WINNIPEG, MB-A Winnipeg church won a legal battle in January that could have seen local churches pay more in taxes.

The conflict concerned two unoccupied floors of the Winnipeg Centre Vineyard's four-storey building on Main Street. The top two floors of the sprawling 100-year-old building currently store furniture, work materials and clothing.

Eventually, the Vineyard hopes to convert the floors to housing and a community resource centre for people in need.

The Vineyard, which draws 400 people on Sunday mornings, purchased the derelict building in February 2002 and invested more than $500,000 in renovations before moving in. The church also has a drop-in centre providing street people and prostitutes with coffee and laundry facilities, as well as a place to talk.

"We're on the main traffic track here for all the people who come from the North End," says John Rademaker, one of three team pastors at the Vineyard. "They all walk by the door here."

They were surprised when the City of Winnipeg's assessment department appealed a decision by the City's Board of Revisions to exempt the Winnipeg Centre Vineyard from paying taxes on the building, targeting the two upper floors used for storage.

Under current laws, property owned by a religious denomination that is occupied and used by the denomination primarily as a church, synagogue or place of religious worship, is exempt from paying municipal taxes.

The city argued that since there was no worship taking place on the top two floors, the Vineyard should be taxed on those floors; an amount of $5,000 annually. The consequences of such a ruling would stretch well beyond the Vineyard church. By narrowing the interpretation of the legislation, the city would in effect open all religious organizations to potential taxation.

"Every church in Manitoba who isn't using some of their space primarily for religious purposes could be taxed," says Rademaker. That could have included gymnasiums, office areas, basements and kitchens.

"The City saw a potential taxation opportunity," he says.

The Court of Queen's Bench ruled in favour of the church in March 2003, but the city appealed again.

"Because of the wide-reaching and precedent-setting nature of the case, they needed a higher court ruling on it," says Rademaker.

The Manitoba Court of Appeal ruled in favour of a broader interpretation of the legislation on January 7 of this year. In fact, the three judges who make up the Court of Appeal did not even call to hear the Vineyard's arguments before making the unanimous decision.

"Churches are about charity and religion," says Rademaker. "They exist because of people donating. They don't earn money. It frankly would have been ludicrous to put churches on the same level as commercial enterprise because of a narrow interpretation of the legislation."

The Vineyard made a conscious decision not to go public with the case while it was going on. They did not want to provoke media attention and paint the City of Winnipeg in a negative light, Rademaker says.

"The City was not attacking us," he says, emphasizing it was not a tax grab. "This was way more than that. They were making arguments for the letters of the law."

Though Winnipeg mayor Glen Murray was aware of the issue, Rademaker insists the appeal was driven by the tax assessment department.

"This was an administrative legal issue for the City of Winnipeg. It was not a political issue," he says.

While the ruling was in favour of the Vineyard, the city hails the Manitoba Court of Appeal's ruling as a smaller loss compared to the original, general ruling of the Court of Queen's Bench, which ruled that the Vineyard "uses the entire building to carry out the objects of the church."

"I think [the lower courts' decision] would have had a much broader impact," says Denise Pambrun, a City of Winnipeg lawyer who worked on the case. She gives an example that a stand-alone clergymen's residence could have been tax exempt under the first ruling.

The Manitoba Court of Appeal's ruling that the Vineyard's space is "ancillary to its purpose as a place of worship" has less impact than the first ruling, she says. In other words, the two floors are simply considered part of the building's use, like washrooms and hallways.

"I think it's fair to say it's a little bit of an expansion as how we have historically treated it," says Pambrun. "It's difficult to say if this case would have any ramifications."

The Vineyard is now hoping other churches of all faiths will help pay the law firm that made their win possible. Aikens MacAuley Thorvaldson accepted the church's case despite their inability to pay the legal fees, because of the potential far-reaching negative impact to the religious community. They were also confident they could win.

The Vineyard plans to contact Muslim, Jewish and Christian organizations to establish a legal fees fund in order to repay a portion of the fees incurred, which totalled more than $40,000. Rademaker calls it a "wonderful posture of generosity" that churches can take toward the corporate community in gratitude of their success in court.

"I think it was a just outcome, given the impact that the religious groups of Manitoba have on the social and spiritual fabric of their communities," says Rademaker.