5 Tips from the Ontario Divisional Court’s Refusal to Exempt Property Tax for Lands Owned by Places of Worship
Religious organizations in Ontario are accustomed to relying on Property Assessment Act property tax exemptions for land owned by a church or religious organization and used as “a place of worship and land used in connection therewith”. The Divisional Court’s 2022 upholding of the Municipal Property Assessment Corporation’s (“MPAC”) decision to exempt only portions of the properties of the Fung Loy Kok Institute of Taoism (“FLK”) holds lessons for many religious organizations .
FLK owned two fully exempt temples and a partially exempt international center in the Greater Toronto Area. In 2013, FLK applied for exemptions for several other consecrated properties throughout Ontario on which it conducted Taoist Tai Chi classes (“satellite sites”) along with the rest of the International Center lands, consisting of an area of land overflow camping area, a retail area and a Contemplative Garden.
The rejection of the application for the commercial area (which sold relatively few religious items and was mainly devoted to “selling things”) is as expected. The camping area was also not exempted with the comment that “[w]orship requires one to be awake. The contemplative garden area, although used for personal prayer, has been treated in the same way as convents, monasteries, some retreats and mansions have been treated in the past, with areas devoted primarily to acts of prayer private places of worship not considered places of worship. The most interesting analysis stems from the judicial treatment of arguments concerning satellite sites.
Initial facts and crucial evidence
The Divisional Court’s decision is rooted in the principle that the application judge’s application of the facts to the law can only be reversed by palpable and overriding error, which it was not. willing to see. The first lesson is that the facts, as first assessed by MPAC and the Motions Judge, are of paramount importance.
Clearly, when it came to satellite sites, FLK was always going to be somewhat constrained by its own operational decisions and factual admissions. The “undisputed facts” included the fact that the Tai Chi classes at the satellite sites were run by volunteers who were neither religious leaders nor teachers, nor even required to be Taoists or to have any level of knowledge. taoist. The satellite sites were not classified by FLK itself as “temples” and Tai Chi instructions for beginners were limited to physical movements only and did not include any prayers or chanting (i.e. more clearly traditional religious or worship activities).
FLK attempted to overcome these factual limitations by filing a religious expert affidavit explaining how FLK’s Tai Chi movements alone could be considered a religious practice and are revered by FLK. Interestingly and practically instructive, we find that MPAC’s lead representative only read this affidavit long before the court process began because “he wasn’t interested in it” and limited his search to YouTube videos, Google searches, FLK website and news articles. on community opposition to one of the FLK sites. He had already formed his opinion that the Tai Chi practiced at the satellite sites was no different from the Tai Chi taught at the Wu Ying martial arts studio, with no instruction or understanding of “movement meditation”.
Registration forms signed by participants were produced and there was careful consideration of who was entitled to participate, on what terms and how payments were characterized (variably as membership fees and participant contributions ).
Ultimately, these facts led the motions judge to the main deciding factor with respect to the satellite sites, which was that while “the practice of tai chi is an integral part of the FLK religion, the reverse is not not necessarily the case”.
Clarification of the law
Both parties cited case law in support of their positions. MPAC relied on court rulings finding that places that only facilitate private prayer or evangelism, such as convents, manses, some youth centers, offices, and summer camps, do not constitute places of worship, and that there is a distinction between classes led by volunteers and certified teachers, the former being indicative only of a recreational, health or fitness purpose. FLK relied on a ruling in Quebec that its properties there, used in a similar manner, were exempt from property tax and on rulings that emphasize the primary purpose of the activities carried out on the land and which do not require continued active use for worship activities.
There was little discussion in the motions judge’s decision about potentially conflicting case law. However, the Divisional Court decision clarifies the concepts more clearly.
First, he clearly recognized that there is a distinction between a religious organization’s use for evangelistic purposes versus its use as a place of worship, with the crucial determination being what constitutes worship. The “consecration” of a site itself and the argument that “if we say it’s a cult, it is”, will probably never be conclusive. Instead, an objective analysis is required, assessing whether any religious expression and activity carried out constitutes worship.
Here, the Divisional Court found that there was enough evidence to contradict the “subjective evidence of the FLK expert” and to conclude that the activity did not correspond to the four corners of the cult. The Divisional Court declined to engage in any further analysis of the evidence in an attempt to arrive at a different view of that evidence. As the author has already said, the nature of administrative law limits what an appellate court can do on appeal. It is best to carefully plan the clear distribution of worship and non-worship activities within the buildings or grounds of a religious organization and how information about these activities is presented at the first instance of decision-making. Indeed, the first kick to the box is the most important, as the second and third kicks will be constrained.
The Divisional Court makes it clear that a more subjective, human rights-based approach to assessing worship or religious observance is inconsistent with the statutory scheme, which inherently differentiates types of religious conduct and activities to determine if and at what level of tax exemption will be granted. In other words, he recognized that the Property Assessment Act grants different exemptions for different types of religious experiences and actions. The decision refers to the need to balance two distinct social goals (supporting certain types of religious observances versus raising funds for government expenditures) as a basis for not strictly ensuring that the exemption is available to all religious activities that can subjectively be considered worship. In the opinion of the Divisional Court, judicial deference in adjudicating religious doctrine or disagreements about actions that constitute a particular type of religious activity on the part of a particular religion will not limit the ability of a court to assess whether specific types of religious observances occur as the primary purpose of ownership.
Perhaps the most interesting aspect of the appeal was FLK’s assertion that the assessment of facts and evidence through a Judeo-Christian lens is impermissible and constitutes an error of law. There is almost no doubt that MPAC’s senior representative assessed the facts and evidence through such a lens. The Divisional Court found, however, that the motion judge, while rejecting the assertion that the activities are religious if the doctrine of the religious organization so requires (what it calls subjective argument), correctly assessed the evidence to determine the primary purpose of the area under consideration.
This matter is probably far from being concluded at the moment. We understand that leave to appeal to the Court of Appeal for Ontario is sought. Nevertheless, some practical conclusions can be drawn.
- This decision represents another brick in the wall that appears to have been judicially erected to deny property tax exemptions claimed under the “places of worship” provisions of the Property Assessment Act for properties used primarily for:
- evangelistic activities, especially when the teachers themselves are not leaders or serious adherents of the faith;
- Private or self-guided prayer; or
- Private or self-guided meditation.
- The decision again underscores the need to carefully consider how activities, legal relationships and documentation are structured to capture both the true intentions and theological understanding of the religious organization from the outset. This affects not only property tax exemptions, but any other matter that is based on activities or relationships that can be characterized as religious or ecclesiastical in nature.
- The specific facts of a case are determinative when it comes to property tax exemptions. The Divisional Court’s discussion of using an objective approach to assess the primary purpose of ownership, as well as its discussion of what constitutes worship, may cause MPAC to look more critically and carefully at the properties currently exempt as places of worship at the next general reassessment. There is no clear indication of when the next reassessment of all Ontario lands will take place, as this was delayed from 2021 by the onset of the COVID-19 pandemic in 2020. Religious organizations may wish to proactively review, and possibly modify, their policies, practices, practices, and materials in advance.
- Act proactively. Derogations can only be obtained on the request of the court. Consider whether the religious charity is currently (or with modifications) engaged in any activities that might qualify for another type of exemption. If so, take steps to ensure that the documentation and specific manner in which it conducts these activities enables it to successfully claim this exemption.
- If a religious charity determines that some of its land may not qualify in future years for the property tax exemption, it could consider adjusting its budget, perhaps including a reserve appropriate for potential property tax payments.