Ripping off the Church in San Francisco

From the excellent Catholic Key, blog of the newspaper of the Diocese of Kansas City-St. Joseph in Missouri, where the great Bishop Finn shepherds his portion of the Lord’s flock, comes this.

Tuesday, December 1, 2009
City Fines Archdiocese of San Francisco $14.4 Million

The City of San Francisco is hard up for cash, so they’ve decided to steal it from the Archdiocese of San Francisco because they can – nakedly, in broad daylight, without the slightest plausible legal pretense. The Church is openly hated and condemned in San Francisco for its support of Proposition 8 and its defense of human sexual morality in general. The City can steal from the Archdiocese because the City needs the money and because it makes the citizenry happy to stick it to the evil Catholic Church.

Here’s some backstory from a previous post:

    When you sell a piece of property in many California jurisdictions, including San Francisco, the seller must pay a rather exhorbitant tax for the privilege which is based upon the value of the property. It is akin to a sales tax on a home or commercial property.

    The San Francisco Archdiocese owns hundreds of lots in San Mateo, Marin and San Francisco counties. The exceedingly vast majority of these properties are the lots which make up a parish plant, i.e., church, school, parish hall, parking lot, rectory. . .

    The Archdiocese has historically held title to these properties under two names – The Roman Catholic Welfare Corporation and the Roman Catholic Archbishop of San Francisco, a Corporation Sole.

    In December, 2007, San Francisco Archbishop George Niederauer announced a corporate restructuring within the archdiocese and by May 2008, almost all properties in question had been consolidated under the title of the Archdiocese of San Francisco Parish and School Juridic Persons Juridic Property Support Corp.

    Since this is not a sale or transfer to a different organization or person, no transfer tax is invoked and no transfer tax has ever been invoked in the history of the state for such a transaction.

That is, until City Assessor Phil Ting gauged the likely public reaction to an outright theft from the Prop. 8 supporting Catholic Church and realized it would not only be profitable, but popular. Last year Ting, unlike assessors in Marin and San Mateo Counties, decided to charge the Archdiocese a transfer tax on all Archdiocesan properties in San Francisco. This includes properties such as Mission Dolores, which have been owned by the Church since before there was a State of California or a taxing authority in San Francisco.

They are still owned by the Church. No money changed hands. Yet, the City is charging the Archdiocese the second largest real estate transfer tax in history, as if the Archdiocese were a real estate investor selling a profitable high-rise office building.

The Archdiocese appealed Ting’s decision to an appeal board which yesterday agreed to take $14.4 million from the Church. The Archdiocese will now take the issue to court. Archdiocesan spokesperson Maury Healy told the San Francisco Chronicle:

    “The board members, all of whom are City Hall administrators rather than members of the judiciary, apparently faced tremendous pressure in view of the city’s desperate need for revenue . . . We are glad that having exhausted the required administrative process we can finally proceed to a formal, neutral civil court forum . . . We trust that the civil court will carefully consider the applicable law, devoid of the sensationalism and politics that the archdiocese thus far has faced.”

Pray for the persecuted Church in San Francisco. This is just one of many assaults the Church has suffered there recently. Hat Tip to A Shepherd’s Voice who has more background here and especially here.

Expect more of this in the future.

These are trial balloons, in my opinion.

Even if the city loses in court, they will have shift public opinion a little.

The same goes whenever some anti-Catholic oaf introduces legislation to, say, strip Catholic institutions of tax exemption, or priests of privilege of the Seal.

They do what they do, knowing they will lose.  

But after having done it a few times, then they start to win.

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27 Responses to Ripping off the Church in San Francisco

  1. bookworm says:

    This action on the part of the civil authorities is utterly ridiculous.

    However, I wonder why the SF Archdiocese took so long to abolish the practice of placing diocesan and parish properties in the “corporation sole” name of the Archbishop himself? Some dioceses dropped that practice and underwent this kind of restructuring back in the 1930s if not earlier.

  2. MargaretMN says:

    They probably delayed because they were afraid of something like this happening. I doubt that the Church is the only entity that might run afoul of this precedent since corporate structures are pretty complicated these days. They should appeal it all the way to the Supreme Court if necessary.

  3. Dave N. says:

    This type of action by local assessors happens all the time in California. To say that the Church is being singled out is disingenuous.

  4. Brian Day says:

    This type of action by local assessors happens all the time in California. To say that the Church is being singled out is disingenuous.

    Dave N.,
    Do you have any links to back up that assertion? It may be true, but I’d like to read up on the details.

  5. Titus says:

    This is very similar to a decision that was rendered in the Archdiocese of Portland bankruptcy proceedings. There, the archbishop owned all the parish property in the diocese in his capacity as a corporation sole (a charitable non-profit corporation that is made up of just the bishop). When the diocese declared bankruptcy, the bankruptcy court ruled that the diocese owned all the school and parish property (and that these were thus subject to sale to satisfy creditors’ claims), because each hadn’t been separately incorporated using civil mechanisms. The court completely ignored the canon law that governs parishes and dioceses and gives each distinct personality.

    Here, San Francisco is doing the same thing: it’s claiming the right to ignore the canonical structure of the diocese and look only to the civil corporate mechanisms that the diocese uses. There’s a reasoned legal argument that this is illegal and perhaps unconstitutional, but it’s not an argument that has been universally accepted. The problem is that dioceses have used civil incorporation in some cases, and reaped its advantages, but they have not always done so as carefully as they should. Now they’re claiming that they should be entitled to the protections of the civil corporations and the protections of their canonical structures, but not to the liabilities associated with their civil structures. This is not a good argument to have to make in a courtroom.

    Of course, from the city’s perspective, there have been transfers: conveyances from one corporation to another. The city claims that the only entities it can take cognizance of are civil corporations and individual persons and that it can ignore the canonical structures. This is the counterpoint to the argument I mentioned previously. It is not clear who the civil law regards as right.

    Fortunately for the archdiocese, it’s situated in a Mexican cession state once subject to Spanish dominion. There is forceful federal judicial precedent holding that the Church in such jurisdictions is a common law corporation organized along canonical lines, and that its status as such is guaranteed by international law. Old cases from Porto Rico, Florida, the Philippines, Florida, and Texas suggest that this is the case. It’ll be outright malpractice if the archdiocese’s counsel doesn’t plead this.

  6. Titus says:

    This type of action by local assessors happens all the time in California. To say that the Church is being singled out is disingenuous.

    I don’t think Dave really understands the crux of the claim here. Obviously assessors regularly levy taxes on property transfers. The claim here is that the state is not entitled to regard the diocesan reorganization as a transfer under the taxing statute.

    PS — The other compelling argument available to the archdiocese is that the city has waived its right to levy the tax in this manner and is now estopped from doing so (i.e. the diocese acted as it did because the city had long treated such transactions as non-taxable, so the city cannot now use behavior that it induced to harm the actor). It’s often hard to win such a claim against the government, and it may not even be possible under California law, but it’s a possibility.

  7. Dave N. says:

    The same issue comes up all the time in corporate reorganizations in the State of California–for example, the collapse of a subsidiary corporation into a parent corporation or transfers of property between subsidiary corporations–no change in control, but the assessor will try to allege a transfer. This is what assessors do here–it may not be legally rational, but that’s what happens. This is not to say that the Archdiocese may have a good case; they should of course pursue all legal avenues and I’m guessing they will probably prevail. But to make this out as some sort of isolated religious persecution of San Francisco Catholics is really not true–and that is what is at issue in the article.

  8. DisturbedMary says:

    Homosexuality fuels spiritual rage so deep that no money, moral approval, religious persecution or legal victory can assuage it. Imagine how popular Ting will be when the federal hate crimes legislation kicks in.

  9. Melania says:

    This is another reason why the Church needs to be pro-active in shaping its public image and getting the truth about its teachings, mission, etc. out to the general public. Just preaching the Gospel in church, RCIA and catechism is not enough. Most of the time, the Church is simply defensive in these situations. That ultimately leads to defeat, as Fr. Z predicts. We cannot let our opponents define us. The use of all media, as Fr. Z suggests, is important. Ad campaigns, media-savvy spokesmen, and other modalities are also important. We have people like those who created the “Catholics Come Home” campaign who are talented, experienced and faithful who can help. This is not a luxury, it’s clearly becoming a necessity.

  10. Timbot2000 says:

    The way the Orthodox organize their Eparchies is looking smarter all the time. THe physical properties and buildings are “owned” by the congregations, while the Bishop “owns” the priests. This is how they avoided lawsuits from SNAP since snap would ahve to issue hundreds of small individual suits as there is no big fruit to pick, and the bishop only owns his Cathedral.

  11. pyrosapien says:

    I work for a fire department in Washington State. I am also the head of the labor union that represents the firefighters and support workers at my fire department. A consistent point that gets brought up whenever there is revenue and budgeting discussions is the “Churches don’t pay property taxes” complaint. One of the commissioners really gets upset about it. As with many issues, logic and reasoning don’t get much traction with people who are “anti-church”. It’s very telling that they don’t have problems with other tax exempt organizations.

  12. worm says:

    What Melania said.

  13. Thomas S says:

    Just watch, this will be turned on its head to further assault the Church, just like the situation in Washington DC. Now the reporting will totally ignore the unprecedented nature of what the CITY did, and instead will say the CHURCH is trying to dodge contributing to the “good” of the city. This in turn will lead to a reevaluation of why the Church is tax-exempt and how the secular authorities can get around it.

    Persecution is coming, and I now firmly believe it will come in my own lifetime (I’m 27).

  14. wanda says:

    The persecutions have always come. They’re here and will come again. The history of mankind is the story of dour combat. Our battle is not against flesh and blood but against Principalities and Powers. St. Michael the Archangel defend us in battle.. Each of us has a place on the battle line. Our weapons are not physical but Spiritual, prayer, fasting, penance, reparation and the big one – the Rosary. To Arms!

  15. irishgirl says:

    wanda-yes! To Arms! Prayers to Our Lady Immaculate, our Patroness!

    St. Francis of Assisi must be shaking his head in heaven, looking down on the city named for him.

    Timbot2000-that’s a good thought!

  16. Rob Cartusciello says:

    I am a tax attorney with a specialization in state taxes. This is an issue that comes up from time to time. Some jurisdictions have an exemption from the tax is there is no “real” change in ownership of the property. Other jurisdictions do not provide such an exemption. For example, a property transfer in NY with no real change in ownership is not subject to tax, but in New Jersey it is.

    There is a long standing principle that taxpayers are free to make whatever business arrangements they desire, and the tax consequences follow. Here, the Church chose to make the transfer and should have been aware that it was subject to tax. If anything, there is a malpractice suit hanging out there somewhere.

    I am unhappy the city’s decision, but if the tax statute is drafted to apply to all transactions and no exemption applies, the Church is subject to the tax. If, for some reason, the city is interpreting the taxing statute in a way that singles out the Church or that is not reconcilable with the statue, the court could overturn the decision.

  17. Geoffrey says:

    Why not transfer all ownership of parishes, etc., to Vatican City State? As a sovereign entity, such property would then be immune, no? Almost like little embassies. All parishes would be “Vatican territory”.

  18. Francisco Cojuanco says:

    Geoffrey, that’s a diplomatic rabbit-hole waiting to happen.

  19. MichaelJ says:

    If the author of this piece is to be believed that “no transfer tax has ever been invoked in the history of the state for such a transaction”, it seems to me that it is clearly the case that the Catholic Church is being singled out and that the city’s actions are unjust.

    Would this not carry any weight in a court, regardless of what the statutes actually state?

  20. DisturbedMary says:

    Wanda you are so right. And here’s one assault you can add to their loss column (for now anyway, these people never give up): Just today the NY State Senate voted down homosexual marriage which was high on our (catholic) Governor’s agenda despite the fact that the State economy (like America) is falling apart. Will you add a big thank you in your prayers to Blesses Mother for this one?

  21. Titus says:

    Why not transfer all ownership of parishes, etc., to Vatican City State? As a sovereign entity, such property would then be immune, no? Almost like little embassies. All parishes would be “Vatican territory”.

    Several problems:

    1) This isn’t the sort of structure canon law envisions for parishes and dioceses. These entities are more like corporations organized under the laws of the Holy See than properties owned by the Holy See (to use an analogy).

    2) The Vatican’s diplomatic and sovereign immunity would probably not shield parishes and dioceses from much liability, probably including tax liability. Foreign governments can lose these protections if they engage in too much activity inside the United States.

    Timbot’s description of the corporate organization of eparchies is a model that some, but not nearly enough, American dioceses have adopted.

  22. Titus says:

    Would this not carry any weight in a court, regardless of what the statutes actually state?

    I mentioned this above: there is a legal doctrine that could provide a defense in such a situation, but it can be difficult to assert against a government actor and may be barred by statute in California.

  23. Jacob says:

    Why not transfer all ownership of parishes, etc., to Vatican City State? As a sovereign entity, such property would then be immune, no? Almost like little embassies. All parishes would be “Vatican territory”.
    Comment by Geoffrey — 2 December 2009 @ 12:37 pm

    Off topic, but I thought I’d clarify:

    As such, diplomatically, and in other spheres the Holy See acts and speaks for the whole Catholic Church. It is also recognized by other subjects of international law as a sovereign entity, headed by the Pope, with which diplomatic relations can be maintained.[1]
    The Holy See is not the same as the Vatican City State… Ambassadors are officially accredited not to the Vatican City State but to “the Holy See”, and papal representatives to states and international organizations are recognized as representing the Holy See, not the Vatican City State.

    There is more at the article.

  24. wanda says:

    DisturbedMary, I certainly will say prayers of gratitude to Our Lord and to His Blessed Mother. I was thrilled to see that Marriage had been defended by the good people of New York. We have much more to pray for..today the White House released federal funds (your money and mine) for embryonic stem cell research. Have mercy on us Lord. St. Michael the Archangel, defend us in battle..

  25. bookworm says:

    Re the corporate structure of eparchies: If I remember correctly, from reading a 100-year history of the diocese I grew up in (Peoria, Ill.), in the early 1930s its bishop at the time (Bishop Joseph H. Schlarman) changed the diocesan structure from everything being in the bishop’s name to separate corporations for the diocese and for each individual parish, to shield the entire diocese from going bankrupt because some parishes floundered or went under during the Depression. This was considered a wise financial move at the time and it looks even smarter in retrospect.

    This change was just one of the ways in which Bishop Schlarman — a larger than life figure physically as well as spiritually, since he stood 6 feet 5 inches tall — was ahead of his time. I’m surprised more bishops haven’t done the same. They’d have much less to worry about today if they had.

  26. James Locke says:

    there are two constants in the USA. taxes and hatred of catholics!

  27. irishgirl says:

    DisturbedMary and wanda-Yes! When I saw the morning paper’s headline saying that the NY State Senate turned down the homosexual ‘marriage’ bill, I was overjoyed!

    Governor Patterson’s Catholic? Since when?

    But I have a feeling that the homosexual lobby is going back on the attack, so we can’t rest on our laurels! We have to ‘keep fighting’ with our Rosary weapon in our hands!

    Mary Immaculate, help us! St. Michael the Archangel, fight for us! Holy Jesuit Martyrs of Auriesville, pray for us! All Saints and Blesseds of New York State, pray for us!