San Francisco will try to collect up to $15 million in taxes from the Archdiocese of San Francisco, which is refusing to pay certain taxes on properties the church is transferring from one Catholic nonprofit organization to another.That tax bill would be the second largest of its kind in San Francisco history.
But the archdiocese has appealed the charge, saying the church should be exempt from property transfer taxes for a variety of reasons - primarily because the properties are being moved among groups that all are a part of the same overarching organization: the Archdiocese of San Francisco.
The written appeal, which will be heard before a review board in the coming weeks, suggests that the assessor's office is unfairly targeting the archdiocese by applying taxes to property transfers that have been tax-free for other religious nonprofit groups.
"The city has applied the law in an uneven fashion (e.g. We are aware of non-Archdiocesan, non-Catholic charities which have transferred property to other charities and no transfer tax has been levied)," wrote Jack Hammel, legal counsel for the archdiocese, in an e-mail to the assessor's office.
San Francisco Assessor-Recorder Phil Ting said the tax is fair and equitable. He said his office spent months investigating the archdiocese's case and considering all of the reasons the church might be exempt from the tax.
"Because we knew the accusations (of unfair treatment) could be out there, we worked to look at every single document so we could totally and completely understand their argument," Ting said. "We looked at all the various exemptions that could have been applied, and we felt that none of them were applicable in this case. That meant it was our determination that this was a taxable event."
The tax assessment would apply to hundreds of properties, most of them empty lots or commercial land but a few that are high-profile, including Mission Dolores, Old St. Mary's Cathedral and St. Francis of Assisi Church.
The assessor's office hasn't yet determined the exact amount of the entire tax bill, but depending on the value of the properties, it would range from $3 million to $15 million, Ting said.
Even at the low end, it would be the second-largest transfer tax in city history. The largest was applied in 2007 on the sale of 10 downtown office buildings that resulted in a $30 million transfer tax.
The archdiocese is not actually selling any properties, but Ting said that doesn't matter - even if the properties are moved from one owner to another without payment, the tax still applies.
The city faces a budget crisis that is in no small part related to a crippling fall in property transfer taxes due to the real estate downturn. The city took in $6.7 billion in property taxes in 2007 but only about $1 billion last year.
The archdiocese is not being taxed to make up for a budget deficit, Ting said. But he noted that since he took office three years ago, he has made a concerted effort to collect all applicable transfer taxes, especially those owed by corporations.
"(This case) is really an affirmation of the work we had already started doing and will continue to do to make sure every taxpayer is treated fairly," Ting said.
The archdiocese first notified city officials of the ownership changes in May. All told, the archdiocese has transferred 232 properties.
The church is transferring the properties as part of a restructuring of the archdiocese, which includes dissolving one nonprofit group and creating a new one to hold properties for Catholic schools and parishes.
The archdiocese is moving 111 parcels from the now-defunct nonprofit Roman Catholic Welfare Corp. to the Roman Catholic Archbishop of San Francisco, a nonprofit corporation.
The archdiocese is then transferring those 111 parcels, plus another 121 owned by the archbishop, to a third nonprofit corporation called the Archdiocese of San Francisco Parish and School Juridic Persons Real Property Support Corp.
The disagreement comes over the nature of the three nonprofit corporations. The archdiocese argues that the Roman Catholic Welfare Corp. and the Real Property Support Corp. are essentially subsidiaries of the Roman Catholic Archbishop of San Francisco - that what belongs to them also belongs to the archbishop.
"San Francisco Recorder Phil Ting has taken a step that is unprecedented in the history of the state of California. He has determined that an internal reorganization of church property, within the family of corporations of the Archdiocese of San Francisco, constitutes a 'sale' and is subject to a property transfer tax," said archdiocese spokesman Maurice Healy in an e-mail.
"The law is overwhelmingly in favor of the archdiocese in holding that church property transfers of this nature are exempt from transfer taxes."
In the written appeal, the archdiocese states that "the archbishop ... operates the parishes and schools, and has long directly owned all parish real property in San Francisco."
But Ting says months of investigation by his office show that the three nonprofits are separate entities, with separate leaders and separate bylaws. Most important, he says: Properties owned by the smaller nonprofits are not owned by the archbishop.
"These are separate legal entities, and the reorganizations were not just a cosmetic, simple reorganization," Ting said.
The issue: City tax collectors say the Archdiocese of San Francisco owes up to $15 million for transferring properties, including Mission Dolores (above), from one nonprofit group to another.
The church's position: This is just a simple reorganization, not real estate sales that should be taxed.
The city's position: At a time when city coffers are bleeding red ink, it's important to collect all property taxes. The Catholic nonprofits are separate groups, and there's no legal reason to let them escape the tax.
Coming up: A city review board will hear the issue.
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(Source: RCN)