Thursday, February 21, 2013
Supervisors mull taxation questions
By SUE WATSON
Marshall County supervisors, who have complained developers are trying to get out from under their tax status as platted subdivisions when lots do not sell, are now up against another question.
What does the county do about taxing empty subdivision lots that have been given by the developer to a church?
Supervisor George Zinn III brought up the topic of transfer of property in a subdivision to a church.
Tax assessor Juanita Dillard explained that under the tax code, a religious organization is not taxable for property it owns if it is used exclusively for religious purposes. Uses include holding Sunday school, church education, as a pastor’s residence or when used entirely for religious affairs.
Zoning director Conway Moore said a church would not be tax exempt if it rented a structure on a property out for income. The 95.9 acres donated to Hillcrest Baptist Church in Warsaw contains 50 platted, unsold lots.
Dillard said developers pay higher taxes when lots are platted in a subdivision because of the selling prices the developers set themselves. Agricultural property may be assessed only a few dollars an acre as compared to empty lots in subdivisions which are assessed about $264 for a lot of 2.1 acres or so. Dillard used an unsold lot in the Moore Plantation subdivision as an example of what a developer pays. The entire 50 unsold lots in Moore Plantation subdivision would run the developer in the neighborhood of $13,200 in year 2012, she said. A 37.5-acre, undivided parcel in the Moore Plantation LLC was taxed about $101 last year as undeveloped agricultural property, she said, or about $2.69 an acre.
Those figures are not actual figures for taxable properties but a general estimation of how taxes run on undeveloped agricultural land as compared to platted subdivision lots.
Attorney Kent Smith advised the board on the matter of the conveyance of the 50 lots in Moore Plantation to Hillcrest Baptist Church and who would be responsible for the tax.
“The conveyance of the property of a subdivision to a church in no way impairs the covenants of the subdivision as filed by the county,” he said. “If there is a need to move forward on streets, if you give lots away, it does not take off the responsibility to put on the second lift (over the developer’s first lift on a subdivision road).
“As a tax issue, the state recognizes property must be filed at the courthouse by January 7 as the cutoff date (for the developer to not be taxed on the conveyed property).”
Smith said the property must be used by a church for religious purposes as a non-profit to be tax exempt and that the church cannot violate subdivision covenants, which do not allow for churches. The lots must be taxed as lots, he said.
Zinn asked if the religious organization is under any tax obligation until they put something in place (as a use or structure).
“It is a circular argument,” Smith said. “You must live by zoning laws and covenants.”
Terry asked, “Who would be responsible for completing such a subdivision road, the developer or the church?”
“I think it rests with the developer,” Smith said. “If they build to county specifications, the developer must convey the streets to the church.”
Dillard said, by law, the developer is responsible for completing a subdivision street and when the roads are finished, the county owns the streets.
Chancery clerk Chuck Thomas weighed in on the topic.
“There are 50 lots there,” he said. “They (the church) thought it was tax exempt and that would hit them hard. I would hate to know a year from now they would be strangled by it.”
Terry said the only way the church could benefit would be to sell lots.
“Ultimately, the lots are responsible for taxes,” said Smith. “If taxes are not paid by August, they would go to the tax sale. I want the church to know it.”
Church trustee Ken Hale said in a separate interview that the church has not decided what to do with the lots.
“The church is non-profit and it will be tax exempt,” he said.
He said any proceeds from the sale of lots will be used by the church.
Dillard added that situations like this are becoming common in Mississippi and over the nation.
She said developers invest in a subdivision at their own risk, as far as the success of their business is concerned. And the developer can put their own rules in force which allows the developer to ask a premium price for their lots.
“The developers decide how many lots to develop, how many streets to put in and what they sell their lots for,” Dillard said. “Taxes are based on the price the developers sell a lot for, so in a way they control their taxes, too.”
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