Should Churches Be Taxed? The Debate on Tax Exemptions and Reinvestment

[Jack21222]

Aren't you guys missing a fundamental problem here: That a non-profit would be non-taxable because by definition there is no profit to tax?

And how are we supposed to know that there's no profit to tax unless they have to file paperwork? Right now, they are exempt from even filing. I think that's the big issue not being addressed in this thread.

What you say is correct. If there is no profit to be taxed, then there is nothing to tax when somebody says "churches should be taxed." However, as I stated in my previous post, they're not even required to file. A church could be making a TREMENDOUS profit but they don't even have to file.

 

[SixNein]

In my opinion, the church shouldn't be subject to any tax exemptions at all. It should be taxed, and the taxes should be reinvested on noble causes, such as health care, education, scientific and technological development, resource and environmental protection, housing security and food security, etc.

Churches are now getting federal and state money through the so called "Faith Based Initiatives." (On a side note, this is one of my great criticisms against Obama) And as others have pointed out, there exists zero accountability. Here is a very rare view inside Catholic books:

http://www.economist.com/node/21560536

In effect, we might as well say that we have a religious tax in America. Where the government transfers the collected tax money to religions of its choice.

In addition, we are also giving them tax exemption. So they don't contribute anything to our society, they are taking from society, and in many cases, they try to influence our political system.IMO, religious people are being very successful in tearing down the wall between church and state.

 

[SunnyBoyNY]

Yet both presidential candidates openly say "God bless America". Seriously, why would you want to tax an organization whole sole purpose is to unite and help people and spread the word?

While acknowledging that the church itself might have hoarded lost of money, the priests and nuns hardly live a lavish life. A lot of money is redistributed back in the society. Also, when I donate money to a local charity, I do not wish to have the money be taxed so further cover expenditures of our ever war-mongering government.

 

[Ryan_m_b]

Yet both presidential candidates openly say "God bless America". Seriously, why would you want to tax an organization whole sole purpose is to unite and help people and spread the word?

You do realize that not everyone agrees with religious beliefs and does not want to see more people converted into them? In addition many people (including those who share your religious beliefs) would rather live in a secular society where religion and government was firmly separate.

While acknowledging that the church itself might have hoarded lost of money, the priests and nuns hardly live a lavish life. A lot of money is redistributed back in the society. Also, when I donate money to a local charity, I do not wish to have the money be taxed so further cover expenditures of our ever war-mongering government.

Whether or not the priests or nuns live lavish lives is immaterial, that's like any other organisation be it for or not for profit arguing it shouldn't pay tax on all it's money because it doesn't give much to it's workers. You'be also touched on the running point of this thread in that many people do not think that religions should be counted as charities as the aim of spreading one's religion is not in of itself a charitable one and charities by definition can have no non-charitable aims.

 

[Curious3141]

This is a good point. Taxing churches effectively gives government control over religious expression.

Quite the reverse, really. This story pertains to a mosque in Chicago, but the principle holds:

http://littlealexinwonderland.wordp...ption-used-to-deny-permit-for-chicago-mosque/

 

[Jack21222]

It turns out that the IRS isn't even enforcing rules that tax-exempt churches not get involved in politics:

http://wtop.com/628/3105426/IRS-not-enforcing-rules-on-churches-and-politics

For the past three years, the Internal Revenue Service hasn't been investigating complaints of partisan political activity by churches, leaving religious groups who make direct or thinly veiled endorsements of political candidates unchallenged.

Some pastors even directly challenged the IRS to taking them to court, by breaking the law and sending them proof that they did it, but the IRS didn't respond:

Last month, more than 1,500 pastors, organized by the Alliance Defending Freedom, endorsed a candidate from the pulpit and then sent a record of their statement to the IRS, hoping their challenge would eventually end up in court. The Alliance has organized the event, called "Pulpit Freedom Sunday," since 2008. The IRS has never contacted a pastor involved in the protest.

 

[mathwonk]

I attended churches for about 40 or more years. In my experience they were not primarily charitable. They were like tax free social clubs and business groups, where one went to find business opportunities. In my last church we had an extremely minimal charity budget if any, and there was a stink when the latest minister wanted to increase it.

Rather it seems to be argued that simply having people sit in pews and be preached at is worthy of a tax break.

Our church also flirted with a philosophy of racial segregation. We had a speaker come in and explain to us how to increase our membership, one method being to become more uniracial in our composition, because as he put it, most people are uncomfortable worshipping in a diverse setting. This hostility to diversity extended to overt attempts to strong arm members to oppose equal rights for non heterosexuals. One Sunday we were asked to physically stand up in church if we opposed such equality. I was quite uncomfortable and conspicuous sitting as almost the entire congregation stood.

In my opinion, there is very minimal if any charitable benefit to exempting churches from real estate taxes on the enormous buildings and land they occupy in my town, although there is one huge local church that does make its buildings available for an annual book festival, most of the others use them exclusively for the benefit of members events.

Even in the case of members there are often minimal services. E.g. when my mother who lived 300 miles away from me, and was a member of the same church for over 50 years, became unable to drive in her 90's, the church had no program and was uninterested in providing any for assisting its elderly members in everyday activities like shopping.

I have similar reservations about so called non profit institutions. In Boston and Cambridge Mass, e.g., Harvard University owns vast real estate holdings and is one of the wealthiest entities in Boston, but all that real estate they and other universities hold, is a dead loss to the city tax base.

The Mormon church and the Catholic church are also extremely wealthy, and when I lived in Salt Lake it was said the Mormons controlled United airlines. It just seems to me to be another example of tax breaks for the wealthy, with a few trickle down charitable benefits.

There is also the political side. In my state there are some churches where the pastors are explicitly exhorting their congregations to vote for one specific candidate for president, although that is prohibited by the law under which they are tax exempt, as Jack21222 said.

the definition of what constitutes a "profit" is also quite arguable. An entity that has so much excess money it can buy businesses and expensive real estate and pay high salaries, arguably is showing a huge profit. recall that even hollywood movies with enormous grosses are often technically said not to show any "profit" after everyone concerned has received a large payout from the proceeds. it is quite correct that not showing a profit goes hand in hand with not paying tax, but doing that is often a matter of accounting for the great sums of money generated in other ways than calling them "profit".

the tax exemption for churches can also be transferred into a tax deferment for individuals. Governor Romney has a trust set up that ostensibly is to provide a gift to the Mormon church on his death, but in the meantime has the ability to increase on investment income tax free, while it pays him and his wife a steady income, with taxes accruing only on that portion which they withdraw. The principal in the trust is well below what current law would require, and the future trend is such that in fact "next to nothing" will actually be left for the charitable donation according to one expert, after the Romneys have received and spent their withdrawals. Thus in this case, and it is common among high income individuals, the tax exemption of the church functions primarily as a tax deferment scheme for wealthy church members.

 

[BobG]

It turns out that the IRS isn't even enforcing rules that tax-exempt churches not get involved in politics:

http://wtop.com/628/3105426/IRS-not-enforcing-rules-on-churches-and-politics


Some pastors even directly challenged the IRS to taking them to court, by breaking the law and sending them proof that they did it, but the IRS didn't respond:

Why would the IRS respond? In spite of the extra publicity created by giving it a special name on a special day, it's not incredibly rare. In one sense, it would be advantageous to evangelicals to have the issue get a little more visibility.

Pew Research Survey

Has the clergy of at your place of worship spoken out about...

                    Importance of voting       About the Presidential candidates

Protestant              54%                                       19%
White Evagelical        52                                        12
White Mainline          32                                         5
Black Protestant        79                                        40

Catholic                48                                           19
White Catholic          46                                           17

Is what you're hearing more supportive of Obama, Romney, or neither?

                       Obama                    Romney             Neither

Protestant               16%                   15%                    69%
White Evagelical          5                    26                     69
White Mainline            7                    13                     81
Black Protestant         45                     0                     55

Catholic                  9                    15                     75
White Catholic            4                    21                     75

 

[Jack21222]

Why would the IRS respond?

Because it's their job to enforce the rules.

 

[BobG]

Because it's their job to enforce the rules.

They did enforce the rules once - in 1995. You still aren't satisfied?

Church at Pierce Creek

Of course, they placed a full page ad in the Washington Times and in USA Today. Interestingly, the church cited the numerous times other pastors/preachers/etc talked about political candidates from the pulpit and the numerous times politicians talked to congregations from the pulpit (Reverend Jesse Jackson, Senators Al Gore, Charles Robb, Frank Lautenberg and Tom Harkin, Senate candidates Oliver North and Harvey Gantt, Governors Bill Clinton, Mario Cuomo and Douglas Wilder, gubernatorial candidates James Gilmore, III and Don Beyers, Jr., Mayors Marion Barry, Kurt Schmoke and Rudolph Giuliani, and numerous others). That defense didn't help them.

The IRS just doesn't care what's said inside of churches. They only care what churches say outside of church. And... there's a certain logic to that.

 

[BobG]

There is a case for taxing the profit that churches make on business ventures. However, the money that is given voluntarily to churches is not taxed because of the first amendment. I think this is better left as it is.

Members of the Unification Church donate all of their income to their church. Their church's leader, the Reverend Sun Myung Moon, owned a fishery and paid his workers well. But he only hired members of the Unification Church, who donated all of their money to the Unification Church, who supported the Reverend Sun Myung Moon to a lavish lifestyle.

He actually did wind up getting in trouble with the IRS. Cute scam, but a little too over the top to actually get away with.

 

[Ben Niehoff]

Haven't read most of the thread. But I think we should tax churches AND allow them to preach politics as much as they want (provided that they are taxed).

The "charity" status of churches was mentioned, which is a point on which I have many doubts. Missionaries are not charity work; they are religious promulgation. I think a church should be welcome to open a genuine charity company separate from the church (i.e., create a separate account). Consequently, such a company should provide real charity, without proselytization.

 

[russ_watters]

I don't think it is reasonable to dis-allow a charity from doing marketing. We'd never do that to the Red Cross or United Way.

 

[Jack21222]

I don't think it is reasonable to dis-allow a charity from doing marketing. We'd never do that to the Red Cross or United Way.

Luckily we're not talking about charities, we're talking about churches.

 

[Containment]

Wouldn't it be a form of double taxation?

 

[russ_watters]

Luckily we're not talking about charities, we're talking about churches.

Who is "we"? Looks to me like about half of the posts in the thread are talking about the connection.

But there is so much shooting from the hip in here, so little connection to reality. Here's the law on churches as non profits: http://en.m.wikipedia.org/wiki/501(c)_organization#section_1

Now, if we revoke the tax exempt status of churches because they don't do enough charity, what does that say for the other organizations on that list?

 

[Cinitiator]

I don't think it is reasonable to dis-allow a charity from doing marketing. We'd never do that to the Red Cross or United Way.

Any non-charitable income of the Church (that is, that isn't provided for charitable causes - spreading religion is *not* a charitable cause at all) should be taxed at a medium rate of about 35%.

 

[Jack21222]

Now, if we revoke the tax exempt status of churches because they don't do enough charity, what does that say for the other organizations on that list?

I haven't argued that churches should have to do charity in order to be a tax-exempt non-profit, so I am in complete agreement there. I do still maintain that they should have to file paperwork to prove they're non-profit (just like every other non-profit), and they should follow the rules barring them from endorsing political candidates (and when they break the rules, the IRS should enforce them).

I think it's a violation of the establishment clause to say religious non-profits are exempt from filing while secular non-profits aren't.

 

[Cinitiator]

I haven't argued that churches should have to do charity in order to be a tax-exempt non-profit, so I am in complete agreement there. I do still maintain that they should have to file paperwork to prove they're non-profit (just like every other non-profit), and they should follow the rules barring them from endorsing political candidates (and when they break the rules, the IRS should enforce them).

I think it's a violation of the establishment clause to say religious non-profits are exempt from filing while secular non-profits aren't.

All the non-charitable income should be taxed though. Even if you play a role as a non-profit charity but only use, say, 40%, or even 65% of that income for charitable causes then your non-charitable income should still be taxed. And all the funds dedicated to spreading religion, homophobia, etc. should be taxed equally at, say, a rate of 35%.

 

[russ_watters]

All the non-charitable income should be taxed though.

Business income doesn't get taxed: only profit.

 

[Jack21222]

All the non-charitable income should be taxed though. Even if you play a role as a non-profit charity but only use, say, 40%, or even 65% of that income for charitable causes then your non-charitable income should still be taxed. And all the funds dedicated to spreading religion, homophobia, etc. should be taxed equally at, say, a rate of 35%.

I have to disagree with this, because the rules would get complicated and I can imagine some grey area about exactly what spreading your religion is. Just treat all 501c3 organizations the same.

 

[Dickfore]

No, I do not think churches should be taxed.

This.

 

[SunnyBoyNY]

Not all non-charity related funds are spent on missionaries. I can write about the local RC church here on our block-- masses are free though most people donate a few dollars here and there. To my understanding, most money is redistributed back into society through the priest- I believe some people in need might get cash, others get free food. Russ Watters mentioned Red Cross -- while I agree with him on most points, Red Cross does not really help people on the street in thus city but church does. Winters here in upstate NY are tough.

I am not sure I would tax a local church when the priest does not have enough money to fix the roof.

On the other hand, when one looks at the opulent city of Vatican, one gets doubts about money flow.

This is a tough nut to crack, really.

 

[Ben Niehoff]

Business income doesn't get taxed: only profit.

This I didn't know. That changes the game a little.

 

[Gokul43201]

Business income doesn't get taxed: only profit.

Do you think churches should be exempt from having to file paperwork to show they have zero business profit?

 

[Jimmy Snyder]

A church is a non-prophet?

 

[russ_watters]

Do you think churches should be exempt from having to file paperwork to show they have zero business profit?

Meh, dunno. I can see the IRS wanting to reduce their paperwork and they wouldn't get much out of having such paperwork filed. Is that really a big issue though?

There is a good reason why you would treat a church differently from, say, the Girl Scouts: Churches are mostly self funded while the Girl Scouts operates much more like a business, drawing substantial income from selling products.

As I said before, people (not you specifically) are really shooting from the hip here, having no idea what they are talking about and just making stuff up as they go. I can't fathom what people are envisioning a church's finances look like, but most of this discussion is nonsensical, or at best, just inapplicable. We're discussing baseball, but talking about touchdowns and baskets and penalty kicks.

I think the problem here is people just have no idea how a corporations work and what the tax implications are.

For example:

My homeowner's association is a 501c corporation...and we don't do any charity. If there's money left over from our landscaping and snow removal at the end of the year, where do people think that money goes? Even if it got distributed to the homeowners, it would just be a rebate of fees paid. In reality, it goes into a fund for next year.

Our association has no 3rd party "owners" who could take our profits, if such profits existed.

 

[Jack21222]

Our association has no 3rd party "owners" who could take our profits, if such profits existed.

But churches are different, particularly so-called "mega-churches" down south. Or the church of Scientology. There are plenty of people that could pocket large amounts of profit from a church.

I still maintain it's a violation of the establishment clause to give churches special benefits over similar secular organizations.

 

[DavidSnider]

There is a good reason why you would treat a church differently from, say, the Girl Scouts: Churches are mostly self funded while the Girl Scouts operates much more like a business, drawing substantial income from selling products.

We're not talking about honest-to-goodness local churches that use the funds to keep a roof up. We're talking about megachurches, like Creflo Dollar or Scientology. It's a whole different ball game.

 

[russ_watters]

Who is "we?" The OP says nothing about megachurches. And just who do you guys think might be profiting? Jack, you say they are different: HOW?

 

[DavidSnider]

http://firstread.nbcnews.com/_news/2008/04/04/4436565-church-directed-money-to-fl-gov

 

[russ_watters]

http://firstread.nbcnews.com/_news/2008/04/04/4436565-church-directed-money-to-fl-gov

What point should I be getting from that link?

 

[Jack21222]

Jack, you say they are different: HOW?

How is a church different from a homeowners association? You said that your homeowners association has no owners that could take a profit if such profits existed. Churches do. I thought that was very obvious.

If you want specific examples of somebody who could potentially take profits out of a church, consider Craig Groeschel. Now, I am NOT accusing him specifically of doing any such thing, but it is an example of a person who would be in a position to do something if he were unethical, unlike your homeowners association who has no such person.

 

[russ_watters]

Churches have owners beyond just the members? Can you substantiate that? WHO are they? No, it most certainly is not obvious: it flies in the face of what churches are.

And I see nothing in that wiki link to support the idea that the pastor profits from the church beyond his income. Are you saying he owns it? Can you prove it?

I think you are making assumptions about things you do not know here.

 

[Jack21222]

Churches have owners beyond just the members? Can you substantiate that? No, it most certainly is not obvious: it flies in the face of what churches are.

And I see nothing in that wiki link to support the idea that the pastor profits from the church beyond his income. Are you saying he owns it? Can you prove it?

I think you are making assumptions about things you do not know here.

I'm saying he would have the ability to do so, as the founder of the church and senior pastor. He's basically in control of the church. By the way, if you had read my post, you would have seen that I was not accusing him of taking profits from the church beyond his income. I very specifically stated that he wasn't. I just said that he could siphon money off of the church if he wanted to. You know, maybe the "church" buys him a new Lamborghini for "church business" or something.

Once again, I am NOT accusing him of doing such a thing. All I am saying is that it's possible.

And because they don't have to make their finances available to the IRS like EVERY OTHER non-profit, he could easily do this and get away with it.

Here's an article from charitywatch.org which addresses this kind of thing: http://www.charitywatch.org/articles/Televangelists_Lack_Oversight.html

If you want a news source, here is something from USA Today: http://usatoday30.usatoday.com/news/washington/2007-11-07-televangelist-probe_N.htm

I'm not just making up hypothetical situations here. There are pastors right now that are apparently getting away with tax-free multi-million dollar homes and Rolls Royces. And before you ask, no I cannot prove it, BECAUSE THEY'RE NOT REQUIRED TO FILE THEIR FINANCES. The churches being investigated by the senate told the government to go screw themselves, basically, knowing that nothing could be done.

Anyway, I can agree that this flies in the face of what churches are SUPPOSED to be, but it does NOT fly in the face of what these churches are.