The Time has Come To Tax the Income of the Churches.

Great Debates
21

If the ‘tract’ is not subdivided into smaller lots in the county land records, my expectation would be that the lot would be either entirely subject to property taxes, or entirely exempt. I’ve never heard of part of a lot being taxed, and and another part not being taxed.

And correct me if I’m wrong, but my understanding is that nonprofits other than churches have to pay property tax just like any other non-church entity. The real question is, why should churches get a special break that other nonprofits don’t, regardless of how big or small it might be?

22

  • You can’t tax God.

  • The IRS can do whatever it wants.

  • The President tells the IRS what to do.

  • The President is telling the IRS to give revenues back to the people who have more money than God.

  • God tells the President what to do.

I guess we’d better ask the people who tell God what to do about this idea first. Or maybe the Supreme Court.

23

You are mostly correct on this. Whatever “use” is going on with vacant land surrounding an approved use is typically judged to also be tax-exempt by the locality. While this depends on local laws, if a church were renting a part of its land to a for-profit entity, it would typically be required to pay a pro rated portion of property taxes on that portion. Figuring this out is often a very difficult accounting problem.

Property taxes are a matter of local law, but most jurisdictions do allow non-religious not-for-profits to apply for exemption from property taxes. This is a big deal, for example, for hospitals. NFPs can also often get exemptions from paying sales taxes (also governed by local law) on their purchases.

24

To all of those who continue to assert that the IRS can do anything they want: prove it. Or please quit trotting out that untruth.

25

Asked and answered.

Any taxation of churches would require legislative action. Not bloody likely.

26

Is there any difference in the way that a non-proffit making institution is judged to be tax exempt, to the way a church is judged to be tax exempt?

I strongly beleive there should not be a difference.

Cheers, Bippy

27

OK, you folks talking about the property taxation of lands owned by churches: this stuff varies highly by jurisdiction, so there’s no use in really talking about this unless for some reason you want to know the rules of one particular jurisdiction (the county Austin is in, for example).

28

More fo a GQ: Do churches have to file the same tax forms as non-profits?

29

They should convet the IRS. Think about it…many disciples were tax collectors.

30

Are churches really non-profit making?

31

Sure they are I, Brian. They don’t have investers or pay dividends do they?

Nonprofits can make money. Why they make it and what they do with it makes them a Nonprofit.

32

I remember reading somewhere (no cite sorry) that every Catholic church sends money up the ladder to higher levels. Eventually, the cardinals send a percentage of the money collected to the Vatican.

The actual amounts are secret.

Can anyone confirm this? Or, better yet, give the amounts?

It seems to make sense to me. The Vatican would want a piece of every collection plate from around the world.

So, unless other charitable organizations are pooling money in this way, I would argue that the Church is not a typical charity.

Now, it should be noted, that private organizations like the NRA and ACLU have to abide by the rules of the IRS. For example, they are both non profit organizations. So, they don’t have to pay taxes, because they are not making a profit (as the Church would seem to be). However, money donated to them is not tax deductable.

Both the NRA and ACLU do have foundations, though. These meet more stringent requirements with the IRS and are also non profits. The bonus of these is that money donated to them is tax deductable. So, if you want to leave a large amount of your will to either organization, this would be the way to do it.

I would suggest that all religions be held to the same standard. The Church can set up a foundation, which is tax deductable and tax exempt, except they can’t keep the money for whatever puposes they want, like say, paying off the families of their victims. The money would all have to go directly to charitable activities.

Meanwhile, the regular money collected by the church would be taxed, after taking into acccount the expenses, just like any other corporation.

33

Asked Apos:

Well, since I was such a smartass before, I suppose I can field this.

The answer is… some of them. To quote the non-omnipotent IRS itself:

Many of the forms cited in that document are the same for all sorts of different groups: W-2, 1099, and 990–the universal *Return of Organization Exempt from Income Tax are all occasionally used.

34

Neither does a private business with one owner.

35

Hey, TaxGuy, I’m with you–my prior post on property taxes pretty clearly refers to the fact that local rules will govern. Nonetheless, I think it is possible to discuss generally what “typical” laws look like. Local governing units change their rules on property tax exemptions fairly often in response to budget shortalls, so we are seeing some toughening right now.

Non-profit entities are formed under state corporate laws. Before the state will grant a NFP charter, the applicant must show that it will pursue one or more of the state’s itemized list of “chaitable, religious, education, community service” activities. If they subsequently fail to pursue these goals, the state may revoke their charters. NFPs can operate businesses, pay salaries, purchase land and goods and generally do the things other businesses can, so long as their goals are proper and any profits they make are plowed back into the business with the proper goals (i.e., the profits cannot be siphoned off to improperly enrich (“inure” to) any individual or for-profit entity). Again, it may help to think of a big, operating NFP hospital as an example.

None of this means that the NFP has any tax benefits. To get an exemption from federal income taxes, the NFP must qualify as a 501©(3) (or another related category under 501©–referrring to a section of the Tax Code) entity, which involves a separate IRS application process. The IRS requirements, generally, are to some degree stricter than state NFP standards, and some NFPs do not qualify for tax-exempt status. While many states piggy-back on the IRS determination for purposes of deciding whether to impose state income taxes, this is also a separate determination. The property tax and sales tax exemptions are, as indicated above, local determinations which also require separate applications and are often even more difficult to get than the income tax exemption.

**Donations made to entities which carry on lobbying and political action are not deductible under IRS rules. Foundations are another type of entity from the perspective of the IRS and are subject to another set of rules.

Generally, religious entities are treated the same as other NFPs for corporate and tax purposes. If a private individual or for-profit entity profits improperly from any church’s operations, this is cause for a revocation of the tax exemptions. (People are of course free to argue about whether “promoting religion” should be in the same favored category as other charitable organizations, but that is an ex ante issue.) I don’t have any knowledge about the flow of funds collected by Catholic churches, but they should be able to transfer funds to their related charities (Catholic Social Services) and other religious bodies (dioceses and other organizational bodies) so long as those entities are also tax exempt NFP entities. Remember, churches can pay for goods and services (from employees or otherwise) so long as the payments are not excessive. I believe the Catholic church would argue that no private person or for profit entity makes a “profit” from its transfers of contirbutions in the manner described. (As Sofa King’s cite indicates, and as I indicated in my post above, if a tax exempt entity has a side business which is for profit (in the hospital context, imagine that a hospital builds a doctors office building in which some doctors invest–that entity generates profits for those individual doctors and therefore cannot be exempt from income or property taxes), it must pay taxes on that portion of its business.)

36

I’m rather conflicted on this issue. I like the Vidal essay referred to by the OP (i like most of the essays in the United States book), and it often seems that churches and other non-profits should be taxed, given their income and the uses to which it is put.

But, on the other hand, where do we decide what activities performed by non-profit organizations should be tax-deductible and which should not? Should be adopt some sort of “public good” criterion whereby certain activities qualify for tax deductibility?

The real porblem it seems to me, is often at the local level. For example, here in Baltimore the Johns Hopkins University is about the biggest employer in the city, one of the biggest landowners, and a general behemoth in the local economy.

Now, on the one hand this is very good for the city, because JHU provides many jobs for locals, keeps many buildings full, and its students give a real boost to the local economy. OTOH, Baltimore is a poor city, and the fact that JHU is the largest landowner around and is also not required to pay local property taxes means that the city misses out on a lot of revenue. Even worse, every time Hopkins buys a new piece of property (something it does constantly) the city’s income drops.

One can argue that Hopkins contributes a lot to the local economy, and it does, but there are things that need doing that the city has to take care of (garbage collection, snow clearing, etc., etc.), and that are supported by the sort of local taxes that the university does not have to pay.

I believe (any Balto dopers who know the story better can correct me) that the city tried a few years ago to make the university pay taxes, and the university agreed to a one-off payment to help the city on the condition that the long-term tax situation didn’t change.

Anyway, in response to the OP, i think that it’s not just a black and white issue of tax vs. don’t tax. Maybe we need more categories, with a graded scheme of tax liability (i know, just what we need, more tax bureaucracy).

37

Great post, Humble Servant.

I was amazed to see that Massachusetts piggy backs on the fed’s 501© form. The MA form is one page!

BTW, do you have any idea what the fee is to file a 501© with the IRS?

38

Thanks, Debaser. The IRS 501©(3) filing fee is $500.

Such “public good” criteria do exist in the lists of activities which qualify a corporation for NFP status (here’s Illinois’) and in the similar list of activites specified by the IRS in Form 1023 (the IRS application form). While these categories are broad, many of these definitions are discussed and applied in case law.

39

Wrong. The IRS makes no ruling on whether or not any FAITH is legit or not- just how the “donations” are collected and to what use they are put. There could be- and are, Churches based upon Aliens. They are legit. However, if even a mainstream Christain Church collect too much of the money in the wrong way, or spends it the wrong way- they can lose their Non-profit status- see the Crystal Cathredral. All churches are assumed to be legit. Even the old “Universal Life Chruch”, which at one time was just a tax scam- wan’t ruled to not be a legit FAITH- it is just that too much of the income coming in wasn’t from donations, and too much was being spent on unchurchly activities.

But if indeed the IRS did or could decide if any church was “real” or not, then that would violate the 1st. They don’t, which is why SCOTUS hasn’t slapped them down (altho the IRS has been ruled against).

40

If I were King, I’d pull a Henry VIII, declare mySelf the head of the Real Church, and assimilate ALL of the churches property, thus making myself fabulously wealthy. Just an idea.