On Jan. 21, the Alaska Supreme Court hears oral arguments in a case involving a dispute over whether local municipalities can tax religious properties.
While the issue originated in the Fairbanks Borough, it now entails local boroughs in Kenai, Mat-Su and Juneau and involves ongoing disputes over tax exemptions for properties with mixed religious and non-religious (or charitable) uses. This would include religious camps or facilities that aren’t used exclusively for religiously exempt purposes under Alaska law.
The original dispute involves Victory Ministries of Alaska that operates a longstanding Christian youth Bible camp within the Fairbanks Borough. Roughly eight years ago, borough officials began levying taxes against the camp due to the fact that the camp occasionally rents cabins and facilities to the public when these buildings were not being used during camp operations.
This resulted in a lawsuit with the camp arguing that the rented buildings are part of the overall necessary income needed to operate the summer camp, and that the entire camp should qualify for religious tax exemptions.
In 2024, Fairbanks Superior Court Judge Kirk Schwalm ruled largely in favor of the Fairbanks Borough, upholding the assessor’s determination that 21 buildings were taxable (while 22 remained exempt).
This decision was appealed to the Alaska Supreme Court and now includes multiple boroughs who stand to benefit from a wider ruling that would allow them to tax religious properties that are occasionally rented out to generate income to further a core religious mission.
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This past November, the Alaska Supreme Court heard oral arguments in which attorneys debated whether seasonal/off-season uses disqualify the exemption or if the camp’s core mission allows full exemption.
Numerous religious camps could be impacted by the ruling, as well as churches that rent out banquet rooms or wedding halls to the general public. In many instances, these entities operate on a shoestring budget and rely on rental income to remain financially viable.
Alaska’s constitution and statutes generally exempt properties used exclusively for religious worship or charitable purposes from local property taxes. It remains to be seen whether boroughs can use partial or mixed uses to justify partial taxation or denials of full exemptions.
