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Church State Issues

Churches win rental tax break with Ducey approval

Mar 25, 2015

Arizona Republic

Churches win rental tax break with Ducey approval

Ronald J. Hansen, The Republic | azcentral.com 6:53 p.m. MST March 23, 2015

Religious groups won an extension to their tax-exempt status on properties they rent.

Gov. Doug Ducey signed House Bill 2128 on Monday as well as 31 other measures in his busiest day of the legislative session so far.

The property tax bill, chiefly sponsored by Rep. Darin Mitchell, R-Litchfield Park, allows religious groups to rent at market rates, but avoid rental taxes. Critics noted that it reduces the number of taxpayers but not the amount of tax owed, suggesting non-exempt property owners will have to pick up the resulting slack, though it is unclear how much that will be.

Most of the bills Ducey signed were low-profile measures, such as designating Sept. 27 as an annual thanks to first responders for their service.

In signing the religious rentals measure, Ducey effectively overturns a veto last year by former Gov. Jan Brewer, who worried it would exacerbate the state's already-chaotic property-tax system.

The conservative Center for Arizona Policy pushed for the tax change and commended Ducey for signing the bill.

"Churches from throughout the state will benefit from this important legislation," the organization noted in a statement. "Pastors from the Crossroads Church in Anthem and Palm Valley Church in Goodyear testified how this bill will help them better serve their communities."

The new law builds on an exemption created six years ago for charter schools that rented property, treating them like public-district schools, which don't pay property taxes.

Supporters of HB 2128 said the taxes helped hold down growth in ministries. Some lawmakers were concerned the measure didn't extend the same tax-exempt protections to other nonreligious nonprofit organizations.

Ducey approved HB 2066 allowing public school tax credits to cover the costs of testing fees and preparation. As law, HB 2109 will require ballots to specifically note if a measure will require bond approval for payment.