Inspired by this news story about “Pulpit Freedom Sunday”
How much Tax revenue would we gain if we suddenly started taxing Churches?
If possible, could we break that down by the major religions?
Christianity
Judaism
Islam
…Scientology because it might be significant.
Do religious organizations need to make their tax records public?
How would you figure the profit for a religious organization for income tax purposes?
Businesses are not charged income tax on gross revenue. They deduct cost of doing business first. Only the profits are taxed.
So what can/cannot a church consider to be their cost of doing business if we are to tax them? Almost certainly could attribute salaries and building maintenance. Probably could consider cost of running programs such as a soup kitchen or after school program as a cost of doing business. When all is said and done I am not convinced that there is much “pure profit” left to be taxed in a typical religious institution.
The larger tax potential is in a property tax levy. The assessed value of the property should be fairly straight forward to calculate. Amount of tax generated would be on a case-by-case basis depending on particulars of the property.
Remove the tax deductability of donations to churches.
Most nonprofits* strive to make a profit at the end of the year, if only to have a reserve against emergencies. You would calculate it the same way you do a business: income minus expenses.
*Nothing in the tax code prevents a nonprofit from making a profit each year. Nonprofit status merely means that the profits are not paid out to individuals or stockholders and are kept by the corporation to pay expenses.
The vast majority of tax revenue would be gained by being able to tax the income of individuals who make financial contributions, instead of allowing them to deduct those amounts from their taxable income. Since this would also have to apply to every 501(c)(3) nonprofit, charitable donations would plummet, and the resulting burden on the government would most likely far outweigh any increase in tax revenue.
It shouldn’t apply to every 501c3, since it’s only the churches who are openly flouting the rules.
Cite?
This doesn’t speak well for the charitable impulses of religious givers, if true, but it’s far from a given. Where do you stand, Munch? Givers to religious charities are hypocritical scumbags, or churches won’t suffer much if tax breaks are curtailed to givers? And, of course, I’d need some basis for either position.
Sorry, I don’t believe there’s any hard research on the outcome of putting 3 million non-profits out of business. I’m afraid my “likely” will have to stand as purely conjecture.
Religious givers? It doesn’t speak well for the charitable impulses of givers, period.
Neither - both of those are absurd. I stand on the opinion that the vast majority of people who complain about churches being tax-exempt are either a) completely ignorant of what the largest source of government tax income would be should those tax exemptions be revoked (charitable deductions), b) oblivious to the fact that revoking churches’ tax-exemption would most likely result in the revocation of all 501(c)(3) organizations’ tax-exemptions or c) both of the above.
Did you read the article? Churches are doing this to get the IRS to come down one way or the other on the Johnson Amendment - which applies to ALL nonprofit organizations, not just churches.
The rule applies to all non-profits, but if a non-profit abides by the rule, there should be no reason whatsoever to change their status.
There are only 2 possible outcomes
This is pretty much the only real revenue stream that churches losing their tax exempt statuses would generate. For my area in Northern Illinois you’d be looking at anything between $2k and $50k a year in property taxes for the church alone which could easily wipe out smaller churches completely. Then figure that many churches also hold lands besides the church itself including cemeteries, nursing homes, schools, orphanages, rec centers, monasteries and nunneries, etc. A particularly large Catholic parish for example in an area with very desirable properties could easily see bills in amounts approaching a half million or more a year in property taxes for all of the things that they own.
I’m happy to make any wager that neither of those happen. Here’s what will happen:
Any church who participates in this proposed activity will get a Strongly Worded Letter from the IRS telling them to not do this again. Additionally, any participating church who has previously had disciplinary action against them by the IRS will either lose their tax-exempt status, or be put on some sort of probationary status.
I’d be surprised if there are any significant number of churches out there who haven’t taken the slightest of precautions and put all of those organizations into their own non-profit charters, particularly cemeteries, which would qualify as 501(c)(13) organizations.
Actually, I agree with you 100%on this. But the point I meant to make was that other charities are not involved in the dispute, and should not be affected at all, regardless of how things turn out for these churches.
I’m fairly surprised I used the word “nunnery” as I’m not Shakespeare, I was looking for the word “convent” and it wasn’t coming to me. Either way, with the supposed loss of the parent organizations tax exempt status it could certainly call in to question those that exist as non profits nominally under the banner of the church.
My point was essentially addressing the OP, who asked “How much Tax revenue would we gain if we suddenly started taxing Churches?”. The answer to that being “if you suddenly start taxing churches, you are going to have to start taxing all nonprofits (and the subsequent charitable contributions to all of those organizations)”. It’s a question that comes up with some regularity on these boards, and usually always involves people who are unaware that churches are legally no different than other nonprofits.
Got it, Munch. Carry on, sorry for the hijack.
No worries! There was an interesting GD thread on this topic (which it looks like both you and I found once it had hit page 3). Lots of good info in there, especially towards the end, if people want to take a look.
This is not true. Churches may be no different from other charitable organizations (and I don’t believe even that’s true since there are special exemptions for pastor’s houses in the tax code – or were), but they are certainly different from many other nonprofits like country clubs that do pay property taxes on their land.
But, in any case, the big tax beneficiaries would probably be the local government with property taxes, and I’m not sure how, if at all, an IRS ruling would affect that.
Fine - please change any instance of “other nonprofits” to “other 501©(3) designated nonprofits”. My point stands.