NO LIMITS TO LOOPHOLE
Dallas church stands out with 11 tax-free clergy residences
DALLAS — Seminary student Tyler Pace and his wife, Kenzie, readily acknowledge they could never afford to live in one of the wealthiest neighborhoods in Texas if it weren’t for a perk Highland Park Presbyterian Church offers numerous staffers: subsidized housing.
But the tax-free residences their church provides have been costing Dallas County taxpayers hundreds of thousands of dollars a year in lost revenue — money that otherwise would be going into the school system, public safety, health care and other government services.
Even as Highland Park Presbyterian is avoiding $25,000 to $35,000 yearly in taxes on each of its clergy residences (also known as parsonages), until a few weeks ago it was charging occupants monthly rent. The Dallas Central Appraisal District has generally considered rent from parsonages a no-no. That’s because of a state law that experts say was designed to prevent religious organizations from making money off of taxexempt houses.
The church eliminated the rent
payments after the Houston Chronicle made inquiries but otherwise said it’s taking advantage of the exemptions it’s entitled to — just like “any other taxpaying citizen.”
Still, the Chronicle spent months investigating tax-exempt clergy residences all over Texas, and Highland Park Presbyterian Church stood alone among the largest Texas counties in two key respects: The 95-yearold church had the most parsonages of any single house of worship — 11 as of the start of the year. And it has knocked more value off the tax rolls from clergy residences, about $15 million to $20 million last year, than any other church.
One of the 11 houses will return to the tax rolls after the Chronicle investigation turned up a vacant parsonage. A second one will get a retroactive tax bill after the church realized on its own it mistakenly claimed an exemption to which it was not entitled.
Though the Texas Constitution established a 1-acre limit on parsonages in the 1920s, more recent state law applies that restriction to “each residence,” leaving a loophole big enough to drive a church bus
through. Appraisal districts generally agree that as long as no single parsonage uses more than an acre of land, churches can have as many of these taxfree exemptions as they qualify for. The sky is the limit on the dollar value.
At the start of 2021, Highland Park Presbyterian’s tax-exempt clergy homes in total sat on 3 acres of land, contained over 30,000 square feet of indoor space and represented about 9 percent of the $173 million that Dallas County’s 198 parsonages are worth, according to estimates from the Dallas Central Appraisal District.
The appraisal district’s figures for the homes’ values are artificially low because officials expend little effort getting upto-date figures on exempt property that won’t produce any tax revenue. The 11 homes that were tax free at the start of the year had appraised values of roughly $15 million while Zillow estimates put their value at about $20 million.
“You would think that a religious organization would be happy to contribute to supporting their school and parks and police,” said Dick Lavine, senior fiscal analyst at the progressive Austin think tank Every Texan. “It’s a shift from the church that’s not paying to everyone else who has to make up the difference.”
Church officials say they pay taxes on homes that don’t qualify for exemptions and point to all the good work their pastors do with their tax savings in Highland Park and beyond — from helping refugees and the homeless to coaching inner-city sports.
“It is impossible to quantify the monetary value of the work this church accomplishes in the communities we serve,” said the church’s executive director, Sarah Good. “Keeping families together, serving the disadvantaged, caring for seniors and children, providing a beacon of faith in these challenging times — our work is more important than ever.”
The Paces, a 20-something couple who moved to Dallas from Chicago in 2018, started living in one of the parsonages in August. They say there’s an important value to having pastors live among the congregants they serve.
Tyler, who as pastor of college discipleship ministers to students, said living near the church allows the clergy to become part of the community, develop a relationship with neighbors and send their kids to the same schools.
He can understand that residents may get “angry and frustrated” if they focus on the narrow issue of taxes.
“But then if you see the vision of like, churches in this community, what we’re doing in Dallas as a whole, then … I feel like a little broader picture would see the investment we make in different organizations,” he said.
A rich real estate portfolio
It’s hard to overestimate the wealth and prestige of the neighborhood where the Paces have been living. The Park Cities, encompassing the tiny incorporated towns of Highland Park and University Park, boasts streets filled with ivycovered mansions and marble fountains. Fictional character Claire Underwood in the Netflix series “House of Cards” is said to be from this community. Also calling this wealthy enclave home is billionaire Jerry Jones, owner of the Dallas Cowboys.
Highland Park Presbyterian, technically in University Park, was founded in 1926 on a 10-acre plot off University Boulevard, at the time considered the main thoroughfare in the Park Cities, according to a church brochure. Over the years the congregation and the church footprint grew, last adding a building in 1978 — and recently enlarged and renovated — that was named after the oil rich Hunt family.
Along the way the church snapped up a lot of single-family residences, now a valuable piece of its real estate portfolio. When the Dallas church broke away from its more progressive parent denomination, the church’s high-dollar parsonages played into a multimilliondollar lawsuit that ensued.
The two sides ultimately settled their breakup when Highland Park Presbyterian agreed to pay Presbyterian Church USA $7.8 million, which let the North Texas church keep about $70 million in assets. That included more than a dozen single-family homes in one of the most desirable neighborhoods in Texas.
Highland Park now belongs to the evangelical Presbyterian denomination known as ECO.
‘Rent paid by clergy’
A monthslong Chronicle investigation of clergy residences statewide found that the laws and rules are permissive, vague and inconsistently enforced.
There are a few requirements that must be met, though. The parsonage has to be owned by the church and not, say, the clergy member living there. No single residence can use more than 1 acre of land.
There’s also this restriction in Section 11.20 of the Texas tax code: Parsonages can produce “no revenue for the religious organization.”
In the eyes of the Dallas Central Appraisal District, that ban includes rent paid by the ministers who live in them. In the past the district has moved aggressively to yank exemptions from churches after they disclosed on routine applications that parsonage occupants had been making rent payments, according to records and interviews.
When an appraiser was explaining on a 2015 worksheet why a Dallas County church would have its exemption denied, for example, the county official wrote in handwriting on the form: “Rent paid by clergy.” The denial was reversed after the church said it wasn’t rent after all but rather mortgage payments the church made.
Elizabeth Sarles, assistant manager of property records and exemptions at the appraisal district, said in recent years several churches “did not qualify because they did pay rent,” and she said if that’s what is happening with Highland Park Presbyterian now, their exemptions will be denied, too.
“If they pay rent, then they should not qualify,” Sarles told the Chronicle in late October.
What counts as revenue?
The Paces said in an interview this summer outside one of the two-story brick parsonages that they paid about $2,000 a month in reduced rent.
“Everyone pays rent,” Tyler said.
Kenzie nodded, adding: “I mean, they’re — it’s millions of dollars. Like, it wouldn’t make sense for them to just give it to us for free.”
On yearly sworn affidavits filed with the appraisal district, the church writes “rent included as a part of base comp” in the field asking if rent is paid. In an emailed statement, the church said all but one parsonage occupant had rent deducted from their paychecks. The one who didn’t insisted on paying rent by check every month.
Good, the church’s executive director, said Highland Park Presbyterian believes the arrangement is legal and that the deductions shouldn’t count as revenue per se.
“No Texas law defines what ‘revenue’ means in this context,” Good said. “Our position is that in fact none of these homes contribute revenue.”
When the Chronicle inquired about the payments, though, the church consulted its lawyers and decided to get rid of the payroll deduction — and any mention of the word rent, Good said. Salaries have simply been reduced by the amount that went for housing. As far as the church is concerned, that makes it a wash in terms of revenue going into its coffers.
“The lawyers suggested a policy modification, which the church has already implemented, to remove any book entry classified as ‘rent,’ ” Good said.
That explanation worked for the appraisal district.
“Follow-up with property owner reports no rent is being paid,” the district said in a Nov. 15 email addressing the status of several parsonages. “No further action by DCAD.”
In the email, the district told the Chronicle, “This concludes our comments regarding this matter.”
Dallas appraisers have generally insisted that Highland Park Presbyterian and others submit annual clergy affidavits to reclaim their parsonage exemptions and identify the clergy members living in the homes. After all, pastors and circumstances often change from one year to the next.
But an enforcement apparatus that depends largely on the honor system hasn’t caught every error.
For example, one of Highland Park Presbyterian’s singlefamily homes on University Avenue, a stone’s throw from the church, has been getting a total exemption for years as an “actual place of religious worship” based on a 2008 application covering multiple properties.
Yet the appraisal district’s own field inspections noted in the summer of 2014 that former senior Pastor Joe Rightmyer — the minister who was defrocked in early 2015 by Presbyterian Church USA for his role in the messy breakup — was living there. And church newsletters described it as the residence of another former pastor and his wife before that.
Neither the church nor the appraisal district could explain why there was no clergy residence application on file for the years it was used as a home for pastors. But the church acknowledged the property is now vacant. Good, the church’s executive director, said Highland Park Presbyterian was “discussing this with DCAD, and the church will pay the appropriate tax.”
Another house got a 2020 exemption erroneously, which the church discovered and selfreported. The problem: A single clergy member, the “pastor of groups,” was used to justify parsonage exemptions on two houses that year.
In the customer service notes attached to the property file, the appraisal district reported this fall that the church “just wanted to correct their mistake” and meant to request a tax exemption for one of the houses the pastor of groups was said to live in.
Both the Dallas Central Appraisal District and Good said Highland Park Presbyterian would fulfill its duty to the taxpayers.
“Based on our conversations with DCAD, we expect to receive a bill for 2020 along with our 2021 bills, and of course we intend to pay it,” Good said.