The newly passed deficit reduction plan, which was forcibly attached to the debt ceiling increase, includes the creation of a special bipartisan congressional ‘Super Committee’ to fast track deficit reduction legislation by the end of the year. A critical, though long-ignored, source of revenue which should be addressed by this committee is the removal of the automatic tax-exempt status provision for churches as well as for synagogues, mosques, and other similar places of worship. This discussion is vital if tax reform is a truly legitimate goal of this Congress, as both Democrats and Republicans have stated on numerous occasions.
The five qualifying factors for charitable organizations to gain tax exemption are the following, according to the IRS:
- The organization must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes.
- The organization’s net earnings may not inure to the benefit of any private individual or shareholder.
- No substantial part of the organization’s activity may be attempting to influence legislation.
- The organization may not intervene in political campaigns.
- The organization’s purposes and activities may not be illegal or violate fundamental public policy.
While charities and religious organizations must apply for tax exemption status and prove that they meet these criteria, churches are virtually automatically tax-exempt. They do not need to apply for the exemption. Nor must they do anything significant to prove that they qualify under the above guidelines.
Not every church violates these qualifiers, but many violate one or more. Giving churches blanket tax-exempt status, without the means to adequately verify that the qualifiers are being met, opens up the system to rampant violations. The answer is simple: Base tax exemptions on specifically documented actions rather than on a “blanket” church tax exemption.
Recent political events illustrate why there is a growing need to change the church tax policy.
With the flood of fundamentalist-backed legislation passing in GOP-controlled states, as well as in the GOP-controlled U.S. House of Representatives, it is most likely that many churches are in violation of the third of these qualifiers. In addition, with an increasing number of churches holding political rallies at their locations, the fourth qualifier is in danger of being ignored as well.
An example of this violation occurred in Republican Representative Allen West of Florida’s 22nd congressional district. On numerous occasions West has not only used various churches for political events, he has also made political appearances at functions officially organized by churches. The IRS maintains that while a politician as a non-candidate may speak at a church event, the event must be non-partisan. However, at one public forum held at a church when one of his constituents asked a legitimate question, which Representative West did not like politically, she was removed forcibly. Hardly a non-partisan reaction!
Additionally, money floating around in churches, in many cases, provides church leaders with an affluent and profitable lifestyle. This may disqualify many churches on the grounds of the second requirement.
In fact, one could argue that churches are not charities at all, they are businesses. They may perform charitable acts at times but so does the average citizen, who is definitely not granted the boon of automatic tax-exempt status. The primary objective of a church is to maintain and recruit members to their organization, and to spread its theology (in other words sell its product) regardless of any factual support. In the process it often makes a profit financially as well as other growth. Thus, churches are either for-profit businesses, private clubs with extensive marketing campaigns, or both. In any event, accordingly, they should pay their fair share of taxes.
In extreme, or perhaps all too common, cases it appears that the only qualifier which some churches meet is the first and possibly the fifth. The church tax exemption code was for small local churches whose major purpose was tending to their “flocks.” However, large mega-churches, many of which have deep political agendas and deeper pockets, are granted the same tax-exempt allowance using large legal staffs to twist the tax code to their own advantage.
Churches should be allowed to itemize charitable exemptions like the rest of America does, no more, no less. If they do perform legitimate acts of charity or substantial non-religious services to the community from which they do not profit, they should be able receive a tax exemption to cover the loss. Though, if they profit from an action it is no longer an act of charity and the church should be taxed accordingly, just like any other business.
Please click on and like the originally published on Examiner.com: Tax reforms should include removal of automatic church exemptions
Edited By: Alexis Atherton