Religious Exemption From Taxation: A History

California’s first constitution, adopted in 1849, stated that Taxation shall be equal and uniform throughout the State and that all property in this State shall be taxed in proportion to its value. California’s first Legislature nevertheless exempted property used for churches, cemeteries, libraries, and scientific institutions. In 1868, the California Supreme Court struck down these exemptions, concluding that they conflicted with the state constitutional requirement that all taxation be equal and uniform. (People v. McCreery (1868) 34 Cal.432.)

This began an ever-expanding series of constitutional amendments and legislative enactments to exempt or exclude property from taxation. Early in this century additional exemptions were added for churches in 1900, veterans in 1911, vessels and colleges in 1914, orphanages in 1920, and immature

trees and cemeteries in 1926. While the constitutional exemption was self-executing, the Supreme Court concluded that the Legislature had the power to enact legislation providing reasonable regulations for its exercise. (Chesney v. Byram (1940) 15 Cal.2d 460, 463-472.)

In 1944, the voters approved a constitutional amendment permitting the Legislature to exempt from taxation all or any portion of property used exclusively for religious, hospital or charitable purposes if certain conditions were met. The Legislature did so. (See Rev. & Tax. Code, § 214 [statutory welfare exemption].) Exemptions of private property from taxation do not extend to special assessments, levied upon the basis of equivalent benefit, unless specifically so provided. (Cedars of Lebanon Hosp. v. County of Los Angeles, et al. (1950) 35 Cal.2d 729, 734747.)

The distinction between a property tax and an assessment is that a special assessment is “a charge imposed on particular real property for a local public improvement of direct benefit to that property, as for example a street improvement, lighting improvement, irrigation improvement, sewer connection, drainage improvement, or flood control improvement” (San Marcos Water Dist. v. San Marcos Unified School Dist. (1986) 42 Cal.3d 154, 162.)

The constitutional exemptions from taxation refer only to property taxes such as property “used for religious, hospital and charitable purposes” and “church property.” (Estate of Simpson (1954) 43 Cal.2d 594, 597-598.)

Several principles can be gleaned from the foregoing.

First, constitutional exemptions to property taxation applied only to direct property taxes and not to other forms of taxation such as an excise or use tax.

Second, since the first state constitution of 1849, the only form of “property taxation” was the ad valorem property tax, a general tax levied in proportion to the assessed value of property.

Third, although certain exactions may be property-related, such as a special assessment for flood control improvement, long-standing precedent established that these exactions were not “property taxes” subject to exemption by religious or nonprofit organizations.

Finally, exemptions from property taxation must be strictly construed against the right to the benefit, and any intent to extend the tax exemption must be conveyed in “unmistakably clear language.” (Estate of Simpson, supra, 43 Cal.2d at p. 603.)

Later California ballot Propositions 8, 13, and 218 have all affected the taxation of church’s property.