A church in The Woodlands is accusing the area municipal utility district of allegedly imposing illegal taxes disguised as fees in a newly filed lawsuit.

What you need to know

Grace Woodlands filed the lawsuit Nov. 15 against the Southern Montgomery County Municipal Utility District and each of its board members in their official capacity.

The church, located just off the North Freeway south of Rayford Road, is expanding its campus after opening its first church building in 2007.

Grace Woodlands built an office building that will serve as the church's international headquarters and has plans to create a new 4,000-seat auditorium.

"In order to have a functioning building, they needed working utilities, including water, and to do so, they needed to tap into the utility district's water system," said Ryan Gardner, an attorney with First Liberty representing the church.

In the lawsuit, the church said it was determined that an 8-inch line was needed to run from one of the district's main lines along the parkway in front of the church to a new water meter on the church's property.

"The District made clear that the actual cost of labor, materials, and equipment to install the tap would not exceed $24,900," the lawsuit reads.

Over several months, Gardner said the cost for the work increased.

"When we kept having ongoing conversations with them about this, it jumped up to around $60,000, and then it jumped to over $100,000, and then finally came back down to $80,000," Gardner said. "As you can see from that, these are just arbitrary numbers they're throwing out."

The lawsuit said there were additional fees the church had to pay that were specific to nontaxable entities.

"The district doubled down and quoted Grace a new tap fee of $147,938.85—more than doubling the prior quoted fee—consisting of the actual cost of installation of $24,900, plus an additional fee of $123,038.85 the district claimed applied to non-taxable entities," the lawsuit reads.

Under Texas law, Grace Woodlands, like other religious organizations, is tax-exempt.

"If you add it up, it would be their tax obligations going into so many years in the future if they were, in fact, a taxable entity," Gardner said. "They are not."

Ultimately, the church paid $83,780, described as a "Capital Recovery Fee," in protest.

What's next

Grace Woodlands filed suit, hoping to recoup the money paid beyond the cost to install the water tap.

The attorney for the Southern Montgomery County Municipal Utility District declined to comment, citing the ongoing lawsuit.

From ABC13.