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Bill to preserve tax-exempt status for mission-aligned rentals focuses on clergy housing, draws assessor concerns
Summary
House Bill 425 would clarify that properties owned by exempt organizations remain tax-exempt when rented to organizations with a similar mission, with sponsors citing clergy parsonages and mission-aligned rentals; municipal assessors urged coordination with parallel bills and flagged overlapping language in other proposals.
Representative Mark Pearson introduced House Bill 425 on Feb. 4, which would permit tax-exempt entities to retain their exemption when they rent property to another organization that shares the same or similar mission, provided the rental income is used for specified exempt purposes such as clergy compensation or maintenance of worship or parsonage property.
Representative Pearson said the bill responds to practical changes in clergy housing and organization operations. "This first bill before you has mostly to do with church properties for its clergy members," Pearson said, explaining that some congregations rent an older rectory to raise funds that are then used to provide a housing allowance for clergy who live elsewhere. The bill seeks to formalize that arrangement as continuing to serve the exempt purpose.
Jim Michaud, chief assessor for Hudson, testified the proposed language duplicates portions of House Bill 585 (before Ways and Means) and risks creating ambiguity if multiple bills with overlapping text advance in different committees. Michaud also noted that existing statute already covers some cases where property used by a tax-exempt organization and used by another qualifying organization can be exempt; he cautioned that piecemeal changes may produce unintended administrative burdens.
Questions from members focused on boundaries — whether exemptions would apply when property is rented to a multi-family or a commercial tenant, whether lots must be contiguous, and how to ensure rental income is used for exempt purposes. Sponsor Pearson said the bill was intended to cover properties historically used for clergy housing or mission-aligned purposes and that municipal governing bodies would retain authority to adopt bylaws and ordinances implementing the local policy.
The Municipal Association’s technical comments and a Hudson assessor’s memorandum urging harmonization with related bills were also provided to the committee. The hearing closed with the chair reporting the remote signup and in-room blue sheets; members did not vote on the proposal at the hearing.
