City and County of San Francisco Says Church Trying to Skip Taxes

According to San Francisco's tax assessor, the Archdiocese of San Francisco has moved the ownership of various assets to a new nonprofit organization in order to shield the properties from being seized or sold for potential lawsuit payouts.

The church has refused to pay the taxes for transferring the 232 properties, Assessor-Recorder Phil Ting said. The tax bill, which the church has appealed, could reach $15 million - one of the largest in city history.

Nonprofits are exempt from property and federal income taxes but subject to property transfer taxes, which are collected if they sell or transfer properties.

At issue is whether the church is moving those San Francisco properties from one Catholic nonprofit organization to another, was transferring the assets to a separate entity, as the city argues, or simply undergoing internal reorganization, as the church contends.

The properties in question include some of the diocese's most famous, such as Mission Dolores, Old St. Mary's Cathedral, and St. Francis of Assisi, as well as empty lots and commercial land throughout the city.

At the upcoming hearing, Ting plans to argue that the church moved 232 properties into a new nonprofit created expressly to protect the archdiocese from losing those assets,

The diocese has sold other peoperties in recent years to help pay out more than $40 million in settlements related to dozens of sexual abuse lawsuits, but church official strongly rejected Ting's accusation.

Ting compared the practice to a private business creating a limited liability company or corporation in order to protect owners from bankruptcy or other legal judments. He said the move is completely legal but that the church cannot have the asset protection and also escape the tax bill. The case could have wide-ranging implications for other churches and nonprofits who decide to reorganize their holdings. Tuing said he has received calls from other religious organizations "who are thinking about doing similar things and are looking eith quite a lot of interest at what happens in this case."

A city appeals board - made up of the city controller, treasurer and head of the real estate division - will hold the hearing on June 16 to determine whether the church owes the taxes. If his office is successful, Ting estimates the arachdiocese could owe between $3 million and $15 million in taxes.

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The above was based on article by Marisa Lagos,
Chronicle Staff Writer