Church of the Isaiah 58 Project of Ariz., Inc. v. La Paz Cnty.

• Decision Date: 12 September 2013
• Docket Number: No. 1 CA–TX 12–0001.,1 CA–TX 12–0001.
• Citation: 670 Ariz. Adv. Rep. 20,314 P.3d 806,233 Ariz. 460
• Parties: CHURCH OF the ISAIAH 58 PROJECT OF ARIZONA, INC., Plaintiff/Appellant, v. LA PAZ COUNTY, Arizona; George Nault, La Paz County Assessor; and Leah Castro, La Paz County Treasurer; Richard Oldham and Oldham Family Trust, Defendants/Appellees.
• Court: Arizona Court of Appeals

233 Ariz. 460

314 P.3d 806

670 Ariz. Adv. Rep. 20

CHURCH OF the ISAIAH 58 PROJECT OF ARIZONA, INC., Plaintiff/Appellant,

v.LA PAZ COUNTY, Arizona; George Nault, La Paz County Assessor; and Leah Castro, La Paz County Treasurer; Richard Oldham and Oldham Family Trust, Defendants/Appellees.

No. 1 CA–TX 12–0001.

Court of Appeals of Arizona, Division 1, Department T.

Sept. 12, 2013.

Alliance Defending Freedom By Erik W. Stanley, Leawood, KS, Co–Counsel for Plaintiff/Appellant.

Steven D. Keist, PC By Steven D. Keist, Glendale, Co–Counsel for Plaintiff/Appellant.

Warnock, MacKinlay & Carman, PLLC By Andre E. Carman, Prescott, Co–Counsel for Plaintiff/Appellant.

Tony Rogers, La Paz County Attorney By R. Glenn Buckelew, Deputy County Attorney, Parker, Attorneys for Defendants/Appellees.

OPINION

DOWNIE, Judge.

¶ 1 Church of the Isaiah 58 Project of Arizona, Inc. (“Taxpayer”) appeals the dismissal of its complaint by the Arizona Tax Court. We affirm and hold that because taxing authorities acted under semblance of authority, the tax court appropriately dismissed Taxpayer's claims for injunctive relief. Additionally, the counts of the complaint seeking declaratory relief were properly dismissed because Taxpayer did not pay the assessed taxes before filing suit.

FACTS AND PROCEDURAL HISTORY

¶ 2 Taxpayer purchased the real property at issue in these proceedings (“the Property”) in August 2006. Among other activities, Taxpayer holds church services and Bible study at the Property, which is located in Quartzsite, Arizona.

¶ 3 According to Taxpayer, it requested a tax exemption from the La Paz County Assessor (“the Assessor”) after acquiring the Property, but was advised in October 2006 that it must pay property taxes for that year.¹ Taxpayer, though, did not pay the 2006 taxes.

¶ 4 On February 20, 2007, Taxpayer filed an Affidavit for Organizational Tax Exemption. By letter dated June 19, 2007, the Assessor requested additional information to “complete [Taxpayer's] application.” Specifically, the Assessor explained that a “Letter of Determination” from the Internal Revenue Service (“I.R.S.”) was “a pre-requisite to the property tax exemption process.” On September 5, 2007, Taxpayer advised the Assessor it was not required to obtain the requested I.R.S. letter and stated it “had decided not to file for a 501(c)(3) letter of determination.” Taxpayer did, however, provide a copy of its Articles of Incorporation.

¶ 5 Due to the delinquent 2006 taxes, the La Paz County Treasurer (“the Treasurer”) sold a tax lien on the Property, issuing a Treasurer's Tax Lien Certificate to Richard Oldham and the Oldham Family Trust and Decedent Trust (collectively, “the Oldhams”). The Assessor also assessed taxes against the Property for subsequent years. When those taxes became delinquent and remained unpaid, they were added to the tax lien.²

¶ 6 On June 23, 2009, Taxpayer sent the Assessor a copy of correspondence it had received from the Arizona Department of Revenue (“ADOR”). The ADOR letter stated that Taxpayer was exempt from state income tax pursuant to A.R.S. § 43–1201(4) and that Taxpayer's property “used or held primarily for religious worship” was exempt from taxation under A.R.S. § 42–11109(A). Based on the ADOR letter, the Assessor granted Taxpayer an exemption for 2009, with the proviso that the exemption did not apply to that portion of the Property east of South Moon Mountain Road.³ Taxpayer received the exemption despite the fact that the statutory deadline for submitting exemption requests had expired for tax year 2009. SeeA.R.S. § 42–11153(A).

¶ 7 Taxpayer filed a seven-count complaint in the tax court in March 2011, requesting:

• Count 1: injunctive relief against “Illegal Tax”;

• Count 2: injunction against foreclosure;

• Count 3: declaratory relief (entitlement to religious exemption);

• Count 4: “Action Pursuant to A.R.S. § 42–18352”;

• Count 5: injunctive relief based on the Free Exercise of Religion Act (“FERA”);

• Count 6: declaration that the “practice and policy of granting property tax exemptions only to those churches who have a 501(c)(3) letter of determination from the IRS favors some churches over others,” in violation of the “Federal Establishment Clause”;

• Count 7: injunctive relief based on “Violation of Federal Free Exercise Clause.”

¶ 8 The Assessor, the Treasurer, and La Paz County (collectively, “La Paz County defendants”) moved to dismiss the complaint “pursuant to Rule 12(b)” of the Arizona Rules of Civil Procedure (“Rule”). The tax court treated the motion to dismiss as one arising under Rule 12(b)(1)—lack of jurisdiction over the subject matter. The court granted the motion, and this timely appeal followed.

DISCUSSION

¶ 9 Taxpayer does not take issue with the tax court's treatment of the motion to dismiss as one contesting subject matter jurisdiction under Rule 12(b)(1). Subject matter jurisdiction “refers to a court's statutory or constitutional power to hear and determine a particular type of case.” State v. Maldonado, 223 Ariz. 309, 311, ¶ 14, 223 P.3d 653, 655 (2010). We review de novo a dismissal for lack of subject matter jurisdiction. Mitchell v. Gamble, 207 Ariz. 364, 367, ¶ 6, 86 P.3d 944, 947 (App.2004) (citations omitted). In resolving a subject matter jurisdiction challenge, the trial court “may take evidence and resolve factual disputes essential to its disposition of the motion” without converting the motion into one for summary judgment.⁴Gatecliff v. Great Republic Life Ins. Co., 154 Ariz. 502, 506, 744 P.2d 29, 33 (App.1987). We will affirm the tax court's decision if it is correct for any reason. See Ariz. Bd. of Regents ex rel. Univ. of Ariz. v. State ex rel. Ariz. Pub. Safety Ret. Fund Manager Adm'r, 160 Ariz. 150, 154, 771 P.2d 880, 884 (App.1989).

I. Tax Years at Issue

¶ 10 Taxpayer did not purchase the Property until after the statutory deadline for requesting an exemption for tax year 2006 had expired. SeeA.R.S. § 42–11153(A) (requiring property tax exemption requests to be filed “between the first Monday in January and March 1”). At oral argument before this Court, Taxpayer's counsel conceded that Taxpayer may not challenge the 2006 tax assessment because it acquired the property too late in the calendar year. We agree. Arizona's statutes do not afford an exemption to an otherwise exempt owner who acquires property after the statutory deadline for seeking a tax exemption.⁵Cf. Bethany Baptist Church v. Deptford Township, 225 N.J.Super. 355, 542 A.2d 505, 508 (N.J.Super.Ct.App.Div.1988) (“[T]ax exempt status depends on the confluence of use and ownership as of the assessment date.”). Because Taxpayer was not eligible for an exemption for tax year 2006, we affirm the dismissal of all claims relating to that year.

¶ 11 Taxpayer filed a timely property tax exemption request for 2007. We examine each count of the complaint as it relates to that tax year infra.

¶ 12 Taxpayer did not file an exemption request for 2008—timely or otherwise. It has thus waived any claim to an exemption for that year. Except under circumstances not applicable here, “a failure by a taxpayer who is entitled to an exemption to make an affidavit or furnish evidence required by this article between the first Monday in January and March 1 of each year constitutes a waiver of the exemption.” A.R.S. § 42–11153(A); see also State v. Allred, 67 Ariz. 320, 329–30, 195 P.2d 163, 169–70 (1948) (notwithstanding constitutional provision granting exemption to veterans, failure of a veteran to follow statutory procedures in requesting an exemption waives that right); Lyons v. State Bd. of Equalization, 209 Ariz. 497, 502, ¶ 19, 104 P.3d 867, 872 (App.2005) (“A taxpayer seeking an exemption for religious property must file an affidavit of eligibility with the county assessor in January or February of the tax year or waives the exemption.”). If, however, Taxpayer had submitted evidence of its tax exempt status under 26 U.S.C. § 501(c)(3), it would have been relieved of the statutory obligation to file annual affidavits of eligibility. SeeA.R.S. § 42–11109(C) (religious organization filing evidence of tax exempt status under § 501(c)(3) is “exempt from the requirement of filing subsequent affidavits under § 42–11152 until all or part of the property is conveyed to a new owner or is no longer used for religious worship”).

¶ 13 The Assessor's failure to formally deny the 2007 exemption request did not affect Taxpayer's ability or duty to comply with statutory requirements for seeking a 2008 tax year exemption. Moreover, Taxpayer knew no later than February 2008, when it received notice of the tax lien, that its exemption request had been denied. At that point, the deadline for requesting an exemption for 2008 had not yet expired. SeeA.R.S. § 42–11153(A). Taxpayer, though, filed no request. We therefore affirm the dismissal of all claims relating to the 2008 tax year.

¶ 14 The 2009 tax year is not at issue in this appeal. As noted supra, ¶ 6, Taxpayer received an exemption for 2009 that covered all but a small portion of the Property.

¶ 15 Having determined that Taxpayer may only challenge defendants' actions regarding the 2007 tax year, we next evaluate the counts of the complaint to determine whether they were properly dismissed.

II. Claims for Injunctive Relief ⁶

¶ 16 Count 1 of the complaint requests an injunction against an “illegal tax,” alleging the Assessor “had no semblance of authority” for imposing property taxes, refusing an exemption, or requiring an I.R.S. letter of determination. Count 5 requests injunctive relief based on an alleged violation of FERA. Count 7 is a claim for injunctive relief based on a purported violation of the free exercise clause of the First Amendment.

¶ 17 It is the “well-established policy of this state to prevent the validity of a tax from being tested by injunctive means.” State ex rel. Lane v. Superior Court (Struckmeyer), 72 Ariz. 388, 391, 236 P.2d 461, 462–63 (1951)....