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Wednesday, June 19,2013

Holy spirits

Riverview Church's possible purchase of former Cadillac Club and its liquor license may have some tax implications for the church

by Sam Inglot
In her 13 years on the Lansing City Council, Carol Wood said she’s never heard of a church in Lansing owning a liquor license. But that may change soon if the Holt-based Riverview Church purchases the former Cadillac Club building in REO Town — along with the building’s liquor license, which could put its tax-exempt status in jeopardy. 

As City Pulse reported last week, if the sale of the former Cadillac Club goes through, the church is considering turning the space into a worship area, banquet hall and coffee shop. The banquet hall would be available to rent for wedding receptions, hence the desire for a liquor license. The space is being used as Discount Dave’s Buy-It-Rite furniture retail store.

“It may jeopardize it,” Lansing Assessor Bill Fowler said of the church’s tax-exempt status if it winds up running a liquor-friendly banquet hall. “If it’s all within the same structure, we may have an issue.”

Under Michigan’s Property Tax Act, religious organizations are exempt from paying property taxes.

Last year, Dave Sheets, the owner of Discount Dave’s and the former Cadillac Club, paid just under $14,300 in property taxes for the building, Fowler said. That money would fall off the books if the church buys the property and it becomes tax-exempt. However, if the church does secure the Cadillac Club’s liquor license and decides to run a banquet hall in the space, it may lose its tax-exempt status, which would put the property — or at least a portion of it — back on the tax rolls.

Fowler said if the church buys the building, it would need to apply for tax-exempt status with the city. To get the exemption, the church must prove four things: It must own property; it must meet the legal definition of a religious organization; it must occupy the property; and it must use the property solely for the purpose for which the church was incorporated. 

The fourth requirement is where the church may run into some shaky grounds because the banquet hall — and even the coffee shop — could be considered a for-profit operation, Fowler said. 

However, the church could keep the worship space as a tax-exempt area if it created a separate LLC to rent the banquet hall from the church organization, Fowler said. In that case, the banquet hall would be taxable while the worship space would maintain its tax-exempt status. 

When asked about the liquor license, banquet hall and its tax-exempt status, Riverview Pastor Dan Price declined to comment, as plans are tentative. 

However, he said the church wouldn’t object to surrounding businesses getting liquor licenses in the future. That’s often a condition attached to special land use permits, which are subject to City Council approval. The church would need one in this case since the property is zoned commercial.

“We don’t have the building yet and don’t know exactly how all this is going to shape up. All of these questions are hypothetical,” Price said in an email. “We want to use the building to benefit the neighborhood and add to the culture not take away from it. For example, we won’t stop any business from having a liquor license. There are a lot of little decisions we need to make, but they really don’t mean anything until we have the building.”

Wood said if Riverview moves into the space, the loss of property taxes would definitely be a downside, but she said that wouldn’t be reason enough for her to deny the church an SLU. 

“One of the things we look at is the fact that we might have the potential of losing property tax from it, and that’s always a concern,” Wood said. “But my understanding is that that’s not a valid reason to not approve a special land use to allow a church there.”

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