A Reexamination of Tax-Exempt Status for Churches/Charities

[Solon]

The thread on Oaks' speech brought back to mind this interesting little article. http://www.economist.com/node/180107...ry_id=18010759

If tax dollars are subsidizing charitable/religious organizations, I think the US public deserves more transparency and accountability.

I don't think losing tax-exempt-status necessarily qualifies as religious persecution, but it sure would hurt the bottom-line of many churches.

[woot]

The thread on Oaks' speech brought back to mind this interesting little article. http://www.economist.com/node/180107...ry_id=18010759

If tax dollars are subsidizing charitable/religious organizations, I think the US public deserves more transparency and accountability.

I don't think losing tax-exempt-status necessarily qualifies as religious persecution, but it sure would hurt the bottom-line of many churches.

I've long advocated that the prohibition against political campaigning by tax-exempt organizations needs to be enforced. Churches just aren't afraid of losing that status, so many don't seem to even attempt to follow the laws on this.

An example needs to be set. I nominate the Mormon church for their meddling in Prop 8.

[old_gregg]

I've long advocated that the prohibition against political campaigning by tax-exempt organizations needs to be enforced. Churches just aren't afraid of losing that status, so many don't seem to even attempt to follow the laws on this.

An example needs to be set. I nominate the Mormon church for their meddling in Prop 8.

do you feel the same way about 501c3's that donate time/money to support climate change legislation?

[woot]

do you feel the same way about 501c3's that donate time/money to support climate change legislation?

If my understanding is correct, 501c3s are not allowed to advocate for any legislation, so yes, doing so in support of climate change legislation is illegal.

[PaloAltoCougar]

501c3s are strictly prohibited from campaigning on behalf of candidates for office. However, 501c3s are permitted to advocate for legislation, provided such advocacy does not comprise a "substantial part" of the organization's activities. The definition of "substantial part" is determined on a case-by-case basis, however for large organizations, the IRS advises that spending less than 5% of its total exempt expenditures on legislation is not a substantial part (the percentage is greater for smaller groups).

One may object to the LDS Church's involvement with Prop. 8, but given the breadth of the Church's non-advocacy activities, a Prop. 8-based challenge to its tax exempt status would be futile under the law as currently written and applied.

[Moliere]

501c3s are strictly prohibited from campaigning on behalf of candidates for office. However, 501c3s are permitted to advocate for legislation, provided such advocacy does not comprise a "substantial part" of the organization's activities. The definition of "substantial part" is determined on a case-by-case basis, however for large organizations, the IRS advises that spending less than 5% of its total exempt expenditures on legislation is not a substantial part (the percentage is greater for smaller groups).

One may object to the LDS Church's involvement with Prop. 8, but given the breadth of the Church's non-advocacy activities, a Prop. 8-based challenge to its tax exempt status would be futile under the law as currently written and applied.

I was going to post exactly this in response to Woot....okay not exactly and my response would have been very non-lawyerly but in any case I'm glad you beat me to it.

The IRS definition might be too narrow. I would think a better definition would not only include 5% of the organizations expenditures but also 5% of the total donations to a cause. This would eliminate the possibility of a very large organization (like any church) imposing its will on a very local matter and claiming it only used 1% of its expenditures so such influence.

In any case, I'm willing to wager that you'll never see the repeal of tax exempt status for churches or other charities, at least not in this generation. I might be biased living in the South but still the churches down here carry enormous influence and no politician would survive is such a thing happened.

[Viking]

The LDS church is clever, as I understand it:

Tax exempt status allows them to collect revenues tax-free. Significant levels of those revenues are then reinvested into operating companies (for profit), which then generate dividend-eligible profit for the parentco, which pays no taxes on those dividends and can reinvest.

Seriously, a monkey could generate great returns over a long, long term period with that kind of a tax advantage.

[All-American]

The LDS church is clever, as I understand it:

Tax exempt status allows them to collect revenues tax-free. Significant levels of those revenues are then reinvested into operating companies (for profit), which then generate dividend-eligible profit for the parentco, which pays no taxes on those dividends and can reinvest.

Seriously, a monkey could generate great returns over a long, long term period with that kind of a tax advantage.

Two problems. One, the church expressly maintains that it does not use its "tax-free revenues" in for-profit investments. Some here have maintained that this is a distinction without a difference, but it's worth noting.

Two, even if the tax advantage does allow the church to generate superior returns, it doesn't tell us anything more than what we already know: not having to pay a tax is financially advantageous. Conceded: the church gains from its tax-exempt status. The important question, it seems to me, is not so much whether that advantage is big or small, but what they are doing with the money, and whether the actions of non-profits are so socially beneficial as to merit the policy decision to exempt them from paying those taxes.

[byu71]

Two problems. One, the church expressly maintains that it does not use its "tax-free revenues" in for-profit investments. Some here have maintained that this is a distinction without a difference, but it's worth noting.

Two, even if the tax advantage does allow the church to generate superior returns, it doesn't tell us anything more than what we already know: not having to pay a tax is financially advantageous. Conceded: the church gains from its tax-exempt status. The important question, it seems to me, is not so much whether that advantage is big or small, but what they are doing with the money, and whether the actions of non-profits are so socially beneficial as to merit the policy decision to exempt them from paying those taxes.

I think the for profit businesses of the church do pay taxes.

[Viking]

Two problems. One, the church expressly maintains that it does not use its "tax-free revenues" in for-profit investments. Some here have maintained that this is a distinction without a difference, but it's worth noting.

Two, even if the tax advantage does allow the church to generate superior returns, it doesn't tell us anything more than what we already know: not having to pay a tax is financially advantageous. Conceded: the church gains from its tax-exempt status. The important question, it seems to me, is not so much whether that advantage is big or small, but what they are doing with the money, and whether the actions of non-profits are so socially beneficial as to merit the policy decision to exempt them from paying those taxes.

So the church maintains that it keeps strict adherence to only using $$ generated from for profit biz?

I can say that I know that's not the case as it relates to Ensign Peak

[Green Monstah]

The thread on Oaks' speech brought back to mind this interesting little article. http://www.economist.com/node/180107...ry_id=18010759

If tax dollars are subsidizing charitable/religious organizations, I think the US public deserves more transparency and accountability.

I don't think losing tax-exempt-status necessarily qualifies as religious persecution, but it sure would hurt the bottom-line of many churches.

I agree re: disclosure. It bothers me that we get the shakedown for fast offerings and the church can pay 2B for a mall in downtown SLC (or however much they paid for it).

[Moliere]

The LDS church is clever, as I understand it:

Tax exempt status allows them to collect revenues tax-free. Significant levels of those revenues are then reinvested into operating companies (for profit), which then generate dividend-eligible profit for the parentco, which pays no taxes on those dividends and can reinvest.

Seriously, a monkey could generate great returns over a long, long term period with that kind of a tax advantage.

Why should donations be taxed? Funds raised through equity offerings are not taxed. Funds raised through debt offerings are not taxed. The church isn't providing a service in the same realm as a business that recognized revenues from a service.

I'm no expert on the churches legal structure, but I assume the for-profit businesses pay taxes on their income, however they probably donate a portion of that income to the church and take a sizeable charitable donation deduction in doing that. Even if the church is taxed on income I'd imagine its expenses are pretty close to income which would negate the amount of income tax to be paid. Many corporations run profits all the time while at the same time having very little to pay in income taxes. The deferred tax liabilities of some companies are quite large.

You are ignoring what would be the biggest hit to the church if the tax exempt status were to be lost: Property taxes. With the current real estate holdings of the church, the amount of property taxes levied could be quite large.

[Katy Lied]

Wouldn't this doom african american candidates from urban precincts? These candidates enjoy enormous support from their local churches, including candidate breakfasts and fund raisers, and churches busing their congregants to voting booths? I once had a discussion on this most popular path to elected office for african americans and the consensus was that the only black american candidate to NOT rise up through an affiliation with say, the AME council of churches was Colin Powell. He rose up via the military.

I don't think Pres Obama would have found the necessary non-religious support to begin his political career in Honolulu, or Cambridge MA.

[LA Ute]

Those clamoring for the church's destruction (or at least grave damage to it) need to consider the really important consequences: How would BYU football fare if the church sponsoring BYU lost its tax-exempt status?

[Green Monstah]

Those clamoring for the church's destruction (or at least grave damage to it) need to consider the really important consequences: How would BYU football fare if the church sponsoring BYU lost its tax-exempt status?

I'd imagine as a private educational institution it could still qualify, even if the church lost tax-exempt status. Am I wrong?