Sex and the transfer tax

We who have served ample time as urban affairs reporters know major property tax decisions, even those involving mind-numbing transfer taxes, can be explosive. This one is catalyzed with a sprinkling of clerical sexual abuse scandal. It's no surprise that the $14.4-million tax board decision against Roman Catholic Archdiocese of San Francisco is exploding in the comment space at SFGate and elsewhere.

The argument is over whether, during a self-protective corporate reorganization in 2007, the church made property transfers from one corporation to another, as you can see from reading ARTICLE 12-C: REAL PROPERTY TRANSFER TAX of the city of San Francisco, rather than undertook a lesser corporate reorganization.

Allegations of capricious action and conspiracy are as inevitable in a case like this as appeal to the courts after long administrative struggle. The underlying argument by most of the outraged is that the church is an abused innocent. That raises general issues which have nothing to do with whether the $14.4-million San Francisco transfer tax levy is legally sound.

Because the corporate restructuring which triggered the property transfer tax was precipitated by Catholic sexual abuse claims in other archdioses.

Clerical Whispers explained:

To protect parish and parochial school assets from being used to pay court settlements [for sexual molestation claims], San Francisco’s Archbishop George Niederauer has approved modifications to the archdiocese’s corporate structure.

The status of parochial property has been a contested issue since Archbishop Sean O’ Malley of Boston sold off parish assets and closed 60 parishes to pay off molestation claims against the Boston archdiocese several years ago. In Aug. 2005 the Holy See ruled that the archdiocese of Boston was wrong in thus seizing parish assets.

This ruling did not affect the U.S. courts. Also in Aug. 2005, Spokane U.S. bankruptcy Judge Patricia Williams ruled that churches, parochial schools, and such assets as cemeteries belong to the diocese, not to parishes. In declaring bankruptcy over molestation claims in Dec., 2004, the Spokane diocese had argued that its assets amounted to only $10 million in real estate. Lawyers for alleged victims, on the other hand, said that, since parishes, parochial schools, and other property, belonged to the diocese as well, its assets exceeded $80 million.

Spokane Bishop William Skylstad said Judge Williams' decision had “national consequences." In Dec. 2005, a Portland, Oregon federal bankruptcy judge denied the archdiocese of Portland's claim that creditors could not force the sale of parishes, schools, and other such assets, since the diocese held these in trust for the parishes as beneficiaries. Judge Elizabeth Perris denied the archdiocese's argument that the status of these properties should be determined by canon law. "Who owns the property is, quite simply, not a theological or doctrinal matter," she said. Perris said, "under civil law, the parishes and high schools are not separate civil legal entities."

Archbishop Niederauer explained in a Dec. 4 letter to archdiocesan school principals that, “if a diocese maintains that under Church law parish and school properties cannot be used at the discretion of the bishop, then this concept must be unequivocally enshrined in the civil law structures of the Church.”

So the properties were transferred to a separate corporation, insulating them from the bishop's discretion [including Boston/Portland-like sale to pay of legal claims] and triggering the transfer tax.

Having undertaken standard corporate maneuvering to protect assets against possible legal attack, perhaps by victims of clerical sexual abuse, the Archdiocese of San Francisco had every right to expect to be treated like a corporation. As is occurring.