A recent legal battle over the tax status of an island in the Salish Sea sheds some light on the privileges some religious institutions enjoy in British Columbia (BC). Expressly, the conditions under which places of public worship qualify for property tax exemptions.
We initially explored these mechanisms in our 2021 report: A Public Good? Property tax exemptions for places of worship in British Columbia. Local governments relinquished an estimated $58.4 million in revenue in 2019 through property tax exemptions given to places of public worship. As we continue to dig deeper into these issues, we are always on the lookout for prominent stories involving religious property tax exemptions.
Enter the Matsuri Foundation of Canada. This Shinto-Buddhist group found itself embroiled in a legal battle over the tax status of Knapp Island, a serene 31-acre piece of land near Swartz Bay, Vancouver Island. Through their case, we can shed further light on how these exemptions work in practice.
Understanding Property Tax Exemptions for Places of Worship in BC
Governments have historically granted tax exemptions to promote socially beneficial activities. For example, there are personal income tax exemptions for volunteer firefighters, childcare and post-secondary education. Organizations that benefit the broader community can also register as a charity; donations to those groups are tax-deductible. Many of those organizations own buildings, which governments often exempt from property taxes.
The BCHA has long maintained that exemptions should only go to organizations that provide a benefit to the public. Private clubs – organizations that only serve their members – typically do not receive these exemptions. We have argued that religion is an essentially private activity and should be treated as such. Assuming religion (particularly theistic religion) provides a broader public benefit is based on an inherently biased view against atheists and the non-religious. As such, we argue against the preferential tax treatment of religious groups.
Tax exemptions represent foregone government revenue. In theory, the societal benefit of the exemption should offset that cost to the public purse. Otherwise, the money would be better spent directly supporting social programs.
In BC, the Vancouver Charter, Community Charter and Taxation (Rural Area) Act set out what properties must be exempt from taxation. Each statute requires specific properties to be exempt, while the former two permit local governments to exempt additional qualifying properties. Each act includes a statutory exemption for places of public worship, that is, exemptions that are automatically applied to the buildings in which worship occurs (statutory tax exemptions). The statutory exemption also applies to the land the building sits on and areas like hallways, foyers and washrooms that are necessarily incidental to the worship. Municipalities may also provide a permissive exemption to ancillary properties relating to those places of public worship, such as parking lots, outdoor meeting spaces, outbuildings, etc.
BC Assessment is tasked with classifying and valuing every property in the province and determining whether any part of that property is subject to a statutory exemption. Its appraisers look at a number of factors to make their determinations, which can include the use of any facilities, access and condition of the structures. Provincial regulations established under the Assessment Act set out nine property classifications. Religious buildings are included in the eighth class: recreational property/non-profit organization.
(b) that part of any land and improvements used or set aside for use as a place of public worship or as a meeting hall for a non-profit fraternal organization of persons of any sex or gender, together with the facilities necessarily incidental to that use, for at least 150 days in the year ending on June 30, of the calendar year preceding the calendar year for which the assessment roll is being prepared, not counting any day in which the land and improvements so used or set aside are also used for
(i) any purpose by an organization that is neither a religious organization nor a non-profit fraternal organization,
(ii) entertainment where there is an admission charge, or
(iii) the sale or consumption, or both, of alcoholic beverages;
Putting this in practice, BC Assessment has a Places of Public Worship Policy. It states:
"A place of public worship must be recognizable as a place having its principle use as a place where people come together as a congregation or assembly to do reverence to God and include an openness without discrimination to the general public."
This definition encapsulates the same theistic privilege that we see elsewhere in government policy in Canada. For example, the Canada Revenue Agency requires “an element of theistic worship” for an organization to qualify as a charity that advances religion. BC’s Vital Statistics Agency applied a similar logic to reject the BCHA’s application to solemnize marriages in 2013. Such policies fly in the face of the state’s duty of neutrality. As Justice Gascon wrote for the Supreme Court of Canada in the Mouvement laïque québécois v. Saguenay (City):
“the state’s duty to protect every person’s freedom of conscience and religion means that it may not use its powers in such a way as to promote the participation of certain believers or non-believers in public life to the detriment of others.” [at para 76]
BC Assessment’s policy sets out a decision tree for determining whether a property qualifies as a place of worship and, therefore, qualifies for a property tax exemption.
- Where is the property located?
- Does worship occur at the property?
- Is the worship public?
- How often does this activity occur?
- If the property is used for public worship, is that its principal use?
- Is the whole of the property used for public worship, or only a portion of it?
- Who owns the property?
This analysis applies only to the portion of the property used for public worship and permits for partial exemptions. Local governments may grant a permissive tax exemption for the remainder of the property - parking lots, outbuildings, green space and any other space around the building. These policies vary extensively across the province, from blanket refusals to the application of public benefits tests to universal approval. Municipalities can also set a cap on the total amount of permissive exemptions that may be granted or prioritize specific properties. As there is no local government in rural areas, those properties, including Knapp Island, are not eligible for permissive exemptions.
If property owners want to dispute the value or classification BC Assessment has assessed them, they first file a complaint with the Property Assessment Review Panel (the Panel). The panel is independent of BC Assessment, and the Minister of Finance appoints its members. The decisions of the panel can be appealed to the Property Assessment Appeal Board (the Board), a further independent tribunal whose members are appointed by Cabinet. The owner (or BC Assessment) can appeal the Board's decision to the BC Supreme Court; however, the Court may only review the legal interpretation and application of the prior decisions, rather than relitigating the facts of the case.
The Matsuri Foundation and Knapp Island
Knapp Island (Google Maps)
The Matsuri Foundation of Canada is a registered charity promoting the Shinto religion. It is also the owner of Knapp Island. Matsuri sought a property tax exemption for the island for 2022, saying it served as a “place of public worship.” The 31-acre island consists of two parcels assessed at a total of $12.9 million. The north parcel was largely undeveloped aside from a walking path with prayer stops and a forest shrine. Among the buildings on the south parcel are the Shin Mei Spiritual Centre (which includes prayer rooms, kitchen, living and dining rooms), several shrines, temples and a wharf for boats. The south portion of the island also features a 5,000-square-foot private residence, guest residences and a water treatment facility.
The Panel initially granted Matsuri’s request for an exemption in part. Specifically, the Panel rejected the exemption for the north parcel but granted it for all of the improvements and 60% of the land on the south parcel. Matsuri appealed that decision to the Property Assessment Appeal Board, arguing it should have received a full exemption. BC Assessment also appealed, saying there should be no exemption.
To qualify for an exemption as a place of public worship, a property must have been used for public worship for at least part of the previous year. BC Assessment argued that Knapp Island was not used for worship in 2021, so it was ineligible for an exemption for 2022. Matsuri argued it began advertising Buddhist retreats in October 2021 and that the Reverend used the property for daily prayers.
Ultimately, the Board denied the exemption entirely, citing the two aspects of the legal test for the exemption.
The first test is whether there is “an invitation to the public to come onto the property to attend public worship” [Board ruling at para 70]. This invitation requires it to be obvious to the public that they are welcome to attend. Further, people must actually be able to attend worship at the place.
Matsuri argued their website made it clear that they were open to the public. However, the Board noted that the website previously referred to “members,” possibly deterring the public. More consequently, before 2022, there were few other efforts by Matsuri to ensure their property was advertised as open to the broader public and not simply a place for private worship retreats. Additionally, the Board found that the Island did not appear from the water to be a place of worship open to the public. In its decision, the Board noted:
“I do find that viewed from the water the residence is unmistakably a residence. Despite claiming otherwise, Reverend Evans’ own view of the residence as personal space was clear from her oral evidence. I further find that viewed from the water the possible uses of the other improvements as places of public worship would be somewhat unclear, especially given that for at least 20 years the very same improvements were in fact places of private worship. The transition from private uses to public use would not be readily apparent from the water, which is the closest a person would be able to view the improvements without entering onto what a passerby might consider to be private property. This may be even more so given the “PRIVATE HARBOUR” sign at the Island’s only access point may deter some passing members of the public who may not see the smaller and less prominent sign welcoming the public to meditate, study, and pray.” [at para 83]
Secondly, the property had to meet the ‘principal use test.’ That is, the property must be used primarily for public worship. Other uses are disqualifying. Because the Board found that the religious use was primarily restricted to a core group of worshippers, it could not qualify as “public.” Further, the island's residence and cottage were deemed (unsurprisingly) residential properties, which do not qualify for exemptions.
The Appeal to the Supreme Court of BC
Matsuri appealed the Board’s decision to the Supreme Court of British Columbia. Because the appeal is limited to questions of law, Matsuri had to concede the Board's factual findings, including that Knapp Island failed the invitation and principal use tests. However, Matsuri argued for an exemption on fairness and equity grounds. In other words, it argued that similar properties in the region were granted property tax exemptions, so to deny their application was arbitrary and unjust.
The Property Assessment Appeal Board had considered these arguments. It found that the Assessor had prepared a report on 19 Gulf Islands Rural Area properties that had received a full or partial religious property tax exemption. And while the Board said the analysis focused “on differences rather than similarities and that the criteria chosen were not necessarily ideal or even perhaps the best to assess equity,” [Appeal Board decision at para 133-134] Matsuri presented no evidence that would justify finding that it had been treated unfairly.
At the Supreme Court, Matsuri argued that the assessor should have considered additional properties selected at random from outside the Gulf Islands Rural Area. The justice rejected this and Matsuri’s other arguments and upheld the Board's decision.
As a result, the island was denied its exemption for 2022 and is currently not receiving a tax exemption. A tax roll search shows the island was assessed a property tax bill of over $25,000 for 2024.
Conclusion
Matsuri’s failed effort to acquire a tax exemption for Knapp Island demonstrates the process by which BC Assessment determines whether a given property qualifies as a place of public worship. The decisions of the Panel, the Board and the Court highlight the importance of the invitation and principal use tests. Namely, there was little evidence that Matsuri was actively inviting members of the broader community to attend worship at its spiritual centre. Instead, the Island discouraged visitors through a “private harbour” sign. The focus on private retreats disqualified Matsuri from claiming its “principal use” was public worship.
Through this story, we can also track the process by which a property owner can dispute their claimed designation: from BC Assessment to the Property Assessment Review Panel to the Property Assessment Appeal Board and finally to the Supreme Court of BC.
Most importantly, this case brings out the limits of religious property tax exemptions. The legal tests suggest avenues for further research into understanding the invitation and principal use tests. The work can inform future efforts to strengthen the tests in their application more broadly.
There are also geographic peculiarities of this case that make it unique. As a private island, the issue of public access was relatively straightforward. However, in many ways, physical access is far from the only or even main restriction on access to a place of worship. Insular religious groups may preclude the general public through their practices. Religious groups that oppose same-sex marriage or the rights of trans people are clearly not safe and inviting spaces for members of the LGBTQ2S+ community and their allies. This begs the question of whether the invitation test, which BC Assessment says "include[s] an openness without discrimination to the general public" [emphasis added], precludes such groups from receiving property tax exemptions.