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

[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.

 

[DavidSnider]

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?

That's exactly what MY link showed.

 

[russ_watters]

You said:

You said that your homeowner's association has no owners that could take a profit if such profits existed. Churches do.

Grammatically, the second sentence is a claim that churches do have owners beyond the members. Are you saying that you didn't intend that there are additional owners, just additional people who could take a profit? That's not what ownership is or what profit is.

Saying that "he's basically in control of it" and could therefor steal money from the church is not a fundamental difference between him and my homeowner's association: My homeowner's association has a President who has a check book and who could write himself checks.

But none of that has anything at all to do with whether churches (mega or otherwise) should pay taxes. Moreover/as such, this has nothing to do with the IRS -- it isn't the IRS's job to look for civil fraud (the pastor in this hypothetical would be stealing from the members, not the IRS). The IRS is not some private accounting firm that audit's peoples' books to look for fraud or skimming. What you are suggesting would make the IRS a government sponsored accounting firm that would -- free of charge, I assume? -- provide financial audits to companies to help them ensure their staff isn't stealing from them. Wow, would companies ever love that! Except for the private accounting firms who currently provide that service, of course! And taxpayers who would have to fund it.

I think, also, you are under the false impression that non-profits file full-fledged tax returns that would provide the sort of information required do do such an audit. I'm pretty sure they don't -- I looked that up and IIRC, non-profits file a little form that states that they are non-profit and that's it. Filing that form to register as a non-profit is what churches are exempt from. I'll have to double-check that/get the link when I get home later, though.

 

[russ_watters]

That's exactly what MY link showed.

Please provide a quote, because I'm not seeing it.

 

[russ_watters]

And regarding the million dollar homes and cars, Jack: how do you know if you say no proof exists?

We have standards here, guys. You can't just fling carp at the wall an hope they stick. You need to substantiate - and explain - your claims.

 

[DavidSnider]

My example was too sketchy as they closed the inquiry prematurely. Let's go to a more clear cut example.

http://en.wikipedia.org/wiki/Peter_Popoff#Financial_details

In 2003, Popoff's ministry received over $9.6 million and by 2005 the amount had risen to over $23 million. In that year he and his wife were paid a combined total of nearly $1 million, while two of his children were receiving over $180,000 each.[37] Financial data is not available for Popoff's ministry following 2005 because Peter Popoff Ministries changed from a for-profit business to a religious organization in 2006, making it tax-exempt.[38] Popoff purchased a home in Bradbury, California for $4.5 million in 2007.[39][40] He reportedly drives a Porsche and a Mercedes-Benz.[41] Some reporters are urging those who have donated money to Popoff in hopes of receiving "miracles" to report to the Attorney General in their state.[8]

 

[russ_watters]

Let me be more succinct: If the pastor of a church is stealing money from the church coffers, what does that have to do with whether or not the church should be paying taxes?

 

[russ_watters]

My example was too sketchy as they closed the inquiry prematurely. Let's go to a more clear cut example.

http://en.wikipedia.org/wiki/Peter_Popoff#Financial_details

Clear cut about what? What is your claim, David?

 

[Jack21222]

You said: Grammatically, the second sentence is a claim that churches do have owners beyond the members. Are you saying that you didn't intend that there are additional owners, just additional people who could take a profit? That's not what profit is.

You're nitpicking. I am saying that churches have founders and presidents who are de facto owners. They have boards which do whatever the president tells them to do, and the president often has "emergency powers" to overrule the board. Please read the links I posted for the source.

Saying that "he's basically in control of it" and could therefor steal money from the church is not a fundamental difference between him and my homeowner's association: My homeowner's association has a President who has a check book and who could write himself checks.

I know of no homeowners association that is run like a church. There is no founding president who has a life position as far as I'm aware in homeowners associations.

But none of that has anything at all to do with whether churches (mega or otherwise) should pay taxes. Moreover/as such, this has nothing to do with the IRS -- it isn't the IRS's job to look for civil fraud (the pastor in this hypothetical would be stealing from the members, not the IRS). The IRS is not some private accounting firm that audit's peoples' books to look for fraud or skimming. What you are suggesting would make the IRS a government sponsored accounting firm that would -- free of charge, I assume? -- provide financial audits to companies to help them ensure their staff isn't stealing from them. Wow, would companies ever love that! Except for the private accounting firms who currently provide that service, of course! And taxpayers who would have to fund it.

All of this is incorrect. It absolutely IS the IRS's job to look for abuses of non-profit status. If the president of a non-profit is having his non-profit organization buy him million dollar vacation homes and a private jet for personal use, that would jeopardize the non-profit status of the church, AND THEN THE NON-PROFIT WOULD HAVE TO BE TAXED. However, churches are exempt from reporting such expenditures that could cause the church to lose its non-profit status. Therefore, this IS about whether churches should be taxed. My argument is that churches should have to file tax returns like every other non-profit, and if they break the rules (such as the http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Inurement-Private-Benefit---Charitable-Organizations), they should be taxed.

I think, also, you are under the false impression that non-profits file full-fledged tax returns that would provide the sort of information required do do such an audit. I'm pretty sure they don't -- I looked that up and IIRC, non-profits file a little form that states that they are non-profit and that's it. Filing that form to register as a non-profit is what churches are exempt from. I'll have to double-check that/get the link when I get home later, though.

Non-profits DO file full-fledged tax returns. Here's the 990-ez form, which small non-profits have to file: http://www.irs.gov/pub/irs-pdf/f990ez.pdf

There is a more complicated version for the larger ones. Churches are exempt from filing that tax return. Here is the source for that:

http://www.irs.gov/Charities-&-Non-Profits/Churches-&-Religious-Organizations/Filing-Requirements

Generally, tax-exempt organizations must file an annual information return ( Form 990 or Form 990-EZ). Tax-exempt organizations that have annual gross receipts not normally in excess of $25,000 ($50,000 for tax years ending on or after December 31, 2010) are not required to file the annual information return; they may be required to file an annual electronic notice, however. In addition, churches and certain church-affiliated organizations are excepted from filing.

I'll state it once again: I believe such exemptions for religious 501c3 organizations is a violation of the establishment clause.

 

[DavidSnider]

As others have said the issue isn't merely whether they should pay taxes, but whether it's prudent for them to file. I don't see any reason for legitimate churches to pay taxes.

But do you think that guys like Popoff shouldn't have to file simply because they call themselves a church?

 

[Jack21222]

As others have said the issue isn't merely whether they should pay taxes, but whether it's prudent for them to file. I don't see any reason for legitimate churches to pay taxes.

Well, the original post was whether churches should pay taxes. I think we're all in agreement that not only should they not pay taxes, if they're run within the rules, they CAN'T pay taxes, because they don't make any profits. I don't feel there can be any argument there.

My problem is that we've given churches shielding from the prying eyes of the IRS as well as congress, so scam artists are using churches as a way to personally profit with no oversight from anybody.

 

[Oltz]

For the record according to this document from the IRS on page 2 it clearly states that not all churches are non-profit.

http://www.irs.gov/pub/irs-pdf/p1828.pdf

Churches and religious organizations may
be legally organized in a variety of ways
under state law, such as unincorporated
associations, nonprofit corporations,
corporations sole, and charitable trusts

People have been using the term Non-Profit as synonymous with 501(c) Tax exempt but there are mutliple classes under that category its actually Non-Profit or Religious associations

Page 3 goes on to say : Bold Mine

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

Nothing says you can not have a for Profit church but those profits can not be transferred to an individual they are essentially a surplus to be used if down years ever occur.

They are also taxed on Unrelated Business income. http://www.irs.gov/Charities-&-Non-Profits/Unrelated-Business-Income-Tax

page 16 from original link

In general, rents from real property, royalties, capital
gains, and interest and dividends are not subject to the
unrelated business income tax unless financed with
borrowed money.

Thus they can use prior profit to grow more profit that can still not be transferred to any individual. Hence the fact that its a criminal fraud charge when church workers do skim off the top AFAIK even if a church "de certified" and gave up its church status the profit it made while tax exempt would still be non transferable and would need to be used for charitable works(as operating expenses would then be gone) or back taxes would be due on it.

There has been allot of back in forth in this thread with little or no support of anything saying "treat all non profits the same" is meaning less as Non-profit does not mean they do not make a profit as an enterprise it means no individual profits from the success that is true of churches and NGO's.

By the way do you really think large global NGO's do not have vast holdings and a stock portfolio? I assume you want them taxed as well and that this has nothing to do with religion.

In addition each state has its own say in which properties are considered tax exempt for example depending on what state a catholic university is in it may or may not be a tax exempt institution.

Atheists, environmentalists and the religious all evangelize for their point of view treat them all the same and currently as far as I can find proof of we pretty much do. You need to keep in mind these other "non-profit" organizations are what at most 50 years old? Give them a couple hundred years to grow.

 

[Oltz]

In 2003, Popoff's ministry received over $9.6 million and by 2005 the amount had risen to over $23 million. In that year he and his wife were paid a combined total of nearly $1 million, while two of his children were receiving over $180,000 each.[37] Financial data is not available for Popoff's ministry following 2005 because Peter Popoff Ministries changed from a for-profit business to a religious organization in 2006, making it tax-exempt.[38] Popoff purchased a home in Bradbury, California for $4.5 million in 2007.[39][40] He reportedly drives a Porsche and a Mercedes-Benz.[41] Some reporters are urging those who have donated money to Popoff in hopes of receiving "miracles" to report to the Attorney General in their state.

Does the church own the house or did they buy it it and deed it to the man? That would be a violation and fraud charges could be filed against the church and the man.

Does the Church own the property and allows him to use it as part of his station? That would be allowed as long as it was actually approved by the church.

If not approved Members could have an investigation started for misuse of funds and he could be charged with fraud.

Or did he purchase it from his own account with his savings from that lavish income you cited as prior to church gaining exempt status that he can still be collecting? Legal

None of these would be investigated by the IRS they are criminal charges the IRS would only get involved in the end stages of the first case.

Non-profits can own property and can have employees in "company" housing and with company vehicles what kind of perks do you think Greenpeace gives to its CEO?

 

[Jack21222]

Does the Church own the property and allows him to use it as part of his station? That would be allowed as long as it was actually approved by the church.

As far as I can tell in Copeland's case, it's this one. However, note that Copeland IS the church. The bylaws for his church state:

the Committee reports that the bylaws of Copeland's church state: "Kenneth Copeland, as Co-founder and ex officio member of the Board of Directors, shall in his sole discretion be empowered to veto any resolution of the Board which he the President shall determine is not in the best financial or operational interests of the Church."

He has full control over it.

In a different church with similar extravagances, there is the following:

A former staff member of Whites' church told the Committee that the church did conduct regular board meetings; however, all decisions concerning the church were made by the Whites and their CFO. The board members typically found out "after the fact."

So here, the "church" is just a rubber stamp for the founder to approve whatever he wants for himself.

Please explain to me how this is NOT the IRS's business. The IRS determines what constitutes personal benefit.

Also, I'm not quite sure what your mention of Greenpeace has to do with anything. If they're violating the rules, I'd like to see them have their status revoked, as it looks like it has been in New Zealand. But at least Greenpeace has to file their tax returns unlike churches.

 

[Oltz]

If his followers do not complain there is no legal wrongdoing and as long as the transactions are done either in his name or the churches without a transfer to him after the fact its not a violation and would not be for any non-profit or church.

If the church still owns the house that's fine if he bought the house in his own name with his own assets that's fine. If the members think he is paid to much they can stop giving or leave the church. If they think he is skimming they can report it to the police and have a fraud investigation. If you look at county records and see that the loan was cosigned by the church or the deed was signed over to him then you can call the IRS and report an illegal personal gain.

Any organization church or not is subject to those things happening. Watch dog organizations look into transactions and records and members should know what they are paying for if a church feels its founder needs a golden toilet that is legal if the red cross wanted its ceo to drive a delorean made of gold it could as long as it maintained ownership and was willing to loose the donors it would turn off.

 

[Jack21222]

If his followers do not complain there is no legal wrongdoing

This is completely wrong and I can no longer take your posts seriously. It is NOT up to his followers to determine if the church is chiefly operating in the public interest rather than the private interest. This is a ridiculous argument to make.

http://www.boardsource.org/Knowledge.asp?ID=3.165

 

[mheslep]

I think I've caught most of the thread. I'm curious why it did not quickly go to the free exercise clause. Apologies if I missed it.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof ...

Elsewhere the Constitution uses terms implying balance, i.e. "unreasonable" in the fourth amendment on searches. Not here. The term is "free".

As to the possibility of taxation impeding free exercise, to my mind that's been asked and answered. See Justice Marshall, 1819, McCulloch v. Maryland:

“...the power to tax involves the power to destroy."

The IRS has, IIRC, ample enforcement mechanisms and a set of rules with teeth to prevent some clown with a bible and twelve year old wife calling himself a tax free church. But beyond that, the law seems to be government hands off, at least in US.

 

[russ_watters]

Non-profits DO file full-fledged tax returns. Here's the 990-ez form, which small non-profits have to file: http://www.irs.gov/pub/irs-pdf/f990ez.pdf

I stand corrected -- I remembered my research.

And if all you care about is equality in reporting that's fine, but what you are saying is still suggesting more:

You're nitpicking. I am saying that churches have founders and presidents who are de facto owners. They have boards which do whatever the president tells them to do, and the president often has "emergency powers" to overrule the board.

So they have power because of their unofficial stature that puts them in a position to be able to steal from the church? Official or unofficial, such people exist in most organizations. They are not unique to churches.

If all you intended from your first post this morning is that there are some people in churches who are in a position to steal from those churches, then we have no disagreement and you misread the post you were responding to if you thought we did.

All of this is incorrect. It absolutely IS the IRS's job to look for abuses of non-profit status. If the president of a non-profit is having his non-profit organization buy him million dollar vacation homes and a private jet for personal use, that would jeopardize the non-profit status of the church, AND THEN THE NON-PROFIT WOULD HAVE TO BE TAXED.

Both parts of that are ridiculous. If someone is stealing from a non-profit, it has nothing whatsoever to do with the non-profit's tax exempt status.

With a quick google, you can find thousands of examples of people stealing from non-profits. Here's two:
http://www.wsbtv.com/news/news/local/woman-steals-thousands-dollars-autism-nonprofit/nHXGz/
http://smallbusinessbandits.com/archives/389

In the first case, the theft was found by the home office of the national non-profit. In the second, the theft was found by the IRS looking into the thief's personal tax return. In neither case did the IRS find the fraud by looking into the non-profit's finances nor does either article suggest that the non-profit's tax exempt status would be in jeopardy as a result. The idea that it would be just does not follow logically. But hey -- it's your claim and since there are thousands of examples of people stealing from non-profits, you should be able to substantiate it if it is true.

I think I know where you're going with that (more later*) and it is wrong-headed thinking.

The second link, by the way is an organization that tracks such stories and they have hundreds, so if such examples exist, I would think you will find them there.

I'll state it once again: I believe such exemptions for religious 501c3 organizations is a violation of the establishment clause.

I'd quibble with it being an establishment clause issue, but otherwise have no objection to the reporting as an issue of fairness.

*Where I think you are going with this is that it sounds like you and David don't think it should be possible to get rich legally by being a pastor. Is that what this is about?

 

[russ_watters]

But do you think that guys like Popoff shouldn't have to file simply because they call themselves a church?

According to your link, Popoff had a for-profit business and filed taxes, but still committed fraud. He's now converted that business to a church and your assumption appears to be that he's probably still committing fraud. I think that's a reasonable assumption. But we're getting further and further away from the subject of the thread. Popoff is not a typical church. If the law is so loose that it enables a fraudster like him to easily conceal fraud and evade taxes, fine -- I give. Make churches file that form.

But stealing from non-profits is such a rampant problem even for non-profits that file that form and a different problem than tax evasion, I think that's not the most effective solution. Mandatory 3rd party auditing would be my suggestion for fixing such fraud.

 

[russ_watters]

*Where I think you are going with this is that it sounds like you and David don't think it should be possible to get rich legally by being a pastor. Is that what this is about?

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.

 

[Jack21222]

I stand corrected -- I remembered my research.

And if all you care about is equality in reporting that's fine, but what you are saying is still suggesting more: So they have power because of their unofficial stature that puts them in a position to be able to steal from the church? Official or unofficial, such people exist in most organizations. They are not unique to churches.

If all you intended from your first post this morning is that there are some people in churches who are in a position to steal from those churches, then we have no disagreement and you misread the post you were responding to if you thought we did. Both parts of that are ridiculous. If someone is stealing from a non-profit, it has nothing whatsoever to do with the non-profit's tax exempt status.

With a quick google, you can find thousands of examples of people stealing from non-profits. Here's two:
http://www.wsbtv.com/news/news/local/woman-steals-thousands-dollars-autism-nonprofit/nHXGz/
http://smallbusinessbandits.com/archives/389

In the first case, the theft was found by the home office of the national non-profit. In the second, the theft was found by the IRS looking into the thief's personal tax return. In neither case did the IRS find the fraud by looking into the non-profit's finances nor does either article suggest that the non-profit's tax exempt status would be in jeopardy as a result. The idea that it would be just does not follow logically. But hey -- it's your claim and since there are thousands of examples of people stealing from non-profits, you should be able to substantiate it if it is true.

I think I know where you're going with that (more later*) and it is wrong-headed thinking.

The second link, by the way is an organization that tracks such stories and they have hundreds, so if such examples exist, I would think you will find them there.
I'd quibble with it being an establishment clause issue, but otherwise have no objection to the reporting as an issue of fairness.

*Where I think you are going with this is that it sounds like you and David don't think it should be possible to get rich legally by being a pastor. Is that what this is about?

I'm less interested in them stealing from their churches as I am structuring their churches for their own private benefit. It is against the rules for a non-profit to be structured primarily for the private benefit of an individual, yet that is exactly what is supposedly happening in some cases.

From a previous link (you can decide how non-biased it is, but it seems legit to me), here are the rules:

Private inurement is prohibited in all nonprofits. It happens when an insider — an individual who has significant influence over the organization — enters into an arrangement with the nonprofit and receives benefits greater than she or he provides in return.

The most common example is excessive compensation, which the IRS condemns through intermediate sanctions (significant excise taxes). Insiders — referred to in IRS parlance as "disqualified persons" — can be high-level managers, board members, founders, major donors, highest paid employees, family members of any of the above, and a business where the listed persons own more than 35 percent of an interest.

I argue that many churches are in violation of this rule, however without tax filings, they're allowed to keep all of their finances, including compensation, secret, so the IRS has no way to enforce this rule for churches. This was the subject of a 2007 Senate investigation, but because the rules are structured the way they are, most of the churches investigated just told the Senate to go pound sand, and so the investigation went nowhere.

And you were close about where I was going. I don't think you should be able to get rich tax-free as a pastor. To me, it looks like some con artists have seized onto the church loopholes and are using them for private gains. They're starting a church, getting people to donate them money, and then taking that money and distributing it to themselves and their "ordained" family members tax-free, and then refusing to disclose any of this to the government. Such "churches" are clearly scams, and the federal government is protecting these scams.

I should be careful with the word "scam," because I don't have any specific evidence that they've done anything illegal (because they're not required to open up their books so any evidence would be hidden), but according to my charity watch link, the Senate investigation revealed the following:

It also pays to be the friend or family member of a televangelist. For example, during the Committee investigation, Randy and Paula White divorced. An insider told the Committee that Randy placed his new girlfriend and her parents on payroll and gave them retroactive back pay. According to the Committee, Paula's son, and Randy's son, daughter, and father are also on the payroll. The four of them were paid a total of $420,000, $560,000, $700,000 and $1,075,000 in 2004, 2005, 2006, and 2007, respectively.

Also:

The Committee reported that some churches allegedly ordain friends, family members, and employees solely for the purpose of getting them the income tax exclusion.

If this isn't a scam, it sure smells like one.

 

[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.