Parker, CO asked in Tax Law for Colorado

Q: In Colorado, if a church rents its parsonage to a non-minister, will it need to pay state property tax?

The income from the rental will be given to the pastor for a housing allowance. Would this count as a "religious use" so they can remain tax-exempt for state property tax purposes?

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1 Lawyer Answer
D. Mathew Blackburn
D. Mathew Blackburn
  • Licensed in Colorado

A: The income from the rental would be unrelated business taxable income. The income is 1. from a trade or business; 2. regularly conducted; and 3. not substantially related to their exempt purpose.

A Form 990 would need to be filed and tax paid on the UBIT.

This does not necessarily negate the charitable or non-profit status of the church as a whole but would likely remove the exempt status for the particular property.

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