PresHouse at UW-Madison faces tax threat in legislature

On any given Sunday evening at the University of Wisconsin-Madison, an average of 50 students gather for worship at the PresHouse chapel.  As many as half of them have grown up in the Presbyterian Church, but most come from other denominations or no church background at all.  Following worship, they enjoy a free fellowship meal together, then make their way back to dorms and apartments to study.  A few don’t have far to go.

In 2007, the Presbyterian Student Center Foundation, known as PresHouse, opened an apartment building adjacent to the chapel, housing 240 students in comfortable apartments in the heart of campus.  The apartments are available for rent to any student, regardless of religious affiliation or belief, though all residents sign an acknowledgement of the values of PresHouse, including the encouragement of “personal spiritual exploration.” A full-time chaplain intern lives on-site, offering friendship and support to all of the residents, as well as providing programming and volunteer opportunities open to the entire campus community.  While there is no requirement for worship or participation in the activities of PresHouse, the apartments offer a community environment of support and encouragement, and an opportunity to extend the ministry of PresHouse beyond weekly worship, literally into the places where students live.

Though the PresHouse ministry, which has been active on the UW-Madison campus for over a century, is growing and thriving today, it hasn’t always been so.  As recently as seven years ago, the ministry had dwindled to one of hospitality, primarily renting space to religious and non-profit groups, or for weddings, parties and receptions.  The Rev. Randy Bare, a campus minister at the University of California at Berkeley, approached the PresHouse board with an idea: convert the chapel parking lot into an apartment building and use the income to fund a revitalized campus ministry at PresHouse. Bare was involved with a similar house at Berkeley, which was recently sold because of financial constraints.  Interestingly, PresHouse staff discovered plans and a drawing for a similar plan for student housing dating back to 1925, but it wasn’t until 2007 that the vision was realized.

Co-Pastors Mark Elsdon and Erica Liu came to PresHouse, a subsidiary ministry of the Synod of Lakes and Prairies, as construction was under way.  They are excited about the ministry that is happening through PresHouse and through the apartments in particular.  Plans for expansion include hiring a full-time director of residential ministry, who would help to develop some intentional communities within the apartment building.  Hopes are to create: a community of recent military veterans who face special challenges in the transition back to school; a community for students in recovery from substance abuse, who would benefit in their recovery with mutual support and living with a sponsor; and an Abrahamic interfaith community, where students of Christian, Jewish and Muslim faiths can live and learn together, sharing their experiences with the larger campus community.

All of those hopes could be dashed by a surprise legislative move that would remove the tax-exempt status of the apartments.  “When the apartments were under construction, it never occurred to us that we wouldn’t be tax-exempt,” said Elsdon.  The chapel and apartments are tax-exempt under federal tax codes, and a conversation with the local member of the board of aldermen revealed no further reasons for concern.  Then the city tax assessor approached PresHouse and said that since the apartments didn’t fit into any existing tax exemption, they would have to pay city property taxes, assessed at over $200,000 for the year.  PresHouse appealed the assessment, which was reduced, but for two years they paid the taxes.

In 2009, working with state Rep. Spencer Black, who has since retired from office, they successfully petitioned for a clarification of the state tax code that would ensure tax-exempt status for PresHouse and the apartments.  The elected members of the Madison City Council voted in support of the exemption as well. But in January of this year, the Apartment Association for South Central Wisconsin hired a lobbyist to advocate repeal of this exemption.  A repeal was passed by a joint committee to be included in the state budget, despite the fact that the exemption has no fiscal impact on the state.  If the exemption is repealed, property taxes would go only to the city of Madison.  Most likely, the estimated $200,000 per year tax bill would make it financially impossible to run the apartments, which were designed with large community spaces – a design central to the mission of the apartments and PresHouse, but contrary to maximizing profits.  If the repeal goes through, PresHouse would likely be forced to sell the apartments to the university, at which point the apartments would again be off the city tax rolls. PresHouse is not the only organization that would be affected.  The ministry Youth With a Mission operates similar housing that would also be affected by the repeal.

There are other houses at UW-Madison owned by private, nonprofit foundations that are exempt from property tax under other categories, including a house for recipients of a scholarship for golf caddies and a French house.  So far, no other property tax exemptions have been targeted except for the one affecting PresHouse and YWAM.  Requests for comment from The Apartment Association of South Central Wisconsin did not respond to requests for comment.

As of June 6, the state budget had been approved by a joint committee with the repeal of the tax exemption.  It now moves to the floor of the Wisconsin Assembly and then the Senate for votes. Once agreed upon by those two houses, it will go to Gov. Scott Walker to be signed. It is possible to have the repeal removed at any of those steps.  PresHouse is working to mobilize Wisconsin residents to contact their state representatives and senators to ask them to block the repeal.  State Rep. Don Pridemore and state Sen. Leak Vukmir, both Republicans, are working with a growing coalition to remove the repeal before the budget passes, but the outcome is uncertain. If it reaches the governor’s desk, Walker could issue a line item veto.  Up-to-date information can be found at https://www.preshouse.org/abt.home.cfm. 

Should the budget be signed with the repeal in place, PresHouse might consider legal action to challenge the constitutionality of taxing church-owned property.  PresHouse would prefer to avoid the costs of litigation, both for the foundation and for the state, but they are concerned about the larger questions raised by this struggle.  It raises questions about the rights of churches and nonprofit organizations to use their property in ways that support their ministry or mission, and about what constitutes a “benefit to society.”  The city of Madison has an existing tax exemption for “housing that provides some benefit,” but city attorneys say this only covers low-income housing, and argue that the spiritual support and community outreach of PresHouse do not constitute benefit to society. 

PresHouse leaders worry about the state setting a precedent that could impact other ministries and churches across the country.  Similar houses are operating at the University of Illinois and California Polytechnic State University, and projects are being explored or are currently under construction in West Virginia, Iowa, Ohio and Missouri. As church, presbytery and synod budgets face increasing strain, this model for self-sustaining ministry is especially important, particularly in ministry and outreach to college students and young adults.