Taxation of religious institutions

There is much talk of taxing the rich, but it’s mostly concerning wealthy individuals and corporations. But religious institutions remain untaxed. How much would the government net if they were taxed? How would that compare to what the government would net from individuals and corporations?

Religious institutions actually do pay taxes on some of their assets/income.

Taxed on what? Gifts and donations? Property and real estate? One problem is separation of church and state. Gifts and donations are tax deductible to the people or organization making them. If you eliminated that, donations to churches would drop.

And what do you mean by a religious institution? It is only a tax-exempt one if the IRS says it is, if it meets the IRS rules for churches. Example: The Church of Scientology is tax exempt because the IRS said it was a church in October 1993. Fascinating story, see Scientology's Puzzling Journey From Tax Rebel to Tax Exempt - The New York Times

PolitiFact rated a claim as false that religious tax exemptions cost the US $71 billion/year and if they paid that we’d only have to pay 3%.

I think that 3% part is the egregious false part here.

Since this is (was) GQ (FQ just doesn’t have the same ring to it) I am not sure if we can debate it but it is a data point. I think Politifact was a bit loosey-goosey with this one but the $71 billion/year seems a fair starting point I think for the OP.

Tax them on what? They operate as non-profits.

For most legitimate churches, the money just isn’t there. If there’s any money available for the taking, it’d presumably be in fake churches operating purely as tax dodges. But how common are those, compared to other kinds of tax dodges?

Right, I cannot just decree the Delirious Temple, decide that all my regular income is its endowment and my living expenses are paid off it, and make myself tax free. I gotta put some work into it.

IIRC last FY the total US government revenue was about four trillion, close to half of which was personal income taxes. Even if you did really raise 71 billion (which seems like a pulled-out-of-their-ass number) and credited it all to ease taxes on individuals that would at best make your taxes go down by 2 to 4 % of what you are paying now, not “to” 3%.

And remember, income taxes are charged on net income, not on raw amount of economic activity, and most property and sales-and-use taxes are paid to the state and municipal governments.

Yeah, sure, St. Patrick’s Cathedral sits on a lot on 5th Avenue across from Rockefeller Center so it’s worth a bundle, though in proportional terms not that much in relation to the rest of Midtown. And Joel Osteen’s ministry probably makes quite some bank. But what would you get from Pleasant Pastures Brethren in Christ Church in Buford Holllow, Flyover County, where the pastor has a day job at the feed store, or from Mighty Power Brotherhood Tabernacle that meets in the upstairs of a sandwich shop in the 'hood?

Yup. Sure. It all goes to the poor and needy right?

Copeland’s ministry owns at least three private aircraft, “Inside Edition” reported, including a $20 million Citation 10 and a Gulfstream V jet purchased from American movie director Tyler Perry. The pastor refused to say exactly how much he spent on the Gulfstream but said Perry made the plane “so cheap for me I couldn’t help but buy it.”

The pastor has used his planes to fly to a vacation home in Colorado at least 143 times, according to “Inside Edition.” He even reportedly has his own airport next to his mansion in Texas.

SOURCE:

The point here is not to pick on this one person (although he deserves it). The point here is to illustrate how strapped for cash non-profit organizations must be because they are “not-for-profit”.

I sit on the council of my church, which means I get to see all the books. We’re a penny-ante organization, as are most local churches. The only real asset we have is the land and church building. The building is pretty much worthless to anyone other than another church. We’ve had developers come around through the years asking about buying us out for the land, but they haven’t offered even half of what the county says that sized parcel should be worth.

“Be careful what you ask for. It might come true.”

If churches had to pay tax on what they receive, the prohibition against preaching politics would be gone. And the last thing the government wants is for churches to whip their congregation in a frenzy with political diatribes.

Isn’t it already?

If I understand correctly…

In exchange for not having to pay tax on earnings, a church is prohibited from using the pulpit to persuade the congregation to vote for a certain candidate, or to vote one way or another on a certain issue. If churches were taxed like any other business, they would then be free to engage in political advocacy.

What do you suppose is the only real asset that most homeowners have (and pay property taxes on)?

:rofl: :rofl: :rofl:

Does what a church receives from, e.g., what people toss in the offering plate count as “earnings”? Is there a distinction between earnings and donations, from a taxation standpoint?

That “prohibition” is a fucking joke.

We don’t have a private jet, we don’t have a highly paid staff, we’re lucky if we can balance the budget at the end of the year, and yet, posters like the one who posted immediately before me, keep citing a handful of televangelist as the reason to tax churches. I might as well cite a handful of billionaires like Bezos and Zuckerberg as reason we don’t need a minimum wage.

A church, operating as a church ‘should’, according to most individuals’ assumptions, would be paying very little tax, even if churches were taxed. However, there seem to be some misconceptions.

One, taxed entities do not get taxed based on income (like private citizens are). They are taxed on the basis of profit. If you do $200k of business and have $100k in expenses, it is pretty much identical to doing $1M in business with $900k in expenses. The tax code is complicated, but this is mostly true.

Two, 501c3s are allowed to produce or take in an excess in funds, which are still not taxed. One year’s surplus will not hurt the charity. In fact, if they can manage it, they can run a surplus every year without hurting the tax-exempt status. They do have to demonstrate that they act primarily as a charitable endeavor, not as a tax shelter, by filing periodic paperwork with the government and there are aspects of the 501c3 status that makes certain information available to the public.

The status of churches, however is similar, but with quite important differences. Churches are automatically tax-exempt upon asserting that status. They have the option of organizing as a 501c3, but are not required to do so. Even if they do decide to incorporate as a 501c3, they do not have to file periodically with the government, nor open their books to the government to demonstrate that they provide any charitable service to any community.

Additionally, one of the most important restrictions on 501c3 operation is the prohibition against ‘inurement to private benefit’. When you are responsible for a charity, you are not supposed to be personally benefitting from funds managed by that charity. However, things like a salary and/or housing allowance obviously cannot be deemed private inurement, since their prohibition would basically destroy the religion industry (at least as practiced on a professional basis).

I’m not done with housing allowances, yet. Housing, either directly as with an employer providing it directly, as with a hotel manager’s apartment, or via a designated allowance, is not common, but not exactly rare either. When an employee receives this benefit, it triggers a taxable event and is regarded as cash income for the tax year in an amount equal to the fair market value of the benefit (or just the cash value if the allowance itself is cash, rather than provided housing). Religious clerics are exempted from paying taxes on this income. Rick Warren was involved in a court case that became moot when legislation was passed clarifying that his entire $70k+ salary could be counted as a housing allowance, meaning that none of it was subject to tax.

To make this even worse, the IRS initiated a moratorium on church audits some years ago and I don’t know if it has ever been lifted. The moratorium was a result of a lack of clarity on specifically which high-level treasury officials are capable of initiating an audit. To my knowledge, no other industry has this specific loop for the government to jump through in order to look into possible fraud or tax evasion.

When I was an internal auditor at a casino, I looks for ways to cheat or steal from the casino. That was my job. Any system can be compromised with enough effort. But, if it is ‘too easy’, then that represents a vulnerability indicating a need for a change in policy, surveillance, or some other security measure. When I look at the regulations around the religion industry, it seems like it is nothing BUT vulnerabilities.

My assumption is that the power players in the industry are tolerant of the possibility of small frauds popping up all over the place because they don’t want attention drawn to their own complete lack of accountability.

Billionaires in other industries not paying taxes is not quite comparable. Those industries may use various financial shenanigans to avoid tax, but the industries themselves are still taxed, until and unless some accounting black magic takes place. The religion industry is simply not.

Churches have to pay taxes ONLY on ‘unrelated business income’. So nothing in the collection plate, end of year donations by check, love offerings, or any other donations receiving nothing tangible in kind are taxed. The operation of the gift shop, from which people receive a mug, t-shirt, etc. would constitute business income taxed as any other shop. Many businesses will send you items ‘for a recommended donation of $X’, though I’m not sure if that dodge has ever been investigated or prosecuted.

I’m going to leave this answer up, but I did a little searching. It looks like the ‘recommended donation’ may be more a marketing ploy than tax dodge. IRS Section 170 indicates that this wording has no impact on the status of such revenue as UBI. The exception being that the purchaser intentionally pays in excess of that recommendation, in which case the excess, but not the sticker price is both tax deductible for the donor and tax exempt for the business. The price required to access the good/service is not tax deductible for the purchaser, nor tax exempt for the business.

For all of you who want churches to be taxed, I have a serious question: what about other organizations that qualify as 501(c)(3) not-for-profit organizations. They have paid employees. Many of them own property. Would you tax the Sierra Club? Greenpeace? The Elks Club? American Legion? That church-owned asisted living center?

Our minister does not control the budget, which covers salary, housing allowance, car allowance, or any other compensation or reimbursement we may pay her The church is run by a board elected by its members, which proposes a budget, which is approved by the members.

I’m not defending shifty, tax-dodging sham organizations disguised as “churches,” whether they’re large or small. People or organizations that abuse their non-profit status don’t deserve to have it in the first plkace.