Church-run B&Bs, other facilities in Italy could be facing $11 billion tax bill

ROME – Visitors planning a trip to Rome and hoping to save some money by staying in a monastery, convent or any other church-run facility might do well to lock their rates in now, because many of those outfits may soon be jacking up prices in order to pay off millions in back property taxes.

Recently the Episcopal Conference of Italy (CEI) dispatched a letter to Italian bishops informing them that church-run facilities in their dioceses may be facing collection requests for unpaid property taxes from the period 2006-2011, based on a recent ruling from the EU overturning exemptions granted in Italian law.

“The secretary general’s office is monitoring the question and will provide guidance in the coming days,” the letter said.

Although precise figures are hard to come by, one conventional estimate is that the total in unpaid property taxes the Italian government now theoretically is required to collect could be somewhere between $3.7 and $11.6 billion.

However, entities affected by the ruling have the possibility of appeal, and it’s also not clear how energetic Italy’s current conservative government, traditionally supportive of tax benefits for the Church, may be in attempting to enforce collections.

During the period 2006-2011, Italian law stipulated that entities operated by the Church, such as bed and breakfast accommodations, guest houses, restaurants, shops and even cinemas were exempt from property tax requirements as long as some portion of the facility was dedicated to religious purposes, such as housing priests or religious or hosting a chapel.

A 2012 ruling from the European Commission found that arrangement to be in violation of European rules on state aid, but suspended application on the basis that Italy’s outdated tax registry system made collection impossible. A different ruling in 2018 overturned that decision, setting the stage for the recent edict to begin seeking payment for the period between 2006 and 2011.

Riccardo Magi, a member of the lower house of the Italian parliament who’s long led a charge to force the Church to pay more in taxes, hailed the EU decision.

“In Rome, there are hundreds of structures which are completely hotels and which take guests in competition with private companies such as beds and breakfasts and other hotel, but which, as religious entities, have never paid property taxes,” Magi said.

“In fact, between 2014 and 2015, you’ll find that of the 300 structures publicized on the institutional sites of the City of Rome, 40 percent have never paid property taxes, and 20 percent sometimes pay them and sometimes don’t,” he said.

In a recent interview with the Italian newspaper La Stampa, Archbishop Giuseppe Baturi, secretary general of CEI, insisted that the Church is not seeking to avoid tax obligations.

“Whoever operates a commercial activity, for example, a hotel, is obligated, like everybody else, to pay taxes, with exceptions and without discounts,” he said.

However, Baturi argued that in many instances, these facilities aren’t simply for-profit operations but rather are seeking income to sustain charitable activities.

“There’s a risk of losing important services for the weakest among us,” Baturi said, pointing out that the exemptions provided in Italian law don’t concern just the Catholic Church but other scholastic, charitable and athletic non-profit groups.

“In a non-commercial way, often without any profit margin, these entities offer important services that can’t be provided by the market, filling gaps in public welfare and guaranteeing the protection of social rights,” he said.

“A society that deprives itself of the contribution of third sector or non-profit organizations becomes poorer,” Baturi said. “This doesn’t mean not paying what is due, but rather experiencing first-hand the effectiveness of a presence. Depriving the community of a presence of proximity and subsidiarity is an impoverishment for everyone.”

While Baturi said that estimates of the total tax liability created by the EU ruling may be inflated, among other things because determinations still have to be made on a case-by-cases basis of whether individual facilities actually are being used for commercial purposes, it’s nevertheless “useless,” he said, to deny that “this situation could put realities which have as their objective the exercise of charity in difficulty.”