A Victory for Church Freedom
The Tarrant County Appraisal District (“TAD”) has agreed to abandon its quest to require disclosure of salaries of all employees of Kenneth Copeland Ministries (the “Church”) as part of a recent settlement agreement. The settlement centers on TAD’s denial of the Church’s application for religious exemption from certain property taxes. While applying for property tax exemption, the Church refused to disclose salary information for each of its employees.
TAD—like many other appraisal districts across the state—uses an application for property tax exemption that was generated by the Texas Comptroller. The form requires the applicant to identify the name, position and salary for each of its employees. Once submitted, the application is placed in the appraisal district’s file, which is public record. As a result, the salaries of all church employees may be viewed by any interested person. For many years, rather than requiring churches to submit actual salary data for each employee, TAD and other appraisal districts allowed churches to provide either a summary of total compensation of employees or a statement from an auditor that the church’s finances were in proper order. However, after a recent change in TAD personnel, TAD adopted a very stringent approach of interpreting the form—rather than allowing a summary of compensation or auditor statement as previously permitted, TAD began to require applicant churches to provide a complete disclosure of salaries as to each individual employee.
The Church filed suit over this issue to protect its privacy, the privacy of its employees, and for the general privacy of all churches. There is a longstanding concept in our country that the government should not intrude into the privacy of its citizens unless it has a compelling reason. For example, although individuals are required to submit their salaries to the government when they file their tax returns, the returns are not public record. Churches are typically afforded an even greater sense of deference by virtue of the religious freedoms granted under the First Amendment to the Constitution as well as the Texas constitution. For instance, churches do not typically file tax returns, thus the salary information of church employees is never reported in any public manner. The Church believes that the salary information of all employees should not be of public record just as an individual taxpayer’s salary is not of public record.
Moreover, the Church believes that it was not within TAD’s governmental authority to request salary information. Currently, the Internal Revenue Service is the only governmental agency that has jurisdiction to investigate churches and more specifically, the compensation of church employees. When the IRS investigates a church’s employee’s compensation, they take the actual compensation number and then have qualified executive compensation experts analyze it based upon access to comparable data. This evaluation of whether the compensation is “reasonable”—as required by the Internal Revenue Code—is not based upon common sense, rather it is determined only after a highly developed fact based investigation.
During the course of the lawsuit, TAD came to realize that it not only lacked the authority to evaluate compensation, but TAD also realized that it lacks the resources to analyze the salaries of every church employee for each church that applies for property tax exemption. TAD officials acknowledged that they were requiring disclosure of salaries for which they had no actual use and that they did nothing with the information other than put it in the applicant’s file.
TAD’s settlement—and concession not to require disclosure of private salary information—is a victory for church freedom, the preservation of religious constitutional protections, and the privacy rights for church employees throughout all of Texas. We are hopeful that going forward, this suit can be the basis for TAD and all appraisal districts, as well as the Texas Comptroller, to remove the salary disclosure requirement from its forms and to develop a process that allows churches and employee privacy to be protected while simultaneously obtaining appropriate documentation of the exempt purposes of the organization.
We here at the Church Law Group applaud TAD for taking this matter to heart and allowing church freedoms to be preserved while still doing its job to make sure that exemptions are being properly administered.