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Kanuga Conference Center is fighting the Henderson County tax collector’s decision to revoke its tax-exempt status, an action that could cost the Episcopal retreat more than $1 million if it stands.
After an investigation into the church-affiliated center’s promotion, marketing and rental of its rooms, cabins and event space, Tax Collector Darlene Burgess ruled that Kanuga is no longer entitled to a tax exemption as a religion-based nonprofit corporation. Unless it wins an appeal to overturn Burgess’s ruling, the Episcopal center would owe $1,063,175.09 in back taxes, current taxes and penalties dating to 2016.
The Henderson County Board of Equalization & Review heard Kanuga’s appeal of the county’s decision in a daylong hearing on Monday before adjourning with plans to resume the matter in early January. Kanuga’s attorneys, Brian Gulden and Anderson Ellis, of the Van Winkle law firm, and Burgess and the county’s attorney, Emily Meeker of Raleigh, agreed that Kanuga would turn over information on 286 groups that had rented rooms and facilities at the conference center and camp and that Kanuga would list its business personal property assets for tax purposes for the past five years.
Founded in 1928 when Bishop Kirkman Finlay bought the bankrupt Kanuga Lake Club from a Charlotte developer, Kanuga has served as a Christian retreat, camp and conference center for parishes and church-affiliated groups from across the U.S. and the Caribbean and several countries in Europe, the Rev. Michael Sullivan, Kanuga’s CEO, told the E&R under questioning from Gulden.
Youth camps focus on teaching the word of God and on confirmation and baptism of attendees. Each room or cabin displays a cross and has no television. Sullivan testified that people who stay at the center sign the Guest Covenant, which requires them to adhere to adhere to Kanuga’s mission to “connect with each other, nature and the Creator” and to its core values, which are Christian-based calls to service, respect, sustainability and stewardship.
“You can’t just show up and say I want to have a wedding,” Sullivan said. “We abide by all the canons for everything that we do related to our faith that is sacramental. … A group in 2019 didn’t want to adhere to our core values so we turned them down and told them no. We share our core values and our guest covenants with everyone. … We engage without apology in the evangelism of the world for the Gospel.”
The tax collector’s revocation of Kanuga property tax exemption was based on its web-based marketing and promotions to the general public and its renting of facilities for non-religious uses.
“Between 2016 and 2021, many events have been held at Kanuga Conferences that are inconsistent with the statutory provisions” allowing a tax exemption for religious organizations, Burgess said as she narrated a slide presentation before the Board of E&R. “Kanuga uses the property to hold for-profit commercial events open to the general public and inconsistent with the religious-based mission for which the exemption was granted.”
Examples, she said, included non-religious conferences and meetings, “weekend getaways” and high-profile recreational events. On its website, Kanuga promotes its lodging for up to 440 guests, the renovated 61-room Kanuga Lake Inn, 39 historic cottages and six guest houses plus meeting space, three dining halls, indoor and outdoor chapels and numerous recreational amenities, including the lake, climbing wall, tennis, shuffleboard and pickleball courts and miles of hiking trails. Examples of non-religion-based events the county cited included Carolina Ophthalmology, Wofford College, First Citizens Bank, a Pardee executive retreat, a Cornell University National Labor Leadership meeting, the filming of the “Dirty Dancing” remake and others.
The county tax office and Kanuga are at odds, too, over events affiliated with the new Ride Kanuga mountain bike park, which draws cyclists of all ages for regular riding and events. The conference center leased 225 acres to Ride Kanuga starting on June 1, 2020. That accounts for 17 percent of the main parcel’s 1,122 acres. Although the 225-acre bike park is non-exempt and currently taxed, the county argued that Kanuga benefits from the for-profit park because the bikers pay for lodging at Kanuga Lake Inn, the cabins and the Camp Kanuga and Camp Bob dormitories. The county cited a report Sullivan made to the Diocese of South Carolina that touted the “Kanuga bike park partnership” that “brings riders to Kanuga to enjoy our property and overnight accommodations.” Ride Kanuga, he said, had “resulted in a significant boost in our lodging reservations and exposed Kanuga to an entirely new demographic.”
Under questioning from Gulden, the Rev. Sullivan said the non-religious organization also took advantage of the spiritual nature of the grounds with meditation and walks in the woods.
“Believe it not, bankers also pray and I have prayed with First Citizens,” he said.
Sullivan said he was dismayed to learn that the county had revoked the center’s tax-exempt status.
“I found it confusing to be honest because I don’t think we are in any way like a regular hotel,” he said. “People come to Kanuga for what it is — a camp and conference center associated with the Episcopal church. … Most people that book a room at the Holiday Inn don’t want a lot of priests around nor loudspeaker prayers nor a cross in every room without a television.” The Christian-focused nature of Kanuga, he said, would be clear to anyone reserving a room. “You could not make that reservation without seeing all those things,” he said. “There is no ability to do it.”
Kanuga’s controller, Mirian Walsh, testified that the amounts the center received was negligible or immaterial compared to its overall revenue and that for some of them — Flat Rock Playhouse, Camplify and Pardee Hospital, for instance — Kanuga offered its facilities at a deep discount as a service to the community.
The county’s investigation found that Kanuga Conferences Inc. and its affiliates received total revenue of $8.9 million in 2018, down from $9.6 million in 2017. The tax collector’s office also compared Kanuga’s marketing to the offerings of Ridgecrest Conference Center, Bonclarken, Camp Tekoa and Mount Shepherd Center, in Randolph County. It said it found that only Kanuga offered its property for non-religious or non-educational purposes, rented to the public and hosted “for-profit commercial events open to the public.” Another spreadsheet was intended to show that Kanuga operated more like Highland Lake Inn and Resort, Horse Shoe Farm or High Hampton resort — all owned by private companies that pay taxes.
“By engaging in commercial activities, Kanuga has placed itself in direct competition with similar for-profit properties,” Burgess said. “Kanuga has an advantage over these other properties because it does not pay property tax. This creates inequity in our tax system.”