Most people who’ve heard of Holy Protection Orthodox Church – if they’ve heard of the Tonawanda storefront church at all – only know of its popular souvlaki stand at Canal Fest.
But while the church was selling thousands of skewers of chicken wrapped in pita with lettuce, tomato and feta cheese during the festival in mid-July, its dozen members were also waging a battle to regain its religious property tax exemption that the city assessor removed this year.
The case pending in State Supreme Court raises fundamental questions about what constitutes a church and qualifies it as tax-exempt. Is it, as the Bible says, “For where two or three gather in my name, there am I with them.”
How many members does a church have to have? And how often do they have to worship to qualify for the exemption?
“Those are serious questions because there’s a reason why state and federal law give a great deal of deference to religious organizations,” said Michael A. de Freitas, an attorney with William Moran & Associates concentrating in nonprofit law. “They are recognized by the law and society as fundamental institutions for a civil society.”
The outcome of this case could affect whether other municipalities across the state try to tax storefront churches with tiny congregations.
Since 1799, New York has exempted real property owned by churches and used for religious purposes. But state law doesn’t always provide clear-cut guidance.
“Statewide there are many gray areas with the language of that law, and so it leaves it open for interpretation,” said David W. Briggs, executive director of the New York State Assessors’ Association. “We will monitor where this goes.”
Tonawanda officials have interpreted the law to mean Holy Protection must start paying about $5,000 a year in property taxes. The church’s exemption was removed due to “public outcry” about the building’s use, said City Assessor Judy M. Tafelski. Since becoming assessor in November, Tafelski said several shop owners and residents have complained to her there is no activity at the Main Street church building, except during the week of Canal Fest.
Tafelski said she checked with the Erie County Water Authority and found that the property had water consumption above the minimum only during the summer quarter, when Canal Fest is held.
“Because a property is owned by a church doesn’t make it a church,” she said.
Holy Protection last month petitioned for a judicial review. Both sides were due in court Aug. 17, but the case was adjourned until Sept. 14.
Holy Protection’s annual souvlaki stand is popular. So popular, in fact, that long lines routinely stretch past the stand at Main and Young streets.
“Come taste the tradition,” reads a large sign. Many do.
There are other signs scattered around the stand, too, notifying patrons that all proceeds benefit Holy Protection Orthodox Church.
And the stand is lucrative for the church, netting $73,327 in 2015, according to the church’s financial report contained in court documents. Souvlaki sales accounted for nearly all of the church’s $75,166 in revenue that year. Nine percent of the proceeds go back to Canal Fest. The rest supports the mission of the Orthodox Christian churches in Tonawanda and elsewhere, said Metropolitan Makarios Katre, a church leader in Toronto.
To have a stand at Canal Fest, an organization must be a civic group or charity from one of the Twin Cities and a registered nonprofit.
“As far as I’m concerned, they meet our criteria,” said Canal Fest Vice President Rick Maier. “They’re great people to work with. They’re definitely a draw for Canal Fest.”
Maier said he’s seen church activity first-hand, when he was invited earlier this year to visit the sanctuary.
“There’s no question in my mind that they’re a church,” he said. “I witnessed it. They even asked me if I’d like to stay for the service.”
Holy Protection, which is affiliated with the Holy Orthodox Church in North America, Metropolis of Boston Diocese, holds services “almost every Sunday” at 10 a.m., according to court filings. Sometimes those services are liturgies with a priest, but more often they’re reader services led by a lay church member, Katre said.
Weddings and funerals are held “as needed” and feast days are observed.
“Unfortunately, as a result of death, divorce, attrition, etc., the congregation is small and attendance is extremely limited,” the church’s attorney, Richard A. Clack, said in a May 19 letter to Tafelski.
Katre declined to comment on the court case but put the number of people who attend church services at about a dozen.
Holy Protection’s filing also notes the church supports “various charitable functions” in the community and does not lease or rent its building to anyone or allow non-church related activities.
Tonawanda’s attempt to tax Holy Protection isn’t part of a broader effort by the city to tax churches, although Tafelski said she is taking a closer look at church properties on Grand Island and the Town of Tonawanda, the two other communities she serves. Holy Protection, whose property is assessed at $125,000, was the only church property of 27 in the city to have its religious exemption removed this year.
The 27 church properties have a combined value of nearly $9.8 million, in a city with total assessed value of $737.5 million – just 1.3 percent of the assessed value of all properties in the city.
Some of Tonawanda’s churches, like Salem United Church of Christ on Morgan Street, are massive stone or brick houses of worship and are assessed for more than $1 million. Others, like Holy Protection, are much smaller.
Holy Protection purchased the former Bryans Flooring building at 143 Main St. with $110,000 of souvlaki proceeds in 2005, after renting a building in North Tonawanda since the church was founded in 1989. Holy Protection has made nearly $140,000 worth of improvements, including $37,000 in 2006 to convert the interior to a church, according to court filings.
Members built a sanctuary with a raised floor, where handpainted icons are displayed, and built a nave separate from the entryway, said Katre. Air conditioning was installed this year and there are plans to improve the nave’s lighting and ceiling, he said.
The church has been exempt from property taxes since it was incorporated in 2005 and moved to the City of Tonawanda.
Tafelski sent Holy Protection a letter dated Feb. 19 notifying it that the property “does not qualify for the religious exemption and it is, therefore, removed” but did not specify a reason.
Holy Protection appealed in May to the Board of Assessment Review, which affirmed the assessor’s determination.
“The Holy Protection Orthodox Church is at a loss to understand your position in this matter,” Clack said in his letter. “Church exemption from taxation is a fundamental constitutional principle, and it is absolutely clear, and undeniable, that the Holy Protection Orthodox Church is, in fact, a church.”
Church and state
So what is a church? What does the law say?
The section of state real property law under which churches seek a property tax exemption is parallel to the Internal Revenue Service’s tests for determining if a church should be recognized as a tax-exempt nonprofit, said de Freitas, who is not involved with the Holy Protection case.
There’s a two-part test – of organization and operation. The organization test means it must be formed as a church and governed by religious corporation law, he said. The operation test means the property must be used “exclusively” for the exempt purposes.
“You need to be using it for the purposes that you’re organized for,” de Freitas. “So if you’re a church, then you must be using the property for church purposes.”
The state and federal governments “provide a good deal of deference to churches,” meaning they often won’t engage in internal issues about ecclesiastical or internal governance matters, he said. Rather, the government wants to see that a church has the “significant common features that churches have, such as a congregation that meets regularly to conduct religious worship,” de Freitas said.
Holy Protection held monthly services with clergy until 2014 when the priest moved from Rochester to Boston, said Katre, who would also regularly fly in for a weekend liturgy when he was based in Boston. But since then, clergy-led services have been on an “erratic” basis, he said. Services led by a lay church member and a fellowship hour are frequently held when a priest is not present, he added.
With five clergy now in Toronto, it will be easier to send a priest to Tonawanda for a monthly service “on a more sustained basis,” he said.
How often do church members need to meet for worship to be tax-exempt? Every week? Every month?
“The IRS doesn’t specify frequency and continuity,” de Freitas said. “Because to specify frequency and continuity would presume that secular law has something to say about how often a church should meet. But the IRS does look for regularity of worship.”
All that ambiguity means there have been many court cases over the years, and some of the decisions are contradictory, said Briggs of the state assessors’ association.
“All these unclear factors in the law leave it up for an assessor’s determination,” he said.
Tafelski said she’d like a judge to decide if Holy Protection is “abusing” the religious tax exemption.
“I don’t think the public wants them necessarily to not be at Canal Fest,” she said. “The public loves their souvlaki. Not a problem. They just don’t think they should be tax-exempt in order to make their $70,000 to $100,000 for the week. I think that’s where most of the people are coming from.”
Randy Fahs, a friend of Holy Protection who has testified on their behalf, is also sticking up for the church. Two church members visited his family in a Tonawanda funeral home in June when his 94-year-old mother-in-law died. They brought candles and incense and prayed with the family.
“These are very nice people,” he said. “In this day and age I would hope that all people of faith would have their beliefs accorded respect.”