As Pastor Dan Scott expanded Christ Church Pentecostal in South Nashville about a decade ago, he envisioned the church offering local citizens a “third space” — a place where people could come together and experience community.
That idea manifested itself in the form of a new gym and activities center, along with a cafe and a bookstore.
While the church may have viewed those amenities as a continuation of their religious mission, the Tennessee Court of Appeals ruled on March 21 that those properties weren’t eligible for full tax-exempt status. The opinion upheld a 2011 Davidson County Chancery Court ruling.
In order for a religious property to qualify for tax-exempt status in Tennessee, it must be used “purely and exclusively” for religious purposes. The gym received a 50 percent tax exemption due to the fact that CCP charged for membership fees but also didn’t turn anyone way.
But the main point of contention for the state was the bookstore, which the Court of Appeals called “a far cry from the traditional use of church facilities ... for worship and fellowship.”
“The bookstore/cafe area in this case was nothing short of a retail establishment housed within the walls of the Community Life Center, complete with paid staff, inventory control, retail pricing, and a wide array of merchandise for sale to the general public,” the opinion read.
CCP closed the bookstore and allowed the YMCA to operate the activities center to comply with the law. But the state is still seeking $168,000 from a four-year period of operating the bookstore — a sum Scott said could have “put us under” during the recession.
But Scott has pushed forward with the case in order to get a definitive answer about an age-old debate: the separation of church and state.
“We got our hand slapped after the fact, not before the fact, because there was no way to determine where that line was — if you cross it, you’re seen as a commercial enterprise,” Scott said.
“We actually realized that churches have abused that privilege. We’ve expressed that to the judges. We’re not anarchists or anything like that. We’re willing to pay the tax. Our question has been: That line must be established so we know where it is.”
The church is being represented in the case by the Alliance Defense Fund, self-described as “a servant ministry building an alliance to keep the door open for the spread of the Gospel by transforming the legal system and advocating for religious freedom.”
Katherine Flake, a professor of American religious history at Vanderbilt University Divinity School, said the Tennessee Court of Appeals made the correct ruling.
“Ultimately, it comes down to just because you’re religious, it doesn’t make everything you do religious,” Flake told The City Paper. “It’s a profit-making enterprise, and as a profit-making enterprise, it has to be treated fairly with all other profit-making enterprises.”
But Scott wants clarification. He points to the juxtaposition between the tradition of smaller, community-oriented churches and the mega-churches of today.
“We had little churches dotting the landscape, and they had a little fellowship hall, a little book table and a basketball court. When you have 100 people that’s what you have. But when you have 10,000 people in a large urban setting, those same things multiply to become bigger things,” Scott said.
“That’s an argument I resonate with and will defend, but I also acknowledge that some churches go way beyond that kind of multiplication of reasonable infrastructure, and we’re paying the price for it.”
Regardless of the circumstances, Flake believes churches should be designated as commercial for tax purposes if they can’t sustain themselves through “traditional means.”
“The rise of megachurches means the rise of the cost of sustaining those churches. If they do not support their costs through traditional means of offerings and gifts, then they are going to have to turn to commercial enterprise,” Flake said. “That’s one of the markers of a megachurch. If they provide services for members that are very costly, and if those members aren’t paying for them, they’ll ask the taxpayers to do it.”
Scott also told The City Paper that he believes CCP, with a congregation of about 3,000, was targeted due to its status as an independent church that isn’t backed by a denomination.
“We feel like we were singled out because we may not fight it ... but I think [the state] wanted a precedent. And an independent church is easier to get a precedent because it can’t rally a massive number of congregants,” Scott said. “Meanwhile, you’ve got larger churches in other areas and other counties that are more affluent and so forth, and nobody bats an eye and nobody cares. That was what was grating to us.”
The Tennessee State Board of Equalization, which is charged with overseeing local tax assessment processes, declined comment on the lawsuit because it was still pending.
Scott said he anticipates they will appeal the decision further.
“This is something all churches are going to have to deal with, and the society has a right to participate in a conversation about what we should be involved in if we wish to be tax-exempt,” Scott said.