Skip to content

ADF files suit to protect Ariz. church from foreclosure based on $50K illegal tax bill

State agrees church shouldn’t owe taxes, La Paz County levied bill anyway
Debunking the Top 5 Myths about Churches’ 501(c)(3) Status

PHOENIX — Alliance Defense Fund attorneys filed suit against La Paz County Wednesday for hitting a rural Arizona church with a $50,000 tax bill that the state agrees the church does not owe. The bill has resulted in a tax lien on the church’s property which could result in foreclosure and an end to the church’s ministry, including its outreach to the needy--a program praised by the Quartzsite mayor, town manager, and police chief.

A property assessor sat on the church’s paperwork for three years before granting a tax exemption and then only granted it for the years 2009 and later, leaving the church with back-taxes for 2006-2008 that it should not owe.

“Churches shouldn’t live in fear of being punished or penalized by the government, but this church truly is in fear of losing everything because of the assessor’s unlawful actions,” said ADF Senior Legal Counsel Erik Stanley. “Even the Arizona Department of Revenue has provided a letter stating that the church should owe nothing in taxes for the years 2006 and later. Nonetheless, the county has levied taxes, so we have been forced to go to court to have this matter resolved.”

ADF sent a letter to La Paz County Treasurer Leah Castro in November of last year asking her to act under a statute that gives her authority to clear up the assessor’s error by eliminating the tax liability and removing the lien. After Castro refused, the person who holds the tax lien on the church’s property notified the church that it was planning on foreclosing on the church on March 31.  To protect the church, ADF attorneys filed the suit Church of the Isaiah 58 Project of Arizona v. La Paz County with the Arizona Tax Court.

The church is frequently involved in feeding the needy through its food program and provides thousands of hot meals to the homeless and needy. In 2006, it purchased property for its worship facility in the town of Quartzsite.

Under state law, the church qualified for an exemption from property taxes, so it filed the appropriate paperwork with the La Paz County property assessor. The assessor requested that the church provide a tax-exempt determination letter from the Internal Revenue Service before it would act on the application. The church correctly explained that the IRS does not require it to have one and that Arizona law does not require the letter in order to be granted an exemption.

Many churches do not obtain letters from the IRS because of the expense involved and the delay in obtaining such a letter. Churches are exempt from federal income taxes without having to obtain an IRS approval letter.

After the assessor refused to correct its error, the church contacted the Arizona Department of Revenue, which issued a letter in June clearly stating that the church is exempt from property taxes under state law and that the “tax-exempt status granted by this letter is effective from and after August 24, 2006.” Nonetheless, the assessor did not correct the error and instead sold the tax lien on the church to a private investor who has notified the church of his intention to foreclose on March 31.

ADF is a legal alliance of Christian attorneys and like-minded organizations defending the right of people to freely live out their faith. Launched in 1994, ADF employs a unique combination of strategy, training, funding, and litigation to protect and preserve religious liberty, the sanctity of life, marriage, and the family.