February 1, 1980

Mr. R. N. Woodruff 
Butte County State's Attorney 
Belle Fourche, South Dakota 57717

Official Opinion No. 80-7

Taxation of Church Property Sold On Contract For Deed

Dear Mr. Woodruff:

You have requested an official opinion from this office in regard to the following factual situation.

FACTS: 

Church A owns legal title to a home used as its parsonage.  The parsonage was previously exempted from real property taxes pursuant to SDCL 10-4-9. Recently the church sold the house by contract for deed to its minister, who continues to use it as his residence.

Based upon the above facts you have asked the following question:

QUESTION: 

Does a house sold by a church to its minister by contract for deed, used as the minister's residence both before and after the sale, retain its tax exempt status 

A.  during the term of the contract for deed while the unrecorded deed remains in escrow subject to the contract; and, 

B.  after the contract has been satisfied and the deed has been recorded?

SDCL 10-4-9 reads where applicable as follows: 

All property belonging to a . . . religious society and used exclusively for . . . religious purposes shall be exempt from taxation . . .

Our Supreme Court has held that there is nothing in the Constitution or statute exempting church property which limits exemption from taxation to that necessarily used for public worship.  The Court in State ex rel. Eveland v.  Erickson, 44 S.D. 63, 182 N.W. 315 held that the statute 10-4-9 covers not only the church itself but property such as a parsonage which is used by the pastor of the church in the overall purpose of the religious society.  The condition of use having been fulfilled in this case, the question then turns on the ownership of the property since the property must be owned as well as used by the exempt society.

In this connection I would call your attention to opinions of my predecessor found at 1959-60 A.G.R., page 65, 1959-60 A.G.R. page 155.  These opinions hold that while a contract for the sale of land is an equitable conversion of the land it does not divest the legal owner from title to an extent that the exemption statutes would permit taxation of the property, where the legal owner is exempt. In other words, the owner of the property for the purpose of taxation is the person having the legal title or estate therein, not one who by contract or by otherwise has a mere equity therein or a right to compel a conveyance of such legal title or estate to himself. 1943-44 A.G.R. 341.  Therefore, during the term of the contract for deed in the present case the property continues to be exempt.

The second part of your question has to do with the effect of the satisfaction of the contract and the recording of the deed.  At that point in time the property would no longer belong to the religious society and therefore the qualification of ownership would not be met.  1959-60 A.G.R. 343.  The  property although used for religious purposes under the Eveland doctrine would nevertheless not fulfill the second qualification of ownership and in my opinion therefore should be taxed at the time the legal title becomes vested in the vendee.

Respectfully submitted,

Mark V. Meierhenry
Attorney General