Should all religions in the US be tax-exempt?

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vela
Staff Emeritus
Homework Helper
I think this claim that churches should have to earn their tax-exempt status by doing good for the local community is a red herring. The reason for the tax exemption is to keep the government from promoting some religions over others via the tax code.

Frankly, I'd rather put up with the abuses of some churches than giving Congress the power to tax churches. I can only imagine what kinds of taxes would have been passed after 9/11 targeting Muslims if Congress had that power.

CRGreathouse
Homework Helper
I think this claim that churches should have to earn their tax-exempt status by doing good for the local community is a red herring. The reason for the tax exemption is to keep the government from promoting some religions over others via the tax code.
Fair enough. But there's also reason to be concerned about the power of, e.g., the Church of Scientology over local governments, which seems to cut in the other direction. Thoughts?

I'm primarily interested in arguments of what is *right* or *desirable* rather than what might or might not be allowable under a particular interpretation of the legal system as it stands now.

Gokul43201
Staff Emeritus
Gold Member
The reason for the tax exemption is to keep the government from promoting some religions over others via the tax code.
Is that really the reason? I hadn't heard that argument before. I always thought the argument was one along the lines of promoting the common good.

Frankly, I'd rather put up with the abuses of some churches than giving Congress the power to tax churches. I can only imagine what kinds of taxes would have been passed after 9/11 targeting Muslims if Congress had that power.
I see it being an obvious violation of the Separation clause if some religious organizations were taxed at different rates than others, and therefore can't imagine it would have any hope of surviving judicial challenge. I don't, therefore - at least not yet - see that making them tax-exempt is a necessary means of protecting Separation (I'm not even convinced it is a sufficient means). But then, maybe I'm just not thinking as creatively as a determined Congressperson (plus staff) might.

Gold Member
II see it being an obvious violation of the Separation clause if some religious organizations were taxed at different rates than others, and therefore can't imagine it would have any hope of surviving judicial challenge. I don't, therefore - at least not yet - see that making them tax-exempt is a necessary means of protecting Separation (I'm not even convinced it is a sufficient means).
If one or more of the televangelical empires were targeted, I would expect their tax-exempt status would fall quickly, leading to a bulk review of the tax-statuses of all "religious" non-charitable organizations at higher court levels.

Gokul43201
Staff Emeritus
Gold Member
If one or more of the televangelical empires were targeted, I would expect their tax-exempt status would fall quickly, leading to a bulk review of the tax-statuses of all "religious" non-charitable organizations at higher court levels.
Ah, I see the merit in that argument. My previous objection, therefore, is withdrawn.

mgb_phys
Homework Helper
If one or more of the televangelical empires were targeted, I would expect their tax-exempt status would fall quickly, leading to a bulk review of the tax-statuses of all "religious" non-charitable organizations at higher court levels.
They still wouldn't pay any tax - just like corporations they would have their headquarters in an offshore tax haven.
Vatican city is hardly likely to charge the catholic church corporation tax!

vela
Staff Emeritus
Homework Helper
Is that really the reason? I hadn't heard that argument before. I always thought the argument was one along the lines of promoting the common good.
Here's a summary of a 1970 Supreme Court ruling about the religious tax exemptions:

It looks like there are several reasons recognized for the exemptions: historical, common good, and constitutional.
I see it being an obvious violation of the Separation clause if some religious organizations were taxed at different rates than others, and therefore can't imagine it would have any hope of surviving judicial challenge. I don't, therefore - at least not yet - see that making them tax-exempt is a necessary means of protecting Separation (I'm not even convinced it is a sufficient means). But then, maybe I'm just not thinking as creatively as a determined Congressperson (plus staff) might.
A justification for a blanket exemption is to avoid the possibility of messing with the tax code to tax some religious organizations more than other through non-transparent methods. Obviously, if a law targeted, say, the Catholic church by name, it would quickly be rejected by the courts as violating the First Amendment. On the other hand, the government could achieve the same result by jacking up taxes in regions which just happen to have a large concentration of Catholic churches if churches weren't exempt.

Gokul43201
Staff Emeritus
Gold Member
Obviously, if a law targeted, say, the Catholic church by name, it would quickly be rejected by the courts as violating the First Amendment. On the other hand, the government could achieve the same result by jacking up taxes in regions which just happen to have a large concentration of Catholic churches if churches weren't exempt.
Agreed. And thanks for the link.

vela
Staff Emeritus
Homework Helper
Fair enough. But there's also reason to be concerned about the power of, e.g., the Church of Scientology over local governments, which seems to cut in the other direction. Thoughts?
I think this is part of the general problem with the influence of any special interest over the local, state, and federal government, but I can certainly understand why people get angry with a church trying to influence elections while not having to play by the same rules as other organizations. I certainly felt that way here in California when Prop. 8 passed largely due to the efforts and backing of the Mormon and Catholic church.
I'm primarily interested in arguments of what is *right* or *desirable* rather than what might or might not be allowable under a particular interpretation of the legal system as it stands now.

loseyourname
Staff Emeritus
Gold Member
I don't have a problem with their tax-exempt status, but I see no compelling reason that high-earning religious organizations shouldn't have to file public 990s like every other non-profit does. They could then be held to the same anti-wealth hording rules that apply to foundations, and furthermore, it would lend transparency to their transactions, which is the basic principle behind why we make public corporations and governments release GAAP-compliant financial statements at regular intervals. How many people need to be found using churches for money laundering before we end this?

I don't have a problem with their tax-exempt status, but I see no compelling reason that high-earning religious organizations shouldn't have to file public 990s like every other non-profit does. They could then be held to the same anti-wealth hording rules that apply to foundations, and furthermore, it would lend transparency to their transactions, which is the basic principle behind why we make public corporations and governments release GAAP-compliant financial statements at regular intervals. How many people need to be found using churches for money laundering before we end this?
I agree with this 100%.

My feeling, too. If an organization is a charitable enterprise, they can take a load off public services, and they deserve to be tax-exempt. I certainly don't think that the Salvation Army needs to be taxed because they do so much good, and they target their efforts locally, using volunteers, as much as possible.
As I said, I think that all landowners (churches, schools, individuals, etc.) should be taxed wrt the same standards. As well as consumers (sales tax). As well as individual incomes (income tax). And yes, the Salvation Army should be subject to the same taxes that any enterprise is subject to. If they want to then spend their net income on helping others, then we can be certain that they're, truly, a charitable organization.

As for the argument that different churches or religious organizations or charitable organizations or private schools might be taxed differently, the answer is to simply tax them all the same, ie., according to the same standards as the rest of us. There's simply no reason, in a society that ostensibly respects all idealistic orientations equally, to give preferential treatment to some orientations and not to others. I'm an atheist. Where's my tax exemption for being an atheist?

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CRGreathouse
Homework Helper
I don't have a problem with their tax-exempt status, but I see no compelling reason that high-earning religious organizations shouldn't have to file public 990s like every other non-profit does. They could then be held to the same anti-wealth hording rules that apply to foundations, and furthermore, it would lend transparency to their transactions, which is the basic principle behind why we make public corporations and governments release GAAP-compliant financial statements at regular intervals. How many people need to be found using churches for money laundering before we end this?
You present a compelling argument. Any idea how much of a burden this would be, in terms of gross cost of compliance across US churches? Anyone?

mgb_phys
Homework Helper
You present a compelling argument. Any idea how much of a burden this would be, in terms of gross cost of compliance across US churches? Anyone?
For a poor little one room baptists church supporting it's minister - about as difficult as filling out a regular tax form for a self employed carpenter.
For a mega church with it's own cable TV channel and a fleet of corporate jets - failry high, or at least to the point at which you are paying the accoutnants more than you would pay to the government.

Personally I fail to see the need for tax exemption for any religion, beyond the political reality that such organizations have money, clout, and the ability to create a hysterical voting block.

loseyourname
Staff Emeritus
Gold Member
You present a compelling argument. Any idea how much of a burden this would be, in terms of gross cost of compliance across US churches? Anyone?
Well, that's the reason for the $25,000 annual budget requirement, but generally, smaller non-profits usually have someone that prepares their tax returns for free as an in-kind donation. Often, the corporate treasurer on the Board of Directors is a CPA and is the person who does it. Only a large organization with a large budget and more complicated operations would have the need of contracting out the work to a CPA firm. I'm not sure how church leadership is organized, for instance, whether they even have boards of directors, but I'm sure they have tax accountants somewhere in the pews who would donate the time if it's a relatively small job. The problem as I imagine it is, however, isn't necessarily restricted to tax reporting. It's more to do with the general untraceable nature of cash donations. Who is to prove that$1 million in cash came from a local drug dealer rather than from 1,000 tithing churchgoers? Neither comes with a paper trail attached and drug dealers aren't cutting checks from banks you can subpoena records from; they're just donating straight cash to funnel back into legitimate operations so that they can deposit it into a bank.

Still, it's hard to see how some level of additional transparency would hurt. If a church with a small and poor membership suddenly shows huge amounts of cash, it would at least attract attention.

GTank7
Small churches, yes, megachurches, no.