Why are churches in the US tax exempt?

Or are they? I really don’t know much about this, but if you’re going to tax profits etc why would churches need the exemption? What taxes are they exempt for anyway - just profits or what? Same question for non-religious charitable organizations by the way (though I’m not at all convinced churches are charitable organizations).

edit: I thought I posted this in GD. If the mods feel inclined to move it there, I won’t mind.

Chruches are non-profit, and non-profits are tax exempt for the most part.

Churches are exempt from property and business taxes because it was traditionally thought that taxing their revenues would violate the First Amendment provision against restricting freedom of religion. Their charitable activities are not taxed because they are charitable (that is, the church does not realize a profit from them.)

Employees of churches and other charitable organizations have to pay regular income taxes.

However, some churches do have profit-making divisions. For example, a church could open a coffee shop. Those businesses have to pay the same taxes any other business would.

It is simply an American custom. Other nations that have no state religions have different systems. Churches in Mexico are owned by the State. In France too, IIRC.

because, in the words of Chief Justice John Marshall, “The power to tax involves the power to destroy”.

It’s always bothered me that the tax exemption of a church seems to require that the government define what a church is – which would seem to be unconstitutional. Is it true that churches are tax exempt simply because they’re non-profit? Are all non-profit organizations exempt from property tax – even a non-profit (private) golf course for example?

As a prior poster noted, churches are tax exempt because it was reasoned by the courts that to tax them would interfer with their first amendment right to exercise their religion.

The term church is an umbrella term that covers, mosques, temples or even Native American sites, so long as the organization meets minimum criteria set forth by the IRS to be tax exempt.

So why, if churches are non-profit, would it matter if their profits would be taxed?

Assume I’m 12 years old and don’t know anything about US taxes etc.

But doesn’t that mean that any corporation qualifying as a church can basically do whatever they like and not pay taxes.

Assume I’m 12 years old and don’t know anything about US taxes etc. Again

Generally yes, although property tax exemptions may vary by state. Here is a blog post contending that the biggest beneficiaries of this rule are universities and hospitals.

Taxes, for purposes of this question, are not imposed upon “profit” as such, but upon income and upon property. A non-profit has income, it just chooses to use that income for charitable purposes. This is as opposed to a profit-making corporation, which would (in a broad oversimplification) distribute that income to its shareholders.

And property owned by a non-profit has value, regardless of its owner’s non-profit status.

So we could tax most charities (although churches would pose certain 1st Amendment problems, as others have noted); we just opt not to.

Would it be a quick wiki or google to chase up what those criteria are? I’ve heard that Jesus and his diciples wouldn’t have qualified.

Ok, so where does the income go for churches and why would it not be taxed? I’m thinking of sales tax etc. I really don’t see why profit wouldn’t/shouldn’t be taxed.

I don’t see why taxing churches would involve the 1st amendment.

Churches are businesses and should be taxed like any other business.

I broadly agree - but the question is: “why aren’t they?”

Ok, I can see why their charitable activities aren’t taxed. So what are property, business and revenue taxes in this respect? I’m a european and I don’t know the details of the US tax system.

It’s probably a holdover from the bitter Catholic-Protestant struggles in England. Remember that back in the day taxation was primarily taxation on property (i.e. land, and the buildings on it.) Discriminatory taxes were a favorite dirty trick to carry out what amounted to confiscation by the state, especially if the Official Church was government-owned and tax exempt. It’s part and parcel with the list of things that the Constitution forbids the US government to do (such as bills of attainder) simply because they had such an infamous history of abuse.

Previous thread, which contains links to previouser threads

I posted this in the other similar thread and I’m not one to waste a good link so:

http://www.irs.gov/pub/irs-pdf/p1828.pdf warning bigish pdf

This is an IRS document on the tax exempt status of churches.

Some relevant parts are:

And here is the definition of church (bolding mine):

A church’s tax exempt status means

Their income can not be taxed. That means the donations from the members is not taxed and the members can deduct from their income the amount that they have donated. The church does not have to fill out profit loss forms.

If a church does own a business there aree limits on that business. A small coffie shop’s income is not taxed. If the church owns a large business it may be taxed.

If you want a good case study, look into the long battle the IRS fought with Scientology on this very issue. Pretty much highlighted every little flaw there is with the tax laws and making your own religion.

Keep in mind that churches and charitable organizations are a subset of a much broader category of non-profit organizations which are not taxed. The IRS lists 28 types of 501© nonprofits:

That’s a pretty diverse list, able to encompass advocacy organizations such as AARP, MoveOn or the NRA, as well as fraternal lodges, various co-op setups, business leagues, labor unions and many other things. Taken in that context, churches being tax exempt does not seem like such a horrible violation of principals.