taxpayers.

Jacobsen: Yet, I can hear commentary now. So, what’s the big deal with taxing churches or places of worship? Why should this be a thing? Is it that big of a deal? What’s the dollar value we’re looking at here?

Phelps Bondaroff: A couple of summers ago, our research teams started looking into tax exemptions for places of worship in BC. It is a good idea to start with some explanation about what we are talking about here. First, there are two kinds of tax exemptions that are offered to places of worship in British Columbia:

1) Statutory tax exceptions are exemptions that are automatically granted to places of worship. These are granted exclusively to the place of worship itself – to the building itself.

2) Permissive tax exemptions are tax exemptions that can be granted to a place of worship by a municipality. These cover all of the property around the specific place of worship, and any improvements. For example a parking lot, out buildings, that kind of thing.

While a place of worship received a statutory tax exemption automatically, permissive tax exemptions can be granted by a municipality, and municipalities have a diversity of policies across the province. Some municipalities will grant permissive tax exemptions [PTEs] automatically. Some municipalities will grant them with benefits tests or on the basis of some set of criteria or requirements.

When we ran the numbers, we determined that municipalities gave out $12.2 million in permissive tax exemption in 2019. When it comes to statutory tax exemptions [STEs], we used a different set of numbers as reported by the CRA. We determined that the value of statutory exemptions in 2019 amounted to $45.9 million for places of worship.

I’m always trying to be careful with my language here because these exemptions are granted as a cash grant. They’re a grant, basically. But no money is being given, however, the state is declining to collect a potential debt it would otherwise be owed. The language used when discussing this can be challenging and we try to be very clear about what we are talking about.  We are in essence talking about values of money the state is not collecting.

Let me briefly outline how we calculated these numbers.

For permissive tax exemptions, our research team went through the annual reports of every single municipality in BC, all 162 of them. Most municipalities report on whether they have tax exemptions and the value of exemptions they grant. Some provide a total number, while others will disaggregate the data by recipient.

With respect to statutory tax exemptions, we had to go through a slightly more complicated process. The full process is outlined on page seven of the report. Basically, we got data from CRA, data on aggregate property values, for all properties classified as churches and Bible schools under Code 652. Then we ran some math, determine the value of those properties and how much taxes those properties were anticipated to pay, if there were to pay taxes.

Jacobsen: What does that translate into in a township with an equivalent project or thing they could do with that kind of money?

Phelps Bondaroff: It depends from municipality to municipality. In our report, we break it down by municipality. But if you average out the value out the value of both tax exemptions [in 2019], it works out to twelve dollars per British Columbian. So, twelve dollars of taxes are going to support places of worship in your community. But it does vary considerably.

For example, the municipality with the highest estimated value of statutory tax exemptions is the City of Vancouver. They are not collecting, an estimated $8.8 million dollars. That is quite high.

When you break it down on a per capita basis, the highest per capita tax exemptions to places of worship was the city of Powell River, with thirty-three dollars per capita allocated to statutory tax exemptions.

Jacobsen: Was it $45.9 million?

Phelps Bondaroff: Yes, that is the total value that we calculate for STEs.

The numbers are quite high in some municipalities. For example, the city of Delta allocated $1.3 million in PTE’s in 2019. The highest, on a per capita basis, was the village of Grand Isle, which granted twenty dollars per capita in PTEs.

You can see how these become significant percentages of municipality budgets. Some municipalities recognize this and have passed bylaws limiting size of permissive tax exemptions to a specific percentage of their budget. This was necessary, because the size of PTEs in some instances was creeping up to over one or two percent of municipal budgets. And that means that a significant amount of that municipality’s budget is going to permissive tax exemptions for places of worship. I should note that we’re not talking about other places, other recipients of tax exemptions, which can include things like hospitals, schools, charities, and so on.

Jacobsen: Let’s go with the definition of a place of worship within British Columbia or even within Canada as a whole. What is the definition there? How are nonreligious groups not necessarily getting the same break?

Phelps Bondaroff: That’s a good question. Canada doesn’t have a definition of what constitutes a religion. There isn’t a firm definition, and there is good reason for this. Quite simply, it is very difficult to pin down what religion is and often a lot of biases come into effect.

Religion is often seen as having a holy book, or having a god or gods, or it is some kind of organized faith tradition. Any kind of definition that could be come up with, we could likely imagine a group that we might consider a religion that would be excluded by from that definition. For example, there was a case recently [The Church of Atheism of Central Canada vs. CRA]. In this case, the judge ruled against the person who was challenging CRA regulations around tax exemptions for churches/places of worship. While I won’t get into the specifics, one thing that was salient was that the judge did note that under the definition they were using, the definition of CRA at that time, Buddhism wouldn’t be considered a religion.

Definitions tend to be based on ‘conventional’ Judeo-Christian interpretations – for lack of a better term – of what constitutes religion. However, this does mean that a lot of new religious movements, or less mainstream religious groups, may be excluded from such a definition.

So to return to your question, what we find is that places of worship are being treated differently than non-places of worship. I’ll give an example: The way that the tax exemptions work in British Columbia, the Community Charter says that places of worship will be granted a permissive tax exemption in perpetuity, whereas other recipients receive a PTE for 10 years. So in this sense, places of worship are being treated differently than other applicants.

Here’s another way in which different tax exemption recipients are treated differently. The reason we give out permissive tax exemptions is to support organizations that are providing a public benefit. This makes sense. Take an organization like the Boys and Girls Club, or a local service club – if they needed to pay $20,000 in property taxes a year, a significant percentage of their income, budget, and time might be used to raise money to pay for these taxes, rather than supporting the services that the club provides to the public. If one of these service organizations can demonstrate they are providing a benefit to the community as a whole, then it makes sense that a municipality would waive these taxes, as doing so would support that organization’s efforts to provide a benefit to community members.

But with the places of worship, with the way the laws are written, there’s an assumption that they’re providing a benefit, but this may not necessarily be the case.  

We can see this reflected in elements of bylaws and the law as they relate to duration. As I mentioned, places of worship are granted the permissive tax exemption in perpetuity, as opposed to others, who receive them for a limited time.

This is a problem, because without the need to re-apply, it’s possible that an organization could change its practices and no longer engage in practices that are in line with the goals of the municipality. Asking recipients of permissive tax exemptions to regularly re-apply and to pass a benefits test is another check and balance on how tax dollars are being spent, and one that is very reasonable.

Without a regular application process, there’s no way of knowing that the recipient will continue to provide a benefit to the community.

Now, I’m not saying that there should be an application every year, but it is not unreasonable to ask that a recipient of generous tax exemptions demonstrate their ongoing benefit to the community at large on a regular basis.

All of this differential treatment is a problem. It certainly violates the state’s duty of religious neutrality. To assume that one recipient benefits the community, while another must apply and demonstrate a benefit, is not fair treatment.

I wanted to talk briefly as to why checks like benefits tests are necessary. The reason why you need checks benefits tests, is that the assumption that places of worship necessarily provide a public benefit is not always the case.

When we look through different tax exemption recipients, and in particular places of worship, we found that some of them are operating as private clubs. What that means is that they are only catering to their parishioners or co-religionists – they are not inviting members of the public to participate. If this is the case, then they aren’t benefiting the public. They’re only benefiting their members.

Permissive tax exemptions are designed to support organizations that provide a benefit to the public. If you are operating a private club, then you should not be receiving a permissive tax exemption.

We also found that recipients were delivering ‘contingent services,’ by which I mean that you only get the service they provide – like a soup kitchen or shelter for the night – if you participate in their religious practices.

Here’s an example: We found an Anglican Church [in Parksville] that for a while was running a ‘Pray and Stay’ program, where people who were experiencing homelessness could spend the night in their church, after the city declined to build the shelter. However, people would have to participate in a religious service before they were able to get shelter. So the Church is offering help, but there are strings attached.

We need to ask the question, should the state be subsidizing a private organization that is engaging in an activity that is advertising and proselytizing and promoting the organization? This again violates the state’s duty religious neutrality. It is also not benefiting members of the public, because not all members of the public benefit from the service, because not all of them can participate in the religious service for a host of reasons. Maybe they’re non-believers, maybe they have a different religion. A service is not available to the public if accessing that service is contingent upon the participation in a religious practice.

Some religious groups, and the services they provide, are not accessible to the public for other reasons, notably because they are insular. For example, if you want to be a member of the Exclusive Brethren (and the exclusivity is in the name), that’s fine. That’s your own personal choice. However, this is an organization that practices of ‘doctrine of separation,’ a doctrine that makes it necessary for members to insulate and isolate themselves from society at large as much as possible.

So, again, if a permissive tax exemption is designed to support the work of an organization that provides a benefit to the public, but the public can’t participate in these religious services or practices because they are exclusive to members, then it does not make sense for that organization to receive a tax exemption.

The Exclusive Brethren is a good example of an insular organization that is still receiving permissive tax exemptions but does not provide a benefit to the community at large. They don’t want to be a part of the public, part of the community, and, therefore, giving them tax exemptions that are intended to support an organization that provides benefit to public seems problematic, to say the least.

And numerous Exclusive Brethren places of worship receive permissive tax exemptions. For example, the Abbotsford Park View Gospel Hall received $4,400 in permissive tax exemptions and the West Richmond Gospel Hall in Richmond received $8,869 in tax exemptions in 2019. This is a significant amount of money going to an organization that doesn’t want to benefit the public.

There’s a side point that I thought I’d mention relating to religious participation, which is on the decline. As a result, municipalities may want to allocate tax dollars somewhere else. So, even assuming that some places of worship do benefit the public, and many do, it might be the case that the municipality has a limited amount of money that they’re able to allocate for tax exemptions, and they may want to allocate it in another way in order to maximize the benefit to the public.

Not only are some that these recipients acting as private clubs or are insular, but some are actively discriminating and excluding people. Some religious groups continue to discriminate against people on a number of bases. The [Canadian] Charter says that the government can’t discriminate on the basis of race, national origin, color, religion, sex, age, or physical ability. Consistent with this is the fact that the government can’t subsidize organizations that discriminate on these grounds either.

We know this because there are examples of the federal government stepping up not funding organizations that violate certain human rights. For example, with the Canada Summer Jobs Grant, the government said “We won’t fund organizations that oppose a woman’s right to choose. Why? Because that’s a fundamental right, and we as a government can’t oppose such a fundamental right because of the Charter.”

If you extend that logic to places of worship that discriminate, then if a place of worship discriminates, they should not receive a permissive tax exemption, or statutory tax exemption, for that matter. They should not be receiving a subsidy from the state.

There are, unfortunately, examples of a place of worship that discriminate. For example, and we explore this in more detail in the report, there was a gay couple that tried to book the Knights of Columbus Hall in the City of Coquitlam. The Knights of Columbus didn’t realize that they were a lesbian couple, and the two women didn’t realize the Knights of Columbus were a Catholic organization.

When the Knights found out that the couple were both women, they cancel the booking and refunded them their booking fee or deposit. The couple took the Knights to court and the case went back and forth. Eventually, the court ruled that the Knights had the right to discriminate against these two women, but also required the Knights to pay compensation because the couple had incurred a significant cost having to reprint of their wedding invitation.

One thing that was interesting about this case was that the Archdiocese of Vancouver, which operated the Hall, and is a Catholic organization, didn’t argue that they did not discriminate. Rather, they argued they had a right to discriminate, in essence declaring, “Yes, we discriminate.” So they are fully committed to discriminating, and as a private entity, they have the right to discriminate in this way.

But then we have a City money to the Archdiocese of Vancouver, which has five properties in Coquitlam. At the time, those five properties, received around $72,000 in permissive tax exemptions in 2004, and in 2005, they received about $75,000 in permissive tax exemptions. What we then have is, in essence, the City of Coquitlam subsidizing places of worship that are overtly discriminatory. That’s a problem.

This is another issue that we wanted to raise with our report, which is the state should not be subsidizing discriminatory activities, either directly or indirectly, through state tax exemptions.

And then there are places of worship that are overtly violating COVID health regulations. There were recently a bunch of places of worship challenging the provincial health regulations in court, and a number of these places of worship have received tax exemptions. What this is then, is the state subsidizing organizations that are endangering lives during a pandemic.

Large religious gatherings in places of worship have been identified as potential super spreaders during the pandemic. There was one church in Korea that was responsible for 36% of all the cases in that country!

Places of worship are particularly susceptible as potential super spreaders because they’re enclosed spaces, with large groups of people in close proximity, meeting for a long duration time. During a religious service, people are talking, singing, and using masks inconsistently. Critically, you also have a large percentage of older folks, who are already at risk of COVID, participating in services.

And yet, there were a number of places of worship arguing for their right to endanger the lives of their congregations in court, all the while they were receiving tax exemptions. For example, in 2019, the Riverside Calvary Chapel received an $11,997 in permissive tax exemptions. They were twice fined for violating COVID regulations. Similarly, the Immanuel Covenant Reformed Church in Abbotsford, received $5,463 in permissive tax exemptions in 2019. The list of recipients who have also violated COVID regulations include the Oaklands Bible Chapel in Victoria.

If the goal of permissive tax exemptions is to support the work of organizations that provide a benefit to the public, it is not in the public’s interest (or benefit) to support private clubs, or organizations that are discriminatory, or to support organizations that overtly undermine public health by violating health orders during a pandemic.

There is a good solution to the issues of permissive tax exemptions that I’ve mentioned.  The BCHA is encouraging municipalities to adopt public benefits tests, such that only grant tax exemptions to recipients who provide a benefit to the public. A good benefits test would, among other things, include questions about whether the recipient operates as a private club, or discriminates, or violates health orders and other laws.

We want to make sure that municipalities have been responsible with tax dollars. Statutory tax exemptions are applied automatically, which means that municipalities don’t have a say in them. That’s significant, as these taxes encroach on a municipalities ability to make choices about their community – to have a say in how they raise funds, and even the size of tax exemptions, that is the percentage of the overall budget that is allocated to tax exemptions,

Many municipalities will, when given the choice with PTEs, cap the size of tax exemptions that they grant. For example, the City of Victoria, property tax exemptions can be no more than 1.6% of their budget. That’s the cap. That’s a lot of money. In 2019, PTEs amounted to $640,554 in Victoria.

This is ultimately a question of government autonomy. The automatic nature of STEs strips municipalities of autonomy, of the ability to make choices about how they collect and allocate taxes. Municipalities are in the best position to make decisions about how to best benefit their communities, but automatically applied STEs do not give municipalities the opportunity to decide how best to levy and spend taxes.   

I would be remiss if I did not mention commercial operations. When we were doing the research for this report, we found a couple of examples of places of worship that were operating commercial operations. These tended to be things like for-profit parking garages. In these situations, you have a place of worship that’s receiving a tax exemption, but they’re running a business and shouldn’t be receiving such an exemption. After all, the exemptions are designed to support not for profit organizations, not commercial operations.

That’s another example where a good benefits test will serve as a way of catching potential recipients who are operating. We always recommend a benefits test would, including a question that asks something like “are you running a commercial operation? Show us your books or, at least, outline some of your budget, so we know how you operate.”

If folks are interested in learning more, or seeing the scale of permissive and statutory tax exemptions in their municipalities, I would encourage them to read the full ‘A Public Good?’ report. Thanks for chatting.

Jacobsen: Thank you for the opportunity and your time, Dr. Phelps Bondaroff.

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Scott Douglas Jacobsen is the Founder of In-Sight Publishing and Editor-in-Chief of In-Sight: Independent Interview-Based Journal (ISSN 2369–6885). Jacobsen works for science and human rights, especially women’s and children’s rights. He considers the modern scientific and technological world the foundation for the provision of the basics of human life throughout the world and the advancement of human rights as the universal movement among peoples everywhere.

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Image Credit: Teale Phelps Bondaroff.