The Church Politics and the IRS

By Jason Bland, guest political columnist – June 29, 2010

Jesus and his disciples traveled unto the outskirts of Jerusalem where they would rest for the night before heading into the city. When they were settled, Jesus told two of his disciples to go into the city and procure an ass and a colt, which he knew was available for them. They did as they were required and returned. [1]

It is a popular biblical story of Jesus Christ entering Jerusalem. Clearly if he was moved to do so, he could have acquired a chariot, decorated steeds, and arrived in the best comfort and luxury the era had to offer. However, in his legendary way, he humbly entered the city on this hybrid equidae and began healing, teaching, and moving closer to his crucifixion.

How the story would be different if Jesus had acquired a chauffeured Lexus to pick him up after his private jet with “JC” on the tail wing arrived at Jerusalem International where he would talk about piety, working for daily bread, and doing without in the name of charity.

A mule was all Jesus needed but many of the celebrity “disciples” of the modern day use their church’s tax-free revenue to buy toys and be politically active, in Jesus’ name.

Of course, if the givers are pleased with how the money they donate is spent, then no harm no foul. However, the other givers to churches are those in the communities that make up the property tax difference.

Scrolling through archives of articles on church taxation, I came across a New York Times article published on November 4, 1901. [2]

“Oppose Amendment to the Constitution” the non-biased newspaper headline read, “It will permit the taxing of church property if passed.” The amendment was a single line work of a surely self-proclaimed “clever” wordsmith who wrote “legislature shall not pass a private or local bill granting to any person, association, firm, or corporation an exemption from taxation of real or personal property.”

This would not only affect churches but benevolent associations as well. Many pastors, ministers, rabbis, and priests took to the podiums the Sunday prior to the vote to clearly tell their congregation to “vote no.”

Churches have always been exempt from taxation in the United States. The need for documenting revenue of churches was not something on the minds of the forefathers as churches were generally small congregations made up of the residents of the small communities in which they were built.

A church can simply be a church and be tax-exempt without filing a 501(c)(3) tax-exempt, tax deductible, status; however, most of the modern day mega churches sign up to receive a gift from 1954’s Senator Lyndon B. Johnson. [3]

It was in 1954 that the churches could receive the benefit of becoming a registered 501(c)(3) organization. By becoming 501(c)(3), a church does not have to pay income tax, they do have to file a return if grossing more than $25,000, and their property (buildings, land, vehicles and airplanes) are tax-exempt.

Church Owned Property

As previously stated, what a church or non-profit organization does with their donated money is solely the business of the contributors to the organization. What many proponents of church taxation want to see is property tax.

Even the loudest of the church taxers generally do not wish to impose income tax on an organization. It is the property tax which has had some people lobbying for church property taxation for 135 years.

In 2008, the Tampa Tribune did a series of articles on Without Walls International Church and their co-pastors, Randy White and Paula White. From their Bayshore home, to their plastic surgery, to their ensuing divorce, the newspaper outlined the ins and outs of the couple and the ministry. [4]

The report led to Senator Charles Grassley (R-IA) doing an inquiry on the church’s finances as well as financials of other mega churches across the country. The exposé led to financial problems within the church and ultimately the church had to liquidate properties and their Gulfstream jet.

Churches do have to pay a tax on some property that may not be tax-exempt such as property not solely used for religious purposes. In this case, Without Walls is paying close to $3,000 a year to the Hillsborough County Tax Collector for their 52,000 square foot establishment. [5]

Comparably, their neighbor Jerry Ulm Dodge Chrysler Jeep of 2966 North Dale Mabry Highway in Tampa is paying the county nearly $100,000 a year for their 30,000+ square foot property. [6] They also pay taxes for separately registered addresses surrounding the main dealership.

To better organize an estimation of the amount of money counties lose on 501(c)(3) properties, we also took a sample of several other churches in Hillsborough County.

From Baylife Church in Brandon Florida’s $0 pay-in for 9,000 square feet [7] to Bell Shoals Baptist Church 108,000 square foot property receiving 100% tax exemption on their $10,000,000 worship center in Brandon. [8]

Over 300 churches are in Hillsborough County. From the very small church that would pay $2,000 a year if not tax-exempt to the mega churches that would be spending $100,000 year if not tax-exempt.

We identified 15 mega churches with a combined missed taxable revenue of $7.8 million a year in Hillsborough County. The remaining 275 churches (including property owned by the Church of Scientology who regained their tax-exempt status in 1993), is estimated at $10 million. This is a very low estimation as many of the churches on the list with low attendance have large properties.

Whether they go to church or not, all 1,180,784 residents of Hillsborough County, Florida, are paying $15/year ($60 for a family of four) making up for non-taxable property. [11]

Perhaps the most controversial part of religious organizations tax-exempt status is their seemingly growing political hold. In the 1954 legislation that prohibited charities and churches from engaging in political activism, churches and charities could not speak out against or for a political candidate nor engage is excessive lobbying.

The IRS, who polices all non-profits, receives a growing number of complaints each election cycle of religious organizations overstepping their political boundaries.

To better understand the law, let’s look at the two issues that are at hand. First, political activism versus endorsing and/or speaking out against a candidate.

IRS on Church Campaign Bias

The IRS does allow churches and charities to maintain their tax-exempt status while doing a certain level of lobbying for different causes however it is very clear in its rules regarding candidate endorsement. [12]

The previously mentioned Bell Shoals Baptist Church in Brandon hosted candidates and supporters of Florida’s Yes on 2 amendment in their tax-exempt building as other churches around the country also participated. [28] In September of 2009, Bell Shoals Baptist Church had all of the Pepsi vending machines removed because of Pepsi’s political contributions to fight California’s Proposition 8 ban on gay marriage. [9] The church has replaced all of the Pepsi vending machines with Coca-Cola vending machines preferring to support the company that received the 100% rating from the Human Rights Campaign due to their outstanding “performance regarding workplace policies for gay, lesbian, bisexual and transgender associates.” [10]

“Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.”

The pulpit has been used as a platform for movement for centuries. In fact, many churches were involved in the progression of the civil rights movement (though at the time, a lot of churches had not converted to a registered 501(c)(3) status). However, the IRS is very particular to primarily prohibit candidate endorsements/rejections.

This led me to a video of Pastor Steven L. Anderson of the Faithful Word Baptist Church in Tempe, Arizona.

In 2008, after the presidential elections, Pastor Anderson preached a sermon about this country electing a “devil,” Barack Obama. Amidst all of the jumping around and yelling, Anderson was saying that Barack Obama was the devil for his falsely interrupted belief that the president-elect was for “partial birth abortions.” [13]

The procedure was banned by Congress when President George W. Bush signed into law Partial-Birth Abortion Ban Act of 2003 thus making anybody’s position on the procedure (pro or con) a mute point. [15]

Be that as it may, receiver of government tax exemption Anderson was pretty steamed and continued to repeat that “Barack Obama is for partial birth abortion, Barack Obama is a murderer.”

He closed his rant with “If you don’t like to hear the truth, get the hell out of my church!” Another sermon was on the topic of “Why God wants me to hate Barack Obama,” which ended with “Tonight, I’m going to pray that Barack Obama dies and goes to hell.” He later clarified that he prefers it to be of “natural causes” so that he would not be a martyr. Both statements earned Anderson a Secret Service interview prior the President making a trip to Arizona in 2009. [16]

In an effort of reporting political fairness, Pastor Anderson is in fact filled with bipartisan hatred and preached many harsh sermons against former President George W. Bush.

These comments were made after the election cycle and therefore were no longer comments for or against a political candidate but rather an elected official, thus not in violation of Faithful Word’s tax-exempt status. However, had such comments been made during the election, the church could face revocation of their tax-exempt status. [17]

IRS on Church Lobbying

The IRS also prohibits churches and charities from engaging in “too much” lobbying.

Its guidelines start by saying, “In general, no organization may qualify for section 501(c)(3) status if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying).” [18]

It then further clarifies by saying, “Legislation includes action by Congress, any state legislature, any local council, or similar governing body, with respect to acts, bills, resolutions, or similar items (such as legislative confirmation of appointive office), or by the public in referendum, ballot initiative, constitutional amendment, or similar procedure. It does not include actions by executive, judicial, or administrative bodies.”

The Alliance Defense Fund, a 501(c)(3) tax-exempt organization, is an activism group who states on their website that the “ADF brought together attorneys and allied legal groups to develop a national strategy to protect marriage even before any significant court challenges were filed on behalf of those who want to receive special legal privileges for same-sex unions.” [19]

With same sex marriage/unions being a topic of political debate and in cases like Florida Amendment 2 and California’s Proposition 8 worked to strengthen and help pass legislation, the Alliance Defense Fund may be in direct violation of their 501(c)(3) status.

In a November 12, 2009, press releases related to IRS complaints against Maine churches, the Alliance Defense Fund said, “Pastors and churches have a right to speak about biblical truths from the pulpit without fear of punishment. They can encourage their congregations to take a stand for marriage and can directly support legislative issues like Question 1 without running afoul of IRS rules,” said ADF Senior Legal Counsel Erik Stanley. “Groups that want to redefine marriage are intentionally threatening the tax-exempt status of churches through fear, intimidation, and disinformation to silence their voice. ADF will stand with these churches to defend their right to free speech and religious expression against these baseless scare tactics.” [20]

In 2009, Maine Marriage Equality organized an effort that resulted in 80,000 people getting together to file a complaint to the IRS against Maine’s Question 1 which revoked the state’s same-sex marriage law stating:

“It’s no secret that the Catholic Diocese led the ‘YES on 1′ effort in Maine, among many other churches encouraging their congregations to vote ‘YES,’ handing out signature forms and collection plates during service, and constantly asking for ‘sacrificial contributions’ from churchgoers.” [21]

The IRS protects the privacy of those investigated thus access to its findings are generally only available if they take a case to court. The IRS and its “Political Activities Compliance Initiative” are responsible for investigating and enforcing tax-exempt policies. [22]

To stay in compliance of the restrictions placed on tax-exempt organizations, organizations such as the American Civil Liberties Union (ACLU) have been forced to break up into two organizations.

The ACLU Foundation is a 501(c)(3) tax-exempt organization that focuses on constitutional education, communication, and litigation. The American Civil Liberties Union is a 501(c)(4) which is permitted to take part in political efforts, endorsements, legislative lobbying, and other activities not permitted under the 501(c)(3) status. Contributions to 501(c)(4) organizations are not tax deductible, money spent on candidates and political activism is taxable, and 501(c)(4) organizations get to enjoy a level of secrecy that 501(c)(3) organizations do not as they are not required to disclose donors. [23 and 24]

Advocacy for Church Taxation

In 1875, President Ulysses S. Grant delivered a speech before the U.S. Congress holding 35,000 signatures stating, “We demand that churches and other ecclesiastical property shall be no longer exempt from taxation.”

He then delivered this speech.

“I would also call your attention to the importance of correcting an evil that, if permitted to continue, will probably lead to great trouble in our land….it is the accumulation of vast amounts of untaxed church property….In 1850, the church properties in the U.S. which paid no taxes, municipal or state, amounted to about $83 million. In 1860, the amount had doubled; in 1875, it is about $1 billion. By 1900, without check, it is safe to say this property will reach a sum exceeding $3 billion….so vast a sum, receiving all the protection and benefits of government without bearing its portion of the burdens and expenses of the same, will not be looked upon acquiescently by those who have to pay the taxes….I would suggest the taxation of all property equally, whether church or corporation.” [25]

It is seemingly unfathomable that such a speech would ever come out of the mouth of any of the last 6 decades of presidents. Congress certainly did not stand with President Grant as no such measures were passed. Today, $3 billion dollars is the equivalent of $57 billion. [26]

Restructuring Tax Exempt Status

Proponents of church tax-exempt status cite the First Amendment of the Constitution which states:

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”

At the same time, those who believe in tighter reporting of church expenses, luxury properties owned by churches needing to be taxed, and other pro-taxation of religious organization policies argue that giving a favorable tax status to churches is in violation of the “respecting an establishment of religion” clause.

Justice William Rehnquist in his 1985 dissent of Wallace v. Jaffree stated “The ‘wall of separation between church and state’ is a metaphor based on bad history, a metaphor which has proved useless as a guide to judging. It should be frankly and explicitly abandoned.” [27]

The number of complaints filed with the IRS grows with each election cycle and may some day end up with church reform legislation. Perhaps the compromise will come with church organizations being required to have sister 501(c)(4) organizations that solicit contributions separate from their religious 501(c)(3) organizations mirroring the structures of the ACLU sister organizations.

The need for tax revenue in local governments may lead to amendments such as the one presented to New York voters in 1901.

Many municipalities and the federal government are running into deficits. A lot of citizens want lower taxes, stable social security, stable Medicare, no national debt, and no group of legislators on either side of the aisle can agree on expense cuts. Therefore, the only way the local and federal governments are going to get out of debt or at least balance an annual budget will be to raise revenue.

Over the next few months, I will be sharing the Political column of the newsroom and will be discussing some of the possible new taxes or tax increases that are available – from the highly controversial, such as taxing church property, to the underreported, such as the Value Added Tax (VAT), and the Financial Transactions Tax.

Some of these are good ideas but may have unforeseen consequences. Should property belonging to not for profit organizations and churches be subject to property tax? Give us your comments below.

Sources

1)      http://kingjbible.com/matthew/21.htm

2)      http://query.nytimes.com/gst/abstract.html?res=9C04E5D91E39E733A25757C0A9679D946097D6CF

3)      http://hushmoney.org/501c3-facts.htm

4)      http://www2.tbo.com/static/special_reports_news/tbo-special-reports-news-withoutwalls/

5)      http://www.hcpafl.org/CamaDisplay.aspx?OutputMode=Display&SearchType=RealEstate&ParcelID=182916ZZZ000005475500A

6)      http://www.hcpafl.org/CamaDisplay.aspx?OutputMode=Display&SearchType=RealEstate&ParcelID=182916ZZZ000005476100A

7)      http://www.hcpafl.org/CamaDisplay.aspx?OutputMode=Display&SearchType=RealEstate&ParcelID=20290226V000004000010U

8)      http://www.hcpafl.org/CamaDisplay.aspx?OutputMode=Display&SearchType=RealEstate&ParcelID=202935ZZZ000002740200U

9)      http://blogs.tampabay.com/bizarre/2009/09/megachurch-bans-pepsi.html

10)  http://www.thecoca-colacompany.com/citizenship/our_progress.html

11)  http://www.google.com/publicdata?ds=uspopulation&ctype=l&strail=false&nselm=h&met_y=population&scale_y=lin&ind_y=false&rdim=state&idim=county:12057&tstart=331257600000&tunit=M&tlen=336&hl=en&dl=en

12)  http://www.irs.gov/charities/article/0,,id=163392,00.html

13)  http://www.youtube.com/watch?v=hdtJwg_8aG8

14)  http://www.ontheissues.org/2008_Fox_News_Sunday.htm

15)  http://news.findlaw.com/hdocs/docs/abortion/2003s3.html

16)  http://www.youtube.com/watch?v=bMEgohWzUds

17)  http://www.irs.gov/newsroom/article/0,,id=161131,00.html

18)  http://www.irs.gov/charities/charitable/article/0,,id=120703,00.html

19)  http://www.alliancedefensefund.org/whatwedo/strategy/Default.aspx

20)  http://www.alliancedefensefund.org/news/story.aspx?cid=5123

21)  http://www.charismamag.com/index.php/news/25410-maine-churches-threatened-with-irs-complaints-for-marriage-support

22)  http://www.irs.gov/charities/charitable/article/0,,id=181565,00.html

23)  http://en.wikipedia.org/wiki/American_Civil_Liberties_Union

24)  http://en.wikipedia.org/wiki/501%28c%29#501.28c.29.284.29

25)  http://www.cooperativeindividualism.org/grant-ulysses_annual-address-1875.html

26)  http://www.westegg.com/inflation/

27)  http://www.belcherfoundation.org/wallace_v_jaffree_dissent.htm

28)  http://www.tampabay.com/features/humaninterest/article799483.ece

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