Rent Out the Hall, Risk the Tax Exemption: A Guide to How Massachusetts Taxes Church Property

• Houses of worship, occupied parsonages and reasonable surrounding land are exempt in Massachusetts
• Vacant church land is generally not exempt unless a church or parsonage is being built
• Leasing space to outside groups can cost a church all or part of its exemption
• A 2017 court ruling allowed towns to tax some church property leased to others

A United Church of Christ conference has set out how church property is taxed in Massachusetts, in a guide last updated in April 2022.

The Southern New England Conference explains that “a church’s house of worship, the parsonage occupied by its ordained minister, and a reasonable amount of surrounding land are exempt from local property taxes, provided these properties are being used exclusively for religious purposes.” Vacant land is generally not exempt unless the church is actively building a house of worship or parsonage on it.

The guide warns that renting out space carries a risk: “Leasing or renting church property to individuals or to other organizations, including non-religious non-profit organizations, could result in a full or partial loss of the property tax exemption.” It recommends written leases requiring tenants to pay any property tax that results. It also notes that “rental of church property will not normally result in liability for Unrelated Business Income Tax.”

The guide cites a 2017 ruling by Massachusetts’ highest court in a case involving the La Salette shrine in Attleboro, which confirmed that towns may tax ancillary buildings and property leased to unrelated organisations, although tenants with charitable status may apply for their own exemption.

The tension is familiar to many churches: renting halls and rooms brings useful income, but tax rules may treat rented space differently from space used for worship. Churches can end up with an unexpected tax bill if they do not plan for it.

Jamaica has its own rules on property tax relief for places of worship, and churches that rent halls, shops or rooms should check with the tax authorities and their attorneys how rental income and rented space are treated. Written leases that allocate any tax liability, and clear records of which parts of a property are used for worship, help avoid disputes.

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