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

[Jim Kata]

yes, the church should be taxed.

 

[Jack21222]

For clarity, here are the top 25 paid CEOs of non-profits:
http://www.charitywatch.org/hottopics/Top25.html

So it is possible to become rich legally by running a non-profit.

There are 3 issues with this:

1) Since churches don't file 990s, you don't see any pastors on that list. However, according to my charitywatch.org article, several pastors should be very high on that list. Four of them from one church would crack the top 10, if they were the CEOs. If the churches filed 990s, I'm willing to bet that list would be dominated by churches. Not that that's necessarily illegal, but it would certainly raise questions about whether the church is designed for the public benefit or for the private benefit of the CEOs.

2) Those salaries might be relatively small when compared to the overall operating budget of the non-profits. Contrast this with Bishop Eddie Long Ministries:

A third-party informant provided the Committee with financials from Bishop Eddie Long Ministries, a nonprofit related to Long's church, from the years 1997-2000. They show for those years, 62% to 89% of the nonprofit's total expenses were spent on items the Committee deemed "questionable," such as clothing, housing, cars, and even compensation payments for a person who did not work any hours at the organization.

3) Pastors get special income tax benefits not available to secular CEOs. They get a tax-free housing allowance, which in the case of Randy and Paula White is:

An insider told the Committee that Randy and Paula White enjoy a $3.5 million condo in Trump Tower in New York City, in addition to their $2.6 million home in Tampa, Florida. Their church allegedly pays a "housing allowance" for both residences.

The CEOs on your list don't get this tax-free

 

[Jack21222]

By the way, here is a link to the 60 page Senate report: http://finance.senate.gov/newsroom/ranking/download/?id=1f92d378-baa2-440d-9fbd-333cdc5d85fc

This paragraph demonstrates why I feel churches should have to file:

The number and types of entities, including private airports and aircraft leasing companies, raises concerns about the use of the church‘s tax-exempt status to avoid taxation. However, given the four churches‘ refusal to provide tax information, we are unable to determine whether and the extent to which they are reporting and paying taxes on income earned in those entities.

Bolding mine.

 

[Oltz]

The point is Jack that if a group of people decided to worship me as a God and establish a religion whose main tenant was attempting to make me the richest man in the world who owns 50 of everything I could ever want. That would and could be a valid religion that the government could make no effort to suppress the free exercise thereof. The only way to stop that practice is for people to willingly stop being a member of the church.

Or maybe a church that believes god will bless them if we get CO2 to 600 PPM in the atmosphere so they buy every member a jet to fly around as much as possible and the least fuel efficient homes and cars they can find.

Our founders choose religious freedom that is why the MUST be treated differently then other organizations to do otherwise would restrict the freedom to practice any faith you choose. Who are you to judge what form of worship others willingly choose for themselves?

The members have the power to make a church stop being a church if they do not agree with its allocation of resources nobody else does.

 

[Jack21222]

The point is Jack that if a group of people decided to worship me as a God and establish a religion whose main tenant was attempting to make me the richest man in the world who owns 50 of everything I could ever want. That would and could be a valid religion that the government could make no effort to suppress the free exercise thereof.

But the government could tax such a church. I've posted links that support my point of view. If you're going to claim that it's unconstitutional for the government to tax religion, you'll need to post a source for that. But I can tell you right now, you're wrong.

For my source, read from the bottom of page 17 to the top of page 20 in that senate report I linked above. The key sentence is at the bottom of page 17:

The Constitution does not require the government to exempt churches from federal income taxation or from filing tax and information returns.

It doesn't get any clearer than that.

 

[Oltz]

Jack,
For clarity do you want religion taxed on profits or do you just want informative paper work filed?

Do you want all "non-profits" taxed or just the churches (they all make profit as we have gone over before)?

I think trying to revoke tax exemption from churches would prove unconstitutional unless it was a flat and low percent ~10% or less and you would need to apply it to all non profit organizations. Any ability to change the rate could easily become discriminatory which is why its safest to simply not have one.

I would also like to point out that your document is a memo and although some sections are well supported with court precedent it still contains a lot of opinion and conjecture none of which can be considered official.

Your document makes it clear that informative paperwork is already required of religious schools and other entities other then the church itself. In addition churches are already subject to detailed reviews of financials. If all you want is a 990 I am fine with that but the thread is about taxing churches. on page 20 it states

We are of the opinion that there is not a constitutional prohibition on requiring churches to file Form 990 information returns. For instance, currently religious organizations that are not churches are required to file Form 990, and churches, as well as other religious organizations are subject to detailed examinations of their books and records. We believe that both of these current law requirements are constitutional and, with respect to examinations of books and records, can be considered more intrusive than the filing of Form 990.

 

[Jack21222]

Jack,
For clarity do you want religion taxed on profits or do you just want informative paper work filed?

I want churches to file 990s, and those that don't meet the requirements to be a non-profit should be taxed like any other for-profit organization.

Do you want all "non-profits" taxed or just the churches (they all make profit as we have gone over before)?

I want all non-profits that violate the terms of being a non-profit to be taxed.

I think trying to revoke tax exemption from churches would prove unconstitutional unless it was a flat and low percent ~10% or less and you would need to apply it to all non profit organizations. Any ability to change the rate could easily become discriminatory which is why its safest to simply not have one.

Nobody cares what you think. I've provided a government source which states that you're wrong. It's up to you to provide a source for your claims.

I would also like to point out that your document is a memo and although some sections are well supported with court precedent it still contains a lot of opinion and conjecture none of which can be considered official.

Meanwhile, you have provided nothing to support your claims.

Your document makes it clear that informative paperwork is already required of religious schools and other entities other then the church itself.

If you read the report, you'd see that many religious schools and "other entities" (including airports and plane leasing companies) are being considered "church affiliated" and are therefore not filing 990s.

In addition churches are already subject to detailed reviews of financials. If all you want is a 990 I am fine with that... on page 20 it states

The IRS member interviewed claims that churches are subject to detailed reviews of their books, however, THIS IS NOT DONE IN PRACTICE. If you actually read the report instead of cherry-picking one line, this becomes clear. In the very next paragraph, it states:

Audits are IRS‘s primary method for enforcement of the tax laws. In determining which organizations to examine (and in determining whether the organizations selected for examination are complying with the tax laws), the IRS relies heavily on the information supplied in the Form 990. But because the Code exempts churches both from applying to the IRS for recognition of exemption and from filing annual returns, it is difficult for the IRS to discover and investigate abuses of section 501(c)(3) status by churches that do not choose to seek recognition of tax-exempt status or to file annual returns.

So yes, the IRS has the ability to audit a church. However, without a 990 to go by, they cannot know which churches need to be audited. In practice, it simply is not done. The quote you posted was about what the IRS is legally allowed to do by the Constitution. You presented it as something which is actually done, which is false. Please don't quote-mine to give the opposite impression of what the author intended.

but the thread is about taxing churches.

Right, and I'm saying that churches that do not meet the qualifications to be a non-profit should be taxed. This is clearly about taxing churches. There are some churches that need to be taxed as for-profit, but without a requirement to file 990s, the IRS has no leads to go on to determine which ones.

 

[Cinitiator]

Business income doesn't get taxed: only profit.

What's your point? This is a false equivalence fallacy.

 

[Jack21222]

What's your point? This is a false equivalence fallacy.

His point is that if a church is run properly, there is nothing to tax. So even if you wanted to subject churches to a 100% tax rate, they'd still pay nothing in taxes.

 

[Oltz]

Jack you provided a source that says the constitution does not require the us to exempt anyone from taxes. This does not mean that taxing churches is necessarily constitutional the Constitution does not require the government to exempt anyone from having their hand cut off for stealing an apple. That does not mean its constitutional to start removing hands.


You do not seem to want to tax churches you want to tax organizations that pose as churches and violate the requirements for tax exemption. So not really taxing the church.

I agree 990's should be required but everything is already in place for legal recourse against the types of organizations you want taxed. As long as the church owns the assets and not an individual they can still legally do whatever they want even if they file a 990 they can buy million dollar homes if the congregation wants to donate money for them or stays in a church that does these actions.

You do not get to decide what is appropriate for a religion to spend its money on or how much they are allowed to play the clergy or elders or whatever.

So I agree with you 990's should be required and any church that violates the rules of tax exemption should be taxed but those rules are pretty loose and would not "bust" most of the churches you are upset about.

I will again post those requirements from the IRS
http://www.irs.gov/pub/irs-pdf/p1828.pdf

To qualify for tax-exempt status, such an
organization must meet the following requirements
(covered in greater detail throughout this publication):
■ the organization must be organized and operated
exclusively for religious, educational, scientific, or other
charitable purposes,
■ net earnings may not inure to the benefit of any
private individual or shareholder,
■ no substantial part of its activity may be attempting
to influence legislation,
■ the organization may not intervene in political
campaigns, and
■ the organization’s purposes and activities may not
be illegal or violate fundamental public policy

As long as the assets are not transferred to an individual other then salary its not a violation. They also tend to be pretty lax in enforcing the ban on lobbying by Non-profit NGO's.

So you want the IRS/Police to be more proactive in investigating fraud and revoking Tax exempt status and you want organizations to provide more information to make the abuses easier to spot.

 

[Jack21222]

I'm happy that you agree with my suggestions, even if you disagree that there's an actual problem to be addressed.

As long as the assets are not transferred to an individual other then salary its not a violation.

Excessive salary and benefits can certainly be a violation. If the salaries paid to the leadership of an organization are too disproportionately high compared to the rest of the organization, it can be argued that the organization's primary purpose is to benefit the leadership. This is against the private inurement rules. If a church brings in $50 million, and $30 million goes to the private benefit of the leadership, their friends, and their families, I believe this raises serious doubts as to whether the organization chiefly exists for the public benefit or the private benefit of the leadership.

You do not get to decide what is appropriate for a religion to spend its money on or how much they are allowed to play the clergy or elders or whatever.

The IRS does if that religion wants to keep its non-profit status.

So you want the IRS/Police to be more proactive in investigating fraud and revoking Tax exempt status and you want organizations to provide more information to make the abuses easier to spot.

This is exactly correct.

 

[Oltz]

This is exactly correct.

Then we are good more oversite is needed and periodic review of tax-exempt/Non-Profit organizations needs to be more consistent. To facilitate this more documentation should be required.

Neither of us want to "tax the church" we want to tax the abusers of the system.

Have fun Jack

 

[jetwaterluffy]

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.

I don't know what the girl scouts are, but scout groups are given charity status automatically. http://scouts.org.uk/supportresources/1578/registering-as-a-charity?cat=262&moduleID=10
http://www.charity-commission.gov.uk/Start_up_a_charity/Do_I_need_to_register/Types_of_charity_index.aspx

Charities that are members of particular national organisations or movements (such as Scouts, Guides and some Christian denominations) are 'excepted' from registration

 

[nanosiborg]

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.

I agree that church income and property should be taxed. I think that all so called nonprofit organizations' incomes and real estate holdings should be taxed. The ideal of equality requires it.

By not taxing them in these ways we are giving them a preference which is at odds with our avowed egalitarian ideals and the doctrine of separation of church and state.

Religious organizations simply cannot be given any special consideration or respect in a society that, supposedly, values freedom of thought, expression, and action.

 

[russ_watters]

I agree that church income and property should be taxed. I think that all so called nonprofit organizations' incomes and real estate holdings should be taxed. The ideal of equality requires it.

By not taxing them in these ways we are giving them a preference which is at odds with our avowed egalitarian ideals and the doctrine of separation of church and state.

Religious organizations simply cannot be given any special consideration or respect in a society that, supposedly, values freedom of thought, expression, and action.

Several problems, most of which have already been pointed out as others have made similar mistakes:

1. Corporate income is not taxed, only profit. So:
2. You can't tax the profit of a non-profit because there is no profit to tax.
3. It is fine to want to tax property, but this is not an inequity with churches since all non-profits have the same tax exemption.

 

[nanosiborg]

Several problems, most of which have already been pointed out as others have made similar mistakes:

1. Corporate income is not taxed, only profit. So:
2. You can't tax the profit of a non-profit because there is no profit to tax.
3. It is fine to want to tax property, but this is not an inequity with churches since all non-profits have the same tax exemption.

Thanks russ watters. Regarding #2, so you tax the income. Is there a problem there? Regarding #3, I agree that this is not an inequity with churches, but I think that the real estate holdings of non-profits should be taxed in accordance with the local laws that other private property owners are subject to. Just my current opinion which might change as I learn facts and arguments.

 

[russ_watters]

Thanks russ watters. Regarding #2, so you tax the income. Is there a problem there?

Destroying the economy? If a business has no profit, but you tax the income instead, the business loses money and has to shut down.

 

[nanosiborg]

Destroying the economy? If a business has no profit, but you tax the income instead, the business loses money and has to shut down.

Ok. Point taken.

I'll just say that I agree with Jack21222's views on this.

 

[mgrwlondon]

I don't think that the church should be tax. For, church are composes of people with different status in life and mostly have been paying tax in the government. And if church should tax, who do you think will shoulder in paying it?

 

[Hlafordlaes]

Point of order on the nomenclature. In accounting terms, business income is profit. It is revenue (monies in) that is not taxed; that would ignore costs.

As for taxing religious organizations, we'd need to re-think a few things, such as when monies are donated by the organization to a third party. Cost, or charitable gift that reduces tax liabilities directly? At any rate, I think at least all businesses and properties owned by religious organizations should be taxed, else the government is in effect aiding in establishing religion.

 

[Oltz]

Point of order on the nomenclature. In accounting terms, business income is profit. It is revenue (monies in) that is not taxed; that would ignore costs.

As for taxing religious organizations, we'd need to re-think a few things, such as when monies are donated by the organization to a third party. Cost, or charitable gift that reduces tax liabilities directly? At any rate, I think at least all businesses and properties owned by religious organizations should be taxed, else the government is in effect aiding in establishing religion.

The inverse could also be said if they start taxing the things you mention more then they already are they would be inhibiting the establishment of new religion and pushing struggling ones out of existence.

 

[willbell]

If it can be shown that in any way a church or any of its branches is supporting a politician through advocacy, I think it is reason for them to be taxed. Perhaps if it can be shown they are making big profits (say more than a $1000000 a year), then they should be taxed the same as a business.

 

[BobG]

If it can be shown that in any way a church or any of its branches is supporting a politician through advocacy, I think it is reason for them to be taxed. Perhaps if it can be shown they are making big profits (say more than a $1000000 a year), then they should be taxed the same as a business.

If a church is preaching "prosperity theology", such as some televangelists like Oral Roberts and others, are they really non-profit organizations?

That's still not a reason to tax all churches. The IRS does do a fair job of sorting out the real churches and the scam tax shelters, but the line gets drawn somewhere and those barely on the right side of the line sometimes seem more like scams than real religions.

 

[willbell]

That's still not a reason to tax all churches. The IRS does do a fair job of sorting out the real churches and the scam tax shelters, but the line gets drawn somewhere and those barely on the right side of the line sometimes seem more like scams than real religions.

I didn't say I wanted to tax all churches, I said I wanted to tax them:

If it can be shown that in any way a church or any of its branches is supporting a politician through advocacy, I think it is reason for them to be taxed. Perhaps if it can be shown they are making big profits (say more than a $1000000 a year), then they should be taxed the same as a business.

I believe this would be broader than the current definition but I didn't say all churches.

 

[russ_watters]

I wonder how many churches even could turn a profit of a million dollars a year? And again, how do you find profit in a non-profit? By definition, there is no profit!

 

[willbell]

I wonder how many churches even could turn a profit of a million dollars a year? And again, how do you find profit in a non-profit? By definition, there is no profit!

You would be surprised, megachurches are growing everywhere in the US and elsewhere. And they are only non-profit by the virtue that they are a church, even if the church happens to be filthy rich its still non-profit, Scientology is a church but they are most decidedly not non-profit even if they take their corporate social responsibility more seriously. They still have revenue and it will show up in their income statement.

 

[Windowmaker]

Taxing the church? Are you guys for real? Lol.

 

[thoughtgaze]

a thousand times, yes they should be taxed

 

[Tosh5457]

What do you mean by church? Don't you mean religious organizations? Tax jewish sinagogues and muslim mosques too, at least AFAIK Christians are much more charitable than those.

 

[Evo]

This thread is about taxing church profits. Disparaging remarks about groups of people will not be tolerated, and have been deleted.