There are no national figures on how much money these tax breaks save religious organizations and on how much extra cost is shifted to other citizens. But a typical state, Colorado, reported that religious real estate valued at more than $1.1 billion was exempt from local property taxes there last year. Nationally, tax-exempt financing for religious organizations totaled at least $20 billion during the decade that ended last year.

As Religious Programs Expand, Disputes Rise Over Tax Breaks
By DIANA B. HENRIQUES

The similarities between Holy Cross Village at Notre Dame, on the north side of South Bend, Ind., and Hermitage Estates, south of town, are almost disorienting. The two retirement communities have the same simple gabled ranch houses, with the same touches of brick and stone, clustered around a pond with the same fountain funneling spray into the air and ducks waddling down the grassy bank.

But the retired residents of Hermitage Estates pay an average of about $2,300 per unit in property taxes. The management of Holy Cross Village, the Brothers of Holy Cross, says that development should be exempt from property taxes, and it has taken that argument to court.

As the Brothers of Holy Cross, a Roman Catholic religious order, sees it, providing the elderly with the amenities of the village — a sense of security, social opportunities and various services to make independent living easier — is a charitable activity rooted in its pastoral mission to serve others.

Members of the St. Joseph County Property Tax Assessment Board of Appeals, all but one of them lifelong Catholics, see it differently. To them, a charitable ministry does not consist of providing lovely retirement living to affluent people. The current residents of Holy Cross Village have an average net worth of $1 million. Those with deposits on the units under construction are even better off, averaging $1.6 million.

If Holy Cross Village is not taxed, members of the assessment board point out, a heavier burden will fall on the working families in the county that are struggling to pay the taxes on their small homes in careworn communities like the west side of South Bend.

“I was educated by the Brothers of Holy Cross” at St. Joseph’s High School, “and I have a great deal of respect, love and affection for them,” said Dennis J. Dillman, a longtime board member. “But I think what they’re doing is just not right. And that is based on the values they taught me at their schools.”

The conflict in South Bend echoes disputes from Alaska to Florida that raise the following issue: As religious organizations of all faiths stretch their concept of mission far beyond traditional worship, should their traditional tax exemptions expand as well? Increasingly, government at all levels is answering yes.

The property tax exemption is one of the oldest tax breaks granted to religious organizations, but it is not the only one. Lawmakers and judges have also approved what amounts to special tax treatment for religious organizations and some of their employees, including exemptions on personal-income and payroll taxes, and have made it easier for them to get tax-exempt construction loans for purely religious projects.

Like the exemptions from federal and state regulations that have proliferated for religious groups in recent years, these tax breaks are widely defended both as an acknowledgment of religion’s contributions to society and as a barrier to unjustified government limitations on the liberty that religious organizations enjoy under the First Amendment.

But in some communities like South Bend, tolerance of religious tax breaks is fraying as local governments struggle to provide basic services with limited resources.