As the previous poster mentions, non-ministerial employees (e.g., the church secretary) pays Social Security. And that means the religion ponies up an extra 7.5% of that employee’s salary toward the employer’s share of Social Security.
Also, religious organizations are not exempt from the obligation of employers who are required to provide health insurance… which is now defined as a tax (thanks, Chief Justice Roberts).
From Rowan and Martin’s Laugh-In, late 1960’s:
City Planner - “The Espiscopalian church is next door, the lot across the street is Baptist, the Catholic church owns the next block, and… So you see, your candy store is the only place in the downtown that still pays property taxes. Your bill this year is $500,000.”
Candy Store Owner - “That’s a lotta Tootsie Rolls!”
City Planner - “When can we expect payment?”
Candy Store Owner - “Get your map off my altar!”
The court is not stupid, and can distinguish between a tax that is designed or results in preventing a free exercise of religion, versus one that asks a church to help pay a reasonable amount for the same social services everyone else also pays for.
Taxing an institution (church, charity, etc.) that survives mainly through voluntary donations simply means you are doubly taxing the more sincere. The members of the congregation who feels strongly enough that they donate to the institution are essentially paying additional for the privilege of being religious. The less religious get a free ride. If your goal is to encourage the free exercise of religion, it makes more sense to spread the burden among all, not just the zealous - especially when the churches also do works that benefit the general (non-contributing) public, like homeless shelters or soup kitchens.
But this is exactly the point. Don’t confuse the charitable work a church does with the “church” work it does. Why shouldn’t members who attend church pay the taxes on the church building and lands that are not required for the charitable work in order to support the fire department that comes if it catches fire or repair the roads that bring its members to church. Why shouldn’t they pay additional for the privilege of being religious if others pay more for the privilege of shopping at a store, going to a country club, etc.
The goal should not be to encourage the free exercise of religion if by “free” you mean without monetary cost rather than not restricted by law.
And as an aside, talk of the IRS is not really relevant here. That has to do with the federal government, income taxes, FICA etc. It doesn’t bear on localities and property taxes.
One problem with this is is that the more complex your laws get, the more loopholes there are and the more court cases with tricky questions that need to be adjudicated there are.
For example, a Baptist church that has a church building and also runs a homeless shelter and an orphanage could come up with a scheme to reorganize the charitable activity as a separate non-profit organization with a nominally-distinct board of directors who in fact are the same people who run the church and have the church “rent” space from the charity. Then you’d need laws to determine what percentage of a real estate plot is used for charitable purposes and what percentage is used for church activities. What do you do, go by raw square footage (e.g. the worship hall and sunday school classrooms take up X square feet and the rest of the building are dormitories, an eating hall, kitchen, and other support facilities for the (homeless shelter, orphanage, whatever)) or do you try to come up with some sort of fair market estimate as to how much it would cost to rent the same space and facilities from an arms-length property owner? More court cases. The church lowballs the price and the tax authority assumes that it’s worth big bucks. What about shared kitchens, plumbing, or electrical power? Do you have to say that the kitchen is used 20% of time for cooking for after-service fellowship meals and 80% of the time to prepare meals served to needy people and thus 20% of the value should be taxed?
Setting aside whether something is a ‘religion’ or not, there are really two federal tax reasons for turning a golf club into a church. The first is that as non-profits, churches avoid a lot of income taxes, etc. Now, I believe there’s no reason at all a group of people couldn’t start a non-profit golf club. Get all the members to chip in to raise the money to buy land, build a clubhouse, etc. As long as it really is not for profit, the IRS would be OK with it (there might be some discussion about whether it’s better organized legally as a cooperative or something). Some recreational sports leagues own their own fields and/or equipment, so this seems pretty OK. Of course, if there’s no profits, there’s nothing to pay business taxes on, so federally this isn’t a huge gain.
But the other part of a church – donations being tax-deductible for the donor – is not so easy to do with a golf club. Even if you somehow made the case that promoting golf is a genuine charitable act and manage to get the club declared 501c3, the IRS says that if you get something of value in return for a donation, the value of that item isn’t tax-deductible (that is, you can’t claim that portion of the donation as a deduction off of your taxable income). Now, the IRS doesn’t generally worry about bake sales (and who claims the $1.75 they spent on cookies on their income taxes, anyway), but they probably would consider a round of golf as something of value, so the ‘congregation’ of the club can’t deduct anything that pay in return for being able to play, whether it’s a per-round fee, or the original capital.
So, yeah, you could form a golf club as a non-profit, if you can get enough people to invest enough money with no chance of profits, but the tax benefits would be pretty minimal.
I think these are general guidelines to help judges and other decision makers to exercise reasonable judgment.
For example, on #7, several religious groups such as Quakers and Jehovah’s Witnesses do not make a doctrinal distinction between clergy and laity. Quakers disavow the idea of ordained ministers in general and Jehovah’s Witnesses consider every member to be an ordained minister. JW’s have positions such as Elders and Ministerial Servants that mimic other churches clergy structures in terms of practical appearance and day to day responsibilities but doctrinally a person becoming one is taking on additional responsibilities beyond that of a regular ordained minister rather than becoming an ordained minister when they weren’t one before. It’s complex. Quakers often appoint one or more members to be “clergy” with respect to the government only when the government requires that someone be designated. For instance, Quaker congregations in the US typically have a person designated as authorized to sign legally recognized marriage licenses for weddings performed in the church, but this person does not have any ecclesiastical authority to make decisions or set rules above that of other members.
On #14, the Old Order Amish do not have organized seminaries for training clergy, although they do have ordained clergy.
I don’t understand what someone would do this for. Set up a church, enjoy tax-exempt status and then…what? Who does what with this status?
Set up a church, enjoy tax-exempt status and then…Profit! 
Really, there’s no solid benefit here. They are NON-profit orgs. What part of “NON” aren’t dudes understanding?
I’m not one of the ‘dudes’ but profit has as much to do with power and influence as it does with money. And sadly, this is something religions understand all too well, while the religious clearly don’t.
This. But I would also like to add the following.
I used to work for a mutual insurance company. If you’re not familiar with the concept, it’s not unlike a non-profit from the point of view of the people who run the organization. All of the money they earn from their investments go to the policy holders who have the type of policy that accumulate a cash value, like whole life policies for example.
The thing is, those investments can be very, very lucrative and the promised payouts on those old whole life policies were pretty measly. As a result, we had an entire floor of old ladies who shuffled around all day in bunny slippers drinking coffee and doing not much of anything else. The connection? That money had to go somewhere and god forbid it should simply be handed over to the policy holders for absolutely no good reason.
I think this is the same concept behind a lot of non-profits and why you should always check a charity out on one of the watchdog groups before donating. In some cases, less than 50% of their income actually goes to programs that help people.
So when you start talking about religious organizations that have no stated obligation to do jack and the only obstacle between 1. start a religion and 3. profit is a little accounting magic, well . . .
Of course, as soon as you get to step 3, it gets taxed.
You’re only not taxed on step 2, which is “spend money on ministries” and “save it up in the church.”
An individual person cannot legitimately profit without paying tax on it. Even if it’s wages to little old ladies in bunny slippers, taxes are now being paid.
Why? Ever since de Tocqueville’s “Democracy in America” have we considered the existence of, and widespread participation in, churches in this country AS a public benefit in and of itself. I’m an atheist, but I see no reason to separate the benefits that St. Francis Church of the Barking Dolphin enjoys from that of the local Optimist Club.
Non-profits are, by definition, disallowed from distributing profits to shareholders.
You mean other than:
2a. Find a congregation that will believe the nonsense you’re spewing.
2b. Convince them to donate substantial amounts of money to you.
I mean, yeah - other than that, it’s simple!
You don’t have to distribute profits to distribute benefits. If I can set up a golf course and call it a church to avoid paying property taxes, then members greens fees – excuse me Sunday donations – can be smaller than otherwise and keep things afloat.
Here’s how it works… (in my neighborhood) a bunch of folks get together and decide that they don’t want to pay property taxes anymore. As long as the group makes appearances at one another’s homes (once a month) for a religious service, they are permitted to call their residence a ‘house of worship’ and enjoy the tax privileges.
(When this catches on in your neighborhood, you will see how much fun it is)
A concerted effort to tax non-profits and churches might run up against the Constitutional right to free association. As groups ‘freely associate’ and then ask its members to contribute to the upkeep of their group, taxing that monetary transaction could be seen as abridging that right. I doubt this has been judicially tested, and if tested, the Court might allow non-burdensome taxation, at which point, there’s a drag-down fight over defining ‘non-burdensome’ since many non-profits do not generate any appreciable positive revenue and any taxation would be burdensome.
Yup.
I see we’re on the same wavelength. Perhaps a slight difference in tone is all.
I’m under the impression that Northwestern University does not pay property taxes because it was originally established as a religious institution. It no longer functions that way, of course. Now, maybe I’m mistaken about their tax status, but it seems to underlie a great deal of Evanston’s town/gown animosity. How can they legitimately avoid paying property taxes?
I don’t see how this would make a difference for federal income tax Some of these groups are denied tax-exempt status and they just report taxes as a corporation. If the dues paid by members are equal to the tax-deductible expenses paid for the group, then there is still no tax due. The tax burden would only apply to an excess of dues over expenses.
(Just as a reference point and example: My church has an operating budget of about 1,500,000. About 70,000 was excess contributions from 2012. Even at the 35% highest tax bracket, that’s 24,500 in tax - barely a line-item in our budget.)
And that’s why this whole thread makes very little sense to me. I think it is based - right from the original question - on a faulty understanding of the legal and tax system.
You can’t, for reasons already mentioned in this thread.