Grace Community Church in The Woodlands, Texas is a large, growing, non-denominational church serving a diverse group of people in the North Houston area. A longstanding part of the Montgomery County community, Grace provides weekly Sunday worship services to approximately 2,000 plus another 800 on Wednesday night, and offers numerous, ongoing opportunities for its members to engage in religious exercise through the local community. Grace provides valuable services to its neighbors in Montgomery County through various ministries and outreach projects to carry out Grace’s deeply held religious beliefs in ministry and evangelization.
To meet the needs of the church’s mission, Grace purchased property in Montgomery County to construct a new church building and related facilities. As the construction project was underway, they needed water services from the county districts utility system. The connection involves a water tap to connect the pipes which delivery water to the new facility.
When new facilities need water services from the district’s system, users have the option to acquire their own installation services at the districts approval or pay to have the district complete the water tap connection. In communications with the district, it was made clear to the church that the actual cost of labor, materials, and equipment to install the tap would not exceed $24,900.
Based on that information, Grace Church requested that the district install the 8-inch water tap. To their surprise the district quoted a tap free of $61,500 which consisted of the installation fee plus 150 percent of the actual installation cost. Grace Church expressed their concern for the significant increase from what was originally quoted. Rather than lowering the cost to the first amount, the district recognized Grace’s tax-exempt status and responded with a new tap fee of $147,938—more than double the prior quoted fee. Broken down, the fee was itemized at $24,900 for the actual cost of installation, plus an additional fee of $123,038.85 the district claimed applied to non-taxable entities.
To complete, occupy, and use the Church for its intended religious exercise, Grace had no choice but to accede to the district’s demands under protest and pay the fees, otherwise Grace Church would not be able to use the facility to carry out its mission.
On behalf of Grace Church, First Liberty Institute and the law firm of King & Spalding filed a federal lawsuit, arguing that the county’s water tap fee violates state and federal law.
“Churches like Grace Community are important parts of the communities they serve,” Craig Stanfield, a partner in the firm of King & Spalding, said. “The resources of churches are best used in fulfilling their mission to serve their congregations and communities, not in paying unlawful taxes. We look forward to securing a refund for Grace Community.”
“The county’s water tap fee scheme is a thinly veiled illegal property tax on Grace Community Church,” said Jeremy Dys, Senior Counsel and First Liberty Institute. “Any attempt by the government to collect taxes from a church under the guise of other fees is underhanded and unlawful.”
News Release
For Immediate Release: 11.15.23
Contact: John Manning, media@firstliberty.org
Direct: 972-941-4453
Water Utility Imposes Illegal, Overly-Inflated Water Service Fee on Local Church
Grace Community Church sues Montgomery County for illegal excessive fees they were forced to pay for their new facility.
The Woodlands, TX—Attorneys from First Liberty Institute and King & Spalding LLP filed a lawsuit today against the Southern Montgomery County Municipal Utility District, claiming it broke the law when it singled out Grace Community Church with excessive water connection fees.
You can read the complaint here.
“Churches like Grace Community are important parts of the communities they serve,” Craig Stanfield, a partner in the firm of King & Spalding, said. “The resources of churches are best used in fulfilling their mission to serve their congregations and communities, not in paying unlawful taxes. We look forward to securing a refund for Grace Community.”
The District initially stated the actual cost to connect to the water line would be $24,900 for labor and materials. When the church requested that the District install the water tap, they followed with a fee of $61,500 which amounted to 150% of the actual installation cost. When the church challenged the amount based on its tax-exempt status, the District countered with a tap fee of $147,938—more than doubling the prior fee. To complete, occupy, and use the new church facility for its intended religious purposes, Grace Community had no choice but to accede to the District’s demands under protest and pay the fees.
“The county’s water tap fee scheme is a thinly veiled illegal property tax on Grace Community Church,” said Jeremy Dys, Senior Counsel and First Liberty Institute. “Any attempt by the government to collect taxes from a church under the guise of other fees is underhanded and unlawful.”
The Church’s petition argues, “The tap fee imposed by the District on its face exceeds the cost of government action here—the installation of the tap. Indeed, one iteration of the tap fee was equivalent to fifteen years of taxes and the last iteration exceeds what Grace would pay in taxes over seven years if Grace were not a tax-exempt entity. Therefore, the tap fee constitutes an impermissible tax. The District and its Directors acted without legal or statutory authority in imposing this tax disguised as a tap fee, and Grace is entitled to a refund of the disputed amount.”
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About First Liberty Institute
First Liberty Institute is a non-profit public interest law firm and the largest legal organization in the nation dedicated exclusively to defending religious freedom for all Americans.
To arrange an interview, contact John Manning at media@firstliberty.org or by calling 972-941-4453.
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