“Mission-Based Use” as a Religious Purpose: Idaho Supreme Court Broadens the Scope of the § 63-602B Property-Tax Exemption

Introduction

First Presbyterian Church of Boise, Idaho, Inc. (FPC) sought a full property-tax exemption under Idaho Code § 63-602B for its downtown campus. For years, the County had granted 100 % relief, but in 2023 it limited the exemption to 82 % because part of the premises was subject to a Shared Use Agreement with the Young Men’s Christian Association (YMCA) for an on-site daycare. The Ada County Board of Equalization (BOE) and the district court affirmed the partial assessment, holding that the daycare component was a commercial lease falling outside the statute.

On direct appeal, the Idaho Supreme Court reversed, establishing two important propositions:

1. A religious organization’s mission-driven outreach activity—even if carried out by a partner entity—constitutes a religious purpose under § 63-602B(1).
2. A below-market lease of space used as daycare classrooms, playground, and meeting rooms is not a business or commercial purpose when it falls within the statute’s carve-out for athletic or recreational facilities and meeting rooms used in connection with the church’s purposes (§ 63-602B(2)).

Summary of the Judgment

Justice Zahn, writing for a unanimous Court, held that:

• FPC proved that the daycare partnership furthered its stated religious mission (feeding God’s children and community outreach), satisfying the exclusive use in connection with religious, educational, or recreational purposes language in § 63-602B(1).
• The Shared Use Agreement is technically a lease because the YMCA pays $7,336/month for possession of the space, but the lease is not for a disqualifying business or commercial purpose because the rooms constitute recreational facilities and meeting rooms used in furtherance of FPC’s purposes. That conclusion invokes the last clause of § 63-602B(2).
• Accordingly, the entirety of the property remains exempt; the 18 % portion cannot be carved out for taxation.
• Because full relief is granted under § 63-602B, the alternative charitable-exemption argument under § 63-602C need not be reached.
• District-court judgment is reversed; FPC recovers costs on appeal.

Analysis

1. Precedents Cited and Their Influence

• Upper Valley Community Health Servs. v. Madison County, 174 Idaho 513 (2024) – reaffirmed that the Supreme Court owes no deference to the district court’s legal conclusions when reviewing BOE decisions.
• Corp. of Presiding Bishop of the Church of Jesus Christ of Latter-day Saints v. Ada County, 123 Idaho 410 (1993) – provided the basic framework for reviewing property-tax exemptions for religious bodies and confirmed that free review applies to statutory interpretation.
• Community Action Agency v. BOE of Nez Perce County, 138 Idaho 82 (2002) – reiterated that taxpayers bear the burden of establishing the exemption with clarity.
• Jayo Development, Inc. v. Ada County BOE, 158 Idaho 148 (2015); Highlands, Inc. (2005) – cited for the maxim that tax exemptions are to be strictly construed in favor of taxation, underscoring how unusual it is for the Court to side with the taxpayer absent clear statutory language.
• Evangelical Lutheran Good Samaritan Society v. Ada County BOE, 161 Idaho 378 (2016) – emphasised plain-language textualism even under the rule of strict construction.
• Krasselt v. Koester, 99 Idaho 124 (1978) & Herndon v. Sandpoint, 172 Idaho 228 (2023) – provided the classical definition of a lease (rent for possession), used to determine that the Shared Use Agreement is indeed a lease.
• Verska v. St. Alphonsus, 151 Idaho 889 (2011) – quoted for the principle that courts cannot rewrite statutes based on policy concerns.

These authorities collectively equipped the Court to adopt a plain-meaning but contextual approach: even while construing exemptions narrowly, if the legislature has supplied an express carve-out, courts must apply it as written.

2. Core Legal Reasoning

1. Statutory Text Controls.
   § 63-602B(1) exempts property belonging to any religious … corporation … used exclusively for and in connection with any combination of religious, educational, or recreational purposes or activities. The Court asked two questions:
   • (a) Is FPC a qualifying religious corporation? (Uncontested yes.)
   • (b) Is the daycare arrangement an exclusive use for an FPC religious/educational/recreational purpose?
   Evidence—from the church’s mission statement, correspondence, and the agreement itself—showed that subsidised childcare for downtown families is part of FPC’s outreach ministry. Outreach, the Court reasoned, is a quintessential religious activity for this congregation, even if it is not overtly evangelistic.
2. Meaning of “Exclusive Use.”
   Exclusively for and in connection with does not mean the church must physically occupy and operate the activity itself. Instead, the property must serve no purpose other than advancing the church’s mission. Because the daycare advances that mission and no unrelated commercial activity occurs, exclusivity is satisfied.
3. Lease Analysis under § 602B(2).
   The Shared Use Agreement fits the classical definition of a lease (rent for possessory interest). The Court rejected FPC’s contention that the modest payment or time-share arrangement negated that status.
4. The “Commercial Purpose” Carve-Out.
   Even if property is leased, the statute excepts certain functional uses—athletic or recreational facilities, … meeting rooms or halls—from the definition of a business or commercial purpose if the use remains connected to the church’s organizing purposes. Daycare classrooms, a playground, meeting rooms, and related ancillary spaces fit neatly within these categories.
5. Rejection of Contra Arguments.
   • BOE’s reliance on an old IBTA decision was dismissed because the Tax Appeals Board cannot override statutory text.
   • The County’s policy argument (anything goes if churches can align with any tenant) was an invitation to rewrite the statute, which the Court declined (citing Verska). The obligation to amend the text lies with the legislature, not the judiciary.

3. Likely Impact of the Decision

a. Expanded Exemption Footprint.
Local assessors and BOEs must now evaluate why the partnered activity occurs, not merely who conducts it or whether rent is exchanged. If the church can demonstrably link the use to its religious mission and the leased space fits within the enumerated facility types, a full exemption is likely.

b. Encouragement of Community Partnerships.
The case legitimises mission-driven collaborations between faith institutions and secular nonprofits. Expect more churches to host daycares, ESL programs, food banks, or sports leagues without jeopardising tax status—so long as rents remain incidental and the activity advances the congregation’s mission.

c. Administrative Adjustments.
County assessors may need refined guidelines (or new Tax Commission rules) to decide when a leased space truly constitutes athletic or recreational facilities or meeting rooms. Valuation disputes over the 3 % threshold may also increase.

d. Potential Legislative Response.
If counties perceive revenue erosion, the legislature could revisit § 63-602B to narrow the carve-out or impose market-rent or square-footage caps. The Court has signalled it will enforce whatever text the legislature supplies.

Complex Concepts Simplified

• Property-Tax Exemption. Idaho taxes all real property unless a statute expressly exempts it. Religious and charitable bodies may claim exemptions, but must apply annually and bear the burden of proof.
• Religious vs. Charitable Exemption. – § 63-602B (religious) requires property use to relate to religious, educational, or recreational activities.
  – § 63-602C (charitable) focuses on relief of poverty, advancement of education, etc. FPC relied on the religious exemption; its charitable claim became moot once it prevailed.
• Exclusive Use. Does not prohibit time-sharing or partner-use, provided the activity furthers the owner’s qualifying purposes and no unrelated business occurs.
• Lease for “Business or Commercial Purposes.” Normally, rent-generating leases nullify the exemption pro tanto. But § 602B(2) carves out specific facility types (athletic… meeting rooms…) when tied to the church’s mission, even if fees are charged.
• 3 % Valuation Safe Harbor. If a business use covers ≤ 3 % of the property’s value, the entire parcel remains exempt. This case did not rely on the 3 % rule because the Court found the daycare not commercial under the carve-out.

Conclusion

First Presbyterian Church of Boise v. Ada County recalibrates Idaho property-tax jurisprudence by recognizing that contemporary faith-based outreach often occurs through partnerships and shared facilities. The Court’s textual reading of § 63-602B accomplishes three things:

1. Affirms that mission outreach is a religious purpose, even when the activity itself (daycare) is secular.
2. Clarifies that the statutory carve-out for recreational and meeting spaces is potent and not limited to sporadic or in-house church events.
3. Signals that policy objections must be addressed legislatively, not judicially.

For practitioners, the decision offers a blueprint: document how each partnered activity ties to the religious entity’s mission; ensure rents are ancillary; and confirm the leased areas fall within the facility types enumerated in § 63-602B(2). Doing so will place the property squarely within the newly reinforced umbrella of Idaho’s religious-property exemption.