Pastor Mike Hobby

A small church in La Paz County, Ariz., is facing threat of foreclosure over a more than $50,000 tax bill the state has already said it doesn’t have to pay, but the county is demanding anyway.

“That would almost be a year’s income for this church,” says Mike Hobby, pastor of Church of the Isaiah 58 Project of Arizona. “We operate on just about that in a year.”

Despite the small budget, however, the church is large on helping the poor, growing out of a ministry that focuses on providing showers, clothing, job counseling and free meals to the needy in and around Quartzsite, Ariz. Since 2008, court documents report, the church has provided over 38,000 free meals in the community, winning the support and praise of town officials.

“Mike’s taxes are that he supports all these down-trodden people who come through this flock, and that’s what he contributes,” says Ed Foster, mayor of Quartzsite. “He shouldn’t be contributing tax dollars to the county.”

The state of Arizona agrees, certifying in a letter to Hobby that his church is exempt from both income and property taxes and has been for years.

But La Paz County nonetheless insists the church owes $52,665.27 in back taxes. Furthermore, it placed a lien on the church’s property, sold the lien to a private investor, and now the investor is threatening foreclosure on March 31 if the church doesn’t pay.

In 2006, the church purchased property for its worship facility and filed the paperwork for tax-exempt status with the county’s assessor.

But the assessor delayed the paperwork, refusing to grant exemption until the congregation filed a 501(c)3 determination letter from the Internal Revenue Service, despite the fact that Section 508(c) of the Internal Revenue Code exempts churches from the requirement to apply to the IRS for recognition of exemption.

Then the tax meter started ticking.

By 2008, as the assessor had still not approved the exemption, the county treasurer placed and sold a lien on the property.

In 2009, the church obtained and presented a letter from the State of Arizona Department of Revenue certifying its tax-exempt status effective all the way back to 2006.

After receiving the letter, the county relented and allowed tax-exempt status, but only for 2009 and beyond, maintaining that the taxes from 2006-2008 – which the county had sold lien rights to a private investor – still needed to be paid.

Church of the Isaiah 58 Project of Arizona

Now facing foreclosure, Hobby turned to the Alliance Defense Fund, which filed a lawsuit to protect the church.

“Churches shouldn’t live in fear of being punished or penalized by the government, but this church truly is in fear of losing everything because of nothing other than an unexplained three-year delay in approving paperwork,” said ADF Senior Legal Counsel Erik Stanley in a statement. “Even the Arizona Department of Revenue has provided a letter stating that the church should owe nothing in taxes, but that doesn’t seem to matter to the county assessor, who seems bent on putting this small church into financial ruin for absolutely no reason or cause.”

An ADF-produced video explaining the case can be seen below:

ADF has also appealed to the La Paz County Treasurer Leah Castro to, as the ADF puts it, “clear up the assessor’s error by eliminating the tax liability and removing the lien.”

But Castro refused to act, writing in an email, “I cannot find justification to abate the taxes, including removal of the tax liens.”

Despite the county government’s resistance, Pastor Hobby holds out hope that his church’s ministry will continue.

“I believe the Lord will work it out,” he said. “It’s just going to be through the grace of God we get through it.”

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