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While the federal government and the Catholic church wrestle over healthcare-required contraception and abortions, city and county governments may have found a unique method of backdoor taxation on nonprofits.

They simply double the water bill for churches and schools.

That’s the focus of a court case that is being carefully watched by churches and nonprofits across the nation. Soon, an Oregon judge will decide whether to allow the practice.

One of the 600-plus ordinances for the city of Canyonville, Ore., states that “churches, schools, and non-profits like our local YMCA and a non-profit senior residence will be charged double the normal water rates and substantially elevated sewage fees.”

One of the current ordinances explains that the surcharges are to be paid “in lieu of taxes.”

Meanwhile, a sign posted in city hall, tells Canyonville residents that they pay less on their water bills than neighboring towns. The non-profits, who are paying double, say that their surcharge is the reason.

Among those affected is Canyonville Christian Academy, founded in 1924. Officials there stumbled onto the double billing, finding that the extra surcharges date back three decades and may total close to $200,000, according to school officials.

Said the school headmaster, Cathy Lovato, “We offered to settle this for a very modest amount last Christmas but the city said ‘no.’”

The school, which operates on a modest budget, once voted to shut its doors in 1995. Alumni and friends donated money to help the school rebound.

Although the ordinances are written to cover all non-profit water users, CCA believes that the city regulations have principally targeted 10 churches and four Christian schools with the biggest bill going to the Canyonville Christian Academy.

Doug Wead, a New York Times bestselling author who is on the school board, said last June CCA notified the city government that it had discovered the improper billing but according to the academy nothing has been done to fix the problem. According to CCA, the city has held four executive/closed council meetings with their legal counsel present.

School officials say that the school has consulted with the Oregon attorney general, a state legislator, multiple mayors of other cities, and multiple law firms.

According to Lovato, “To my knowledge, no one has advised CCA that the double charges on churches and church schools is legal. Many seem to believe that this is a clear violation of the U.S. Constitution.”

On Oct. 19, 2011 CCA offered to resolve the issue by taking a small fraction of the amount of overcharges of the last six years in the form of credits on future bills. Of course, the school also asked that the city desist in the double charges.

Lovato said the city notified the school on Dec. 13, 2011 that the offer was rejected. Meanwhile, the surcharges on nonprofits by the city continues, and is reflected in the most recent water bill mailed to CCA this month.

“We asked a senior city official a year ago about the rationale and legality of the surcharges, and why they were doing this and he replied, ‘We do it because we can,’” Lovato said.

Canyonville is a small town in Southern Oregon with a population of 1,700.

CCA has appealed to the Douglas County Circuit Court in Roseburg, Ore., for a decision on the dispute.

If the court upholds the city, it may provide other city and county governments with a backdoor method of taxation on churches and non-profits.

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