Tax-Exemption Issues For Mass. Churches and Religious Organizations

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Tax-Exemption Issues For Mass. Churches and Religious Organizations

Cases to know when thinking about innovating church property

by Rudy Mitchell, Senior Researcher

Editorial note: The Emmanuel Gospel Center prepared this resource as part of “Exploring Church Spaces,” a research project designed to highlight stories of innovation and impact already happening in Boston and to help inspire new collaborations and solutions. This document is not to be taken as official legal advice but is for informational purposes only for churches considering new uses and rentals of their property. 

As churches explore ways to more fully use their buildings to further their mission and benefit the community, they also need to consider any potential issues that might affect their tax-exempt status. 

Churches can anticipate and avoid negative impacts by studying relevant state laws and rulings in court cases. 

In Massachusetts, the applicable law on tax exemption for religious organizations is Massachusetts General Laws, Chapter 59, Section 5, Clause 11 (M.G.L. c. 59, § 5, cl. 11). Clause 11, the law pertaining specifically to religious organizations, is part of a larger section related to property exemptions. That section includes Clause 3, a separate law pertaining more broadly to charitable organizations. It is important for churches to note the differences in the application of these two clauses to the use of their properties.  

Several court cases discussed in this article shed more light on the interpretation of these property tax-exemption laws. 

Also, when exploring additional uses or rentals, churches should note the distinction between appropriating exclusive full-time rental of space versus allowing occasional use of a space or building still used by the church for its mission and purposes.

Renting to a nonprofit?

Significance

A case involving the La Sallette Shrine and Conference Center is instructive because it considers several different aspects of the tax-exempt status of religious organizations and their various types of property. The rulings here may not always apply to other situations, especially if significant differences exist. However, the La Sallete case does illustrate several issues in determining tax exemption.

Explanation

The La Sallette Shrine and Conference Center in Attleboro, Massachusetts, is a Roman Catholic religious organization. It holds a multi-use property of 200 acres with high visibility because it draws thousands of visitors for its retreats and Christmas festival of lights. While it is not a typical church, it does hold religious services and carries out various forms of religious instruction like other tax-exempt churches. 

The organization’s property included a welcome center, dining hall, gift shop, maintenance and storage buildings, overnight accommodations, a wildlife sanctuary area, and a former convent rented to a nonprofit organization serving battered women. The La Sallette Shrine also rented space to outside organizations for occasional use.

The town sought to tax several parts of the property while the owners defended their tax-exempt status. The court case that ensued, Shrine of Our Lady of La Sallette Inc. v. Board of Assessors of Attleboro, 473 Mass. 660 (2017), was decided in the Supreme Judicial Court of Massachusetts. 

The case arose when the Board of Assessors of Attleboro sought to raise more taxes by identifying parts of the La Sallete Shrine property as taxable. The Shrine appealed a decision of the Appellate Tax Board to the Massachusetts Supreme Judicial Court. The court ruled that the Shrine’s welcome center, maintenance building, and other associated properties were tax-exempt because they were related to carrying out the organization’s mission. 

However, the court did not rule for tax-exempt status for the former convent and the wildlife sanctuary. This is where the subtle but significant difference between the third and eleventh clauses in Massachusetts’ property tax-exemption law mentioned above come into play. 

The Shrine had leased the convent space to a nonprofit organization to use as a safe house for battered women, and the Massachusetts Audubon Society managed the wildlife sanctuary. But it had failed to file for tax-exemption for those two properties under the correct clause. 

According to the case summary, “The safe house and wildlife sanctuary might have been exempt from real estate taxation under G. L. c. 59, § 5, Third (Clause Third), as the property of a benevolent or charitable organization devoted to charitable use, had the Shrine satisfied the filing requirements for such an exemption, but they were not exempt under Clause Eleventh.”

While Clause Eleventh applies specifically to religious organizations and worship-related uses, Clause Third pertains more broadly to charitable uses, including those not explicitly religious in nature.

In its ruling, the court, nevertheless, made clear that it understands a religious organization’s property extends beyond the sanctuary where the religious activity principally takes place. There’s the parking lot, parish hall, offices, and storage areas, to name a few. What matters is that these areas are used in ways connected with the religious worship going on in the sanctuary.

“In interpreting the scope of Clause Eleventh, we recognize that a house of religious worship is more than the chapel used for prayer and the classrooms used for religious instruction. It includes the parking lot where congregants park their vehicles, the anteroom where they greet each other and leave their coats and jackets, the parish hall where they congregate in religious fellowship after prayer services, the offices for the clergy and staff, and the storage area where the extra chairs are stored for high holy days. In some houses of religious worship, all of these portions of property (apart from the parking area) may be located with the chapel in a single building; in others with larger congregations, they may be located in multiple buildings, some adjoining the chapel, some standing alone. We have long recognized that all of these portions of property are exempt from taxation under Clause Eleventh even if no religious worship occurs within these spaces; it suffices that they are used for ‘purposes connected with’ religious worship, Proprietors of the S. Congregational Meetinghouse in Lowell v. Lowell, 1 Met. 538, 541 (1840), or, otherwise stated, purposes that ‘normally accompany and supplement the religious work of a parish.’ Assessors of Framingham v. First Parish in Framingham, 329 Mass. 212, 215 (1952).”  

In addition to the long-term leases of the convent space and wildlife sanctuary, the La Sallete Shrine would also rent space to outside users for occasional use. The court ruled that these uses did not change the organization’s tax-exempt status.

“The occasional or incidental use of such property by an organization exempt from taxation under the provisions of [26 U.S.C. § 501(c)(3)] of the Federal Internal Revenue Code shall not be deemed to be an appropriation for purposes other than religious worship or instruction.” 

The lesson here for churches is that while they may not have a convent or a wildlife sanctuary, they may want to rent a designated building or space for the exclusive use of another nonprofit. In that case, they should check on and comply with any filing requirements for an exemption for that usage.

Using the parsonage for another purpose? 

Significance

A case involving a parish in Royalston, Massachusetts, considers the tax-exempt status of a piece of church property that is no longer used for its original purpose but is still used in a way that is connected to and supplements the religious work of the church. 

Explanation

The First Congregational Church in Royalston, Massachusetts, had a parsonage that the congregation’s pastor no longer occupied. However, the church continued to use the space for other church-related purposes. 

A case concerning the property went before the Appellate Tax Board of Massachusetts. In a 2017 decision, the commissioner ruled that the church, whose nearby parsonage was no longer occupied by the church pastor, was, nevertheless, still tax-exempt because the church and church groups still used it for meetings and storage related to the church’s mission. 

The decision stated: “The relevant inquiry is not whether the property is inhabited as a parsonage, but whether its dominant use is ‘connected with,’ religious worship and instruction, and which ‘normally accompan[ies] and supplement[s]’ the religious work of a parish.” 

Letting secular groups use a parish building? 

Significance

A case involving a church in Framingham, Massachusetts, considers the tax-exempt status of a parish building that the church occasionally allows secular community groups to use. 

Explanation

In the early 1950s, the First Parish in Framingham was involved in a court case with the Assessors of Framingham over the occasional use of the church’s parish building by secular community groups. It is an example of a parish with a second large building adjacent to the church. 

The congregation made the building available to various community organizations, such as a historical society, a library committee, a global humanitarian organization, a choral society, a parent-teacher association, and youth organizations for boys and girls. Some made donations to the church, while some did not. These were occasional uses and did not interfere with the regular use of the building by the Sunday School and church groups. 

The tax assessors of Framingham sought to obtain taxes on the building because it was being used on occasion by various secular groups.

In this case, Assessors of Framingham v. First Parish in Framingham, 329 Mass. 212, 215, (1952), the church’s parish building was used partially as a parsonage and partially for Sunday School classes as well as meetings and dinners of church groups. 

A key distinction in this ruling allowing full exemption of the space was that the use by external organizations did not interfere with the dominant, normal religious activities in the space. The church carefully documented the church’s weekly use of each room in the building and identified each external user. The external groups were not given exclusive ongoing use of the spaces. 

The assessors only cited cases where churches rented space for the exclusive use of businesses or tenants; therefore, those cases were not deemed relevant. 

The ruling, which favored the church, read: 

“The occasional use of the rooms by various secular organizations which does not appear to have interfered with their regular use for religious purposes does not, we think, constitute an appropriation for other purposes…In the instant case the occasional use was incidental to the continued and regular occupation of the rooms for religious purposes. The right of exemption from taxation, which depends on the dominant purpose for which the rooms are maintained and their actual use for that purpose, was therefore not affected.”

This case is differentiated from others where the church appropriates a building or space for the exclusive, permanent, non-religious use of a tenant. If a church anticipates that a proposed rental may result in the loss of a tax exemption, it could require the renter to pay the equivalent of the taxes as part of the rental agreement.

As churches consider additional uses for their tax-exempt property, including parsonages and parish houses, they can be guided by various precedents in interpreting the relevant state laws. Churches can expand their church usage in new ways to benefit the community as they continue to focus on their church mission. 

If they emphasize the purposes that “normally accompany and supplement the religious work of a parish,” and do not allow other uses to interfere with those purposes, they will preserve their tax-exempt status and effectively advance their mission.

Supplement

Massachusetts law provides tax exemptions for churches, their houses of worship, and related properties. In Massachusetts General Laws, Chapter 59, Section 5 (M.G.L. c. 59, § 5), Clause 11 specifically names a few denominations. However, the exemption applies broadly to many religious organizations, regardless of denomination: 

“Notwithstanding the provisions of any other general or special law to the contrary, houses of religious worship owned by, or held in trust for the use of, any religious organization, and the pews and furniture and each parsonage so owned, or held in irrevocable trust, for the exclusive benefit of the religious organizations, and including the official residences occupied by district superintendents of the United Methodist Church and the Christian and Missionary Alliance and of the Church of the Nazarene, and by district executives of the Southern New England District of the Assemblies of God, Inc., Unitarian–Universalist Churches and the Baptist General Conference of New England, and the official residence occupied by the president of the New England Synod of the Lutheran Church in America, Inc., and the official residence occupied by a person who has been designated by the congregation of a Hebrew Synagogue or Temple as the rabbi thereof, but such exemption shall not, except as herein provided, extend to any portion of any such house of religious worship appropriated for purposes other than religious worship or instruction. The occasional or incidental use of such property by an organization exempt from taxation under the provisions of 26 USC Sec. 501(c)(3) of the Federal Internal Revenue Code shall not be deemed to be an appropriation for purposes other than religious worship or instruction.”

Information from the third clause of the law applies to nonprofits. Churches and religious organizations should consider this clause and similar information in the 501(C) (3) federal tax code. Here is Clause 3A from M.G.L. c. 59, § 5:

“If any of the income or profits of the business of the charitable organization is divided among the stockholders, the trustees or the members, or is used or appropriated for other than literary, benevolent, charitable, scientific or temperance purposes or if upon dissolution of such organization a distribution of the profits, income or assets may be made to any stockholder, trustee or member, its property shall not be exempt.”

***This document is not to be taken as official legal advice but is for informational purposes only for churches considering new uses and rentals of their property. 

Conclusion: Key Takeaways and Next Steps

Churches play a vital role in the social and spiritual fabric of Massachusetts communities. As they seek to steward their properties creatively and missionally—whether through expanded programming, community partnerships, or shared space—they must also remain attentive to the legal frameworks that govern tax exemption. The cases and rulings discussed here highlight the importance of maintaining a dominant religious purpose in property use and avoiding exclusive arrangements that may compromise exemption status.

With thoughtful planning and awareness of legal boundaries, churches can continue to innovate in ways that align with their mission while preserving the protections afforded to them under state law.

Next Steps

As your church considers new ways to use its property, here are several practical steps to help preserve your tax-exempt status while faithfully serving your mission:

• Review your current property uses in light of the primary purpose test: Is each space used in a way that supports or supplements your religious mission?

• Consult with legal or tax professionals familiar with M.G.L. c. 59, § 5 and relevant case law before entering into new rental agreements or usage partnerships.

• Document how spaces are used, especially when occasional or incidental outside uses are permitted. Maintain clear records showing the dominance of religious-related activity. Ensure that any non-religious activities do not interfere with your core religious mission.

• Clarify with renters whether they are receiving exclusive use of the space, and consider including clauses in agreements that address tax liability if exemption is lost.

• File appropriate paperwork if your church wishes to claim exemption under Clause Third for space used by another nonprofit with a charitable purpose.

• Continue learning from peer churches navigating similar challenges and opportunities, and consider joining conversations and trainings offered through local networks or the Exploring Church Spaces initiative.

By taking these proactive steps, churches can confidently explore how to use their spaces more fully—creatively and missionally—while remaining in compliance with Massachusetts tax-exemption laws.