The Anchorage Baptist Temple improperly claimed tax-free status for the homes of two of its ministers and now owes the city more than $61,000 in back taxes, the Anchorage Assessor has ruled.
The assessor, Marty McGee, said Friday his decision was final for the two homes in question -- the residences of the Rev. Allen Prevo, the church's lighting technician, and the Rev. Tom Cobaugh, its education minister.
McGee said the church wrongly asserted it was the sole owner of the properties, a requirement under state law for tax-exempt status. The city's nine-month investigation determined that the two pastors held undisclosed ownership interests in their homes, he said.
The ruling could be expanded to include the home of the church's chief pastor, the Rev. Jerry Prevo, Allen Prevo's father, pending receipt of a sworn statement about whether he too holds an unrecorded interest his property, as he did for several years. McGee said he had expected the statement from the senior Prevo on Friday but it hadn't been received by the close of business.
McGee said a draft letter with his decision has been circulated to the church and its legal counsel but he declined to provide a copy to the Daily News because it was a draft. He said he would publicly release the final version of his letter once he receives the affidavit from Prevo.
Anchorage attorney Kevin Clarkson, who represented the church during the assessor's investigation, didn't return a call for comment. Jerry Prevo couldn't be reached. Clarkson has asserted that the church is the legal owner of the properties and correctly claimed the tax exemption.
The ruling will require the church to pay current taxes and six years of back taxes on each of the houses, the most he could levy under the statute of limitations, McGee said. He will not attempt to collect interest or penalties because the taxes were never billed and therefore weren't technically delinquent. He found no evidence that the church or any of its officials committed tax fraud, only that they misinterpreted the law, he said.
The two homes were among 18 parcels -- 14 of them residences -- claimed by the Baptist Temple this year to be tax-exempt. State law bars municipalities from levying taxes on real property owned by religious organizations and used as churches or homes for ministers or religious school teachers.
The Baptist Temple, a megachurch active in conservative politics, holds more tax-exempt residences than any church in Alaska, according to the state assessor. Jerry Prevo and his administrative pastor, the Rev. Glenn Clary, have been deeply entrenched in the Republican Party. Both have been national delegates -- Prevo was chair of the Alaska delegation in 2000 when the party nominated George Bush -- and Clary was once a candidate for state Republican Party chairman.
Allen Prevo has lived on Banbury Drive in East Anchorage in a 2,650-square-foot, tax-exempt house since 2004. But in 2011, he and his wife were in divorce court. Both testified that he had a secret employment agreement with the Baptist Temple that allowed him to accumulate equity -- ownership -- in the house as if the church was carrying a mortgage and he was making monthly payments.
By the time of the divorce, he had built up about $180,000 in equity in the $300,000 home and the judge ruled it was an asset that Allen Prevo had to share with his wife, Holly Jo Prevo.
According to a recording of her testimony, Holly Jo said that Allen had hoped to prevent a copy of his real estate installment sales agreement with the Baptist Temple from showing up in court "because he did not want to get the church in trouble for how they do their housing."
But word leaked out. Before Superior Court Judge Frank Pfiffner accepted Allen Prevo's motion to seal the court file, an advocate for Anchorage gay, lesbian and transgender rights, Melissa Green, obtained some of the documents and wrote about the case on her blog, BentAlaska. Prevo has long been opposed to gay rights legislation and was active against the April gay rights ballot measure.
The Daily News successfully sued to open the divorce file and published a story about the church properties Jan. 15.
In his notes documenting the scope of his investigation, McGee wrote: "Information has come, via public media, that houses exempted as owned by ABT and occupied by clergy may be owned by the individual clergy member. The concern is that there exists unrecorded documentation that an ownership interest has been created in houses where the title recorded with the state indicates ownership by ABT."
McGee said he asked the Baptist Temple to provide every document in its files concerning property ownership. His staff also reviewed personnel files for promises made to Baptist Temple employees regarding their homes.
The church turned over a 2001 sales agreement for Cobaugh for his six-room, 1,824-square-foot home on Sunflower Street, which he still occupies. With the statute of limitations allowing the city to only go back to 2006, the unpaid tax bill for that property is $25,804.
Taxes from 2006 on Allen Prevo's home total $35,483.
The city investigators found two other pastors, Clary and the Rev. Tony Smith, had oral agreements with similar terms. McGee said because Clary and Smith could not use those agreements to force the Baptist Temple to hand over the deeds when the homes were paid for, he determined that those properties were correctly exempt from taxes.
As for Jerry Prevo himself, he said in an interview with the Daily News on Dec. 28 that he wasn't building any personal equity in his home on Baxter Road near the Baptist Temple. His housing agreement with the church allows him and his wife to remain there for life but doesn't provide for a transfer to his name, he said.
But that statement was called into question by a notarized document that city investigators found in the Baptist Temple files dated Jan. 31, 2012, a month after the interview with the Daily News, that purported to document the termination of a sales agreement with Prevo six years earlier.
The document was signed by Floyd Damron, chairman of the church's governing Board of Deacons. The note, written "To Whom It May Concern," said that the Baptist Temple and Jerry Prevo had in fact entered into an installment sales agreement in 1994. The note said the agreement "was terminated" Dec. 24, 2005.
"The termination of this agreement removed any perceived 'ownership interest' in the parsonage in which he was residing," the note said.
Church officials refused to allow the city to photocopy the document but a city investigator copied it by hand and put the copy in the investigative file.
McGee said that document is what precipitated his request that Prevo sign a sworn statement saying he has no ownership or equity in a Baptist Temple tax-exempt property.
The current investigation wasn't the first time McGee has rejected a tax-exempt claim by the Baptist Temple. In 2004, after a complaint was filed by a pair of Republican Party reformers, Clyde Baxley and Ray Metcalfe, McGee ruled that the church was improperly claiming tax exemptions for four homes occupied by a janitor, two teachers and the church's music director.
The Temple paid the taxes, but the church lobbied Juneau for a new law. In 2006, the Legislature acted, adding religious school teachers and any kind of minister as acceptable occupants of church-owned houses for tax-exempt status.
In the last legislative session, Rep. Berta Gardner, D-Anchorage, tried to restore the original law but couldn't get a hearing in committee. She then tried to affix her reform measure to another bill but it failed by a wide margin on the House floor, 11-28.
Reach Richard Mauer at firstname.lastname@example.org or 257-4345.