Render Unto Caesar, or Tax Policy for a Fat Church

All Saints Episcopal in Pasadena is in a protracted fight with the IRS. I don't know what was in Pastor Bacon's "anti-war" sermon, but it has the IRS wanting to reconsider their tax exempt status. I have a solution.

Churches need to give up their tax exempt status. It is completely unjustifiable and constitutes preferential, prejudicial treatment. On what basis do they get the exemption? 501(c)3 ministries have historically receieved tax exempt status because they function as non-profit entitities that serve the community. Does that describe the modern, evangelical or mainline church? Sometimes. Less than half the time—far less than half, I'm guessing. In addition to their tax exempt status, ministers are allowed to take up to 45 percent of their salary as tax-exempt "housing allowance." Sorry, what other job allows that? Time to stop whining about government interference if you're going to keep allowing the government to give you tax shelters, folks. (This is another way pastors are able to say, "My salary is only x," when in fact they often aren't counting housing allowance, retirement, and insurance, things other schmucks have to pay out of pocket. The real question for pastors is, what is your total package?)

Here's what I propose, any money a church spends on benevolence, real benevolence, not taking a group of teenagers to Mexico for a week, can be tax exempt. Pay electric bills for poor folk, house a homeless family, feed people without food, build a house for someone, pay for a medical procedure for a destitute member, etc. All that would come from an account that genuinely does 501(c)3 quality work. All the rest, and here's the rub, all of it, the money you pay your pastor, housing allowance included, the money for the ridiculous electric bills so the coffee shop and bookstore can be open, the money for donuts, the money for your "minister of technology," the youth ski trip, all of it, every dime, is taxable. If you're not feeding the hungry, clothing the naked, or making provisions for the marginalized, not making a substantive, material difference in the lives of the poor and powerless, you pay taxes on the money. I think it's a nice compromise. Sorry, churches, time to render unto Caesar and start trimming the fat.

Comments

[jamie]

What a great idea. I think that perhaps this would make many begin to consider where the money is going.

[greg]

Jamie,

I hope so. Hey, what happened to your blog?

[Streak]

Sounds like a great idea and a great compromise. Great point about complaining about government interference while loving the tax shelter. And, just like all tax policy, I assme we could work out something for the very small, thin, and already poor churches to function.

Now to find someone brave enough to run on this....

[D-Tim]

Letting the Government decide what constitutes "real benevolence" is frightning.

You're idea, in theory though, is excellent. Churches have found the (legal) loopholes and exploited them until it's embarrasing.

Biblically speaking, Churches themselves should take it upon themselves to start addressing/resolving this issue... yeah right.

[Kirk Longhofer]

I wonder what exactly you are suggesting. Are you suggesting that the church give up it's status as a 501c3 organization? That is the issue in question with the California church. This designation is not a right. It's a privilege, granted by Congress. There are restrictions. The question in California is whether or not the IRS is being artitrary or capricious in its enforcement STRATEGY. Not whether or not the rule is right or good or fair.

Are you suggesting that church buildings go back on the property tax rolls? We actually pay property tax on portions of our parking lots, because they generate income by being leased to nearby businesses.

Are you suggesting that churches are taxed for unrelated business income, such as income from a bookstore or coffee shop? They already are, if they're following the law, which they should.

Or are you suggesting that they should pay corporate tax on the contributions of members? Or is it only on dollars expended that don't meet your criteria for caring for the "least of these?"

Where's the line?

Does the nearly $200,000 I spend each year on a television broadcast of a worship service get taxed? I'd be happy to show you a file full of tear stained letters from the elderly all over Kansas and northern Oklahoma who can't go to their own home church and are grateful beyond measure for a connection to a worshiping congregation.

What about dollars spent on a security system that protects the Preschool where more than half of the children are from homes in poverty and attend on scholarship? That was a cool $75K this year.

Oh... and the new lighting and projection and sound we're planning for a youth space. Taxable? The reason we're building it is because we're seeing kids show up who just plain want to learn about Jesus. We need the room, and we need to communicate with them in a culturally appropriate way.

Lots of questions here. Good and valuable questions.

Modern churches should be challenged on how much of their budget is directed internally, and how much is external. I don't necessarily agree that *all* internal expenditures aren't fulfilling the Great Commission. Jesus said "Feed my lambs." He also said "go make disciples."

These questions are real. They are complicated, and deserve real discussion, rather than broad over-generalizations and quick pronoucements on what is fat and what is not.

[Joel the Awesome]

The only church of which I'm aware that pays their taxes is the official Church of Satan. I did a research paper on them a couple years back, and they have some very interesting ideas about church, government, and taxation. They voluntarily pay every form of tax to the government even though they are exempt.

[greg]

Kirk,

Those are all lovely anecdotes, but they don't address the issue of why a church should be granted a special status in regard to taxes. I think it has more to do with a bias toward religion. Many corporations do benevolent work and give to charity, yet they pay taxes as well. So do my wife and I. Why should churches be spared this? Usually it's the Christians who are quoting Romans 13 and render unto Caesar when issues of politics, capital punishment, and civil government come up. Funny how all that doesn't matter when it's a matter of money.

[Tofflemire]

Congress allows money donated to charitable organizations to be tax deductible. It is their tax code. Whether the church wants to cooperate with that tax code is a choice. With that choice, the church gives up control. If they want the control back, stop participating in the system.

The church already operates much differently that most charitable organizations and are allowed much more latitude. Churches do not file tax returns. They are the only money gathering entity, profit or non-profit, charitable or not, that outside of W-2's anyone has a clue of how they spend their money. Anyone can go to Guidestar.com and download current 990's on any charitable organization, expect churches.

Add to this that the standard deduction in 2005 was 10K. So including mortgage interest, the first 10K doesn’t even count. After that you can itemize and depending tax bracket will be able to save 10% to 28%. So if your AGI is 60K and you tithe net (like a good church member), your total contribution should be about 6K, which in effect you are out of pocket around 4.5K. If you make and donate less, you get even less benefit. A tax deductible gift does not decrease your tax burden 1:1. You are still giving away money.

Therefore, the church and its congregation has been trained that if it is not tax deductible, it is not charitable. Screw the tax code and give freely without regard to whether it benefits you or not.

[Alex]

I agree with you Greg. How does a church, like Victory perhaps, justify buying probably $200k worth of lazor light systems, or flatscreens for the congregations seats, or construction costs to build their 8-level worship band platforms. It's ludicrous. You'd think a Christian establishment would have more integrity. I wonder how LC treats their x-box and ball pit area expenses used for their children's ministry area. I mean, if Chuckie Cheeses has to tax their revenue, Lifechurch should too...they're not all that different.

But that's another discussion for another day.

[Alex]

I'm sorry, but I have no real platform to promote this. But you've got to go to the lifechurch tv websight and watch the beginning of the 2nd week of the current series, titled "Disciple". They make a mockery of what "some consumer driven" churches are like, I assume to contrast it to LC. It's ridiculous. And really, really funny...considering the mockery is actually very similar to what LC is like (at least what I think it's like).

[Jason]

"Letting the Government decide what constitutes "real benevolence" is frightning."

Well, we already do, just not in so many words. We define "benevolence" as organizations "operated exclusively for religious, charitable, scientific, testing, for public safety, literary, or educational purposes, or to foster ... amateur sports competition ... or for the prevention of cruelty to animals or children." (Sec. 501(c)(3)) Strike "religious," which is the most vague of the list, and let chruches be tax exempt to the extent their activities fall into any of those catagories. Seems sensible.

[jamie]

greg, I deleted it. After reading Shane Hipps book, I felt compelled to finally delete my blog. I wanted my blog to be like yours, but I struggle to write enough to explain my thoughts thoroughly. Ergo, many people in my life made a lot of assumptions about what I believe. It caused anxiety for me, and I even lost a couple of friends. (I hate when people lurk and don't take the time to clarify.) So I deleted it. I miss it sometimes, but I just couldn't devote more time to it.

[Leighton]

Does the nearly $200,000 I spend each year on a television broadcast of a worship service get taxed?

The question should be phrased, do you get to write that off that $200,000 (which is already in your corporation's bank account) as a tax deduction. Only your accountant knows that for sure, but a good rule of thumb is if you wouldn't want to see (e.g.) American Atheists writing off operating costs for their TV broadcasts as tax deductions, it doesn't make a lot of sense if you try to make yours an exception.

The lighting system for the youth center should absolutely not be tax deductable. (Under our current laws it is, but it shouldn't be.) If you're okay with a Muslim organization shelling out a few hundred thousand quid for a center where teenagers come to learn about Islam--and that's the only function of the center--and having that money count as a tax deduction, then at least your position is consistent; I'm pretty sure I don't want my tax dollars supporting either organization, though. (I hope both of them are successful, just not by means of making my tax money stretch further than it would otherwise have to.)

[bobstevens]

The logistics of a split system are too complicated.

I think Ellul would suggest not paying taxes even if the tax exempt status churches hold in the U.S. were removed.

I'm curious about the story that sparked this, but I'll just look it up. Anti-war sermons don't sound like much of a reason to remove tax-exempt status. The only previous stripping of such I was aware of was B.J.U.

[Kirk Longhofer]

Hey Greg...

So you're saying no special status. Pay property taxes, treat contributions, other than those specifically used for direct benevolance work, as corporate income and pay tax accordingly, and pay sales tax for all purchases, right? Here in Kansas the church already doesn't get out of collecting sales tax on items sold, up to and including the lady's league $5.00 chicken noodle dinner!

An aside to Leighton... things like lighting systems aren't deductable. They're capitalized and the depreciation is expensed. Costs for a TV broadcast are also expenses that go against revenue when figuring net profits. Those profits are then taxed.

The sociological answer to your question is pretty simple. Society has made a decision that the benefits the church provides should be encouraged.

But your question is a lot deeper than that, I think.

But I don't think your question is as much about tax policy as it is about priorities for spending.

Am I right?

That is entirely fair criticism, and worth discussion. Is there wasteful spending. Certainly. Is spending on a facility wasteful. Hmmmm. Not sure. What if that facility facilitates a changed life?

I guess what I'm saying is that I am pretty hesitant to judge what another church does. I have plenty on my plate just keeping track of myself.

Thanks for asking the question.

[Leighton]

Kirk,

Thanks for the clarification.

To answer your question, if a facility "changes lives" the way most churches these days mean when they talk about changing lives, that should be grounds for immediate forfeiture of any kind of special tax status they may have enjoyed in the past. But it won't be, so I don't put too much weight in these discussions.

[Scott Jones]

My understanding of the history behind the exemptions is that it has always been understood that where the state had the power to tax, the state (theoretically) had the power to destroy. Therefore, to protect the freedom of religion, religious institutions received tax-exempt status.

According to what I've read, the only church to ever lose this status is one that in 1992 ran full page ads in the local paper opposing Bill Clinton.

The investigation of All Saints appears, prima facie, to be politically motivated. My understanding is that anti-war statements were made by a guest preacher, and that is the possible violation, according to the IRS. I am assuming, Greg, that you would support ministers being able to make anti-war statements without the fear of government investigation as a result?

[greg]

Scott,

Of course I would. I'd just like to see them do it without tax exempt status.

[cheek]

But that situation makes it perfectly clear that the tax-exempt status in fact further entangles the two supposedly separate institutions. If there were no tax-exempt status, then the government could not intimidate churches with the threat of removing it.

[luke hartman]

Just a pastor weighing in...while the housing-exemption is nice, it only saves my family $1,000 or so a year in GI. Paying self-employment tax (15.3%) is the dark side of the housing allowance. And I don't receive any benefits -- no insurance, retirement, no pay raise for my M.Div, etc. -- so not all pastors (and actually none that I know personally) are in the boat you mention (though I don't doubt it's true for many). I'm certainly not doing this for the monetary compensation.

I do appreciate your point on what should or shouldn't be tax-exempt. My initial thought was "but this will kill many churches!" but that is, of course, your point. Well taken.

[seth]

oh how i would love churches to give up tax exemption. hell, any recognition from the govt.

but you know the real boundary to tax exemption isnt cases like all saints. its scientoligy. ;) i jest.

[Pastor Jorge]

Just a couple of thoughts:

1. The vast majority of churches are small and struggling. They would fold if your suggestion is taken seriously. Only the mega-churches would remain.

2. The military has a tax exempt housing allowance. There are some other groups, too.

[greg]

Jorge,

If by fold you mean the building would close, I agree. That doesn't mean the church folds though. It's simply the way we've come to look at it. Building equals church. Overhead equals church. Organization equals church. Whether or not they fold has nothing to do with the rightness or wrongness of my suggestion. It isn't the government's job to ensure that every small church has a facility.

The military has a tax exempt housing allowance and a food allowance. They also sign away half their freedoms, agree to get shot at, and agree to do what they're told. They are government employees. Are you suggesting churches do the same?

[Kirk Longhofer]

To all who have followed this thread...

There is a great article on the issue in the NYTimes today.

http://www.nytimes.com/2006/10/08/business/08religious.html

[Ned Netterville]

Jesus, "Render unto Caesar what is Caesar's, but render unto God what is God's.

Inquisitor: "But Jesus, what is God's and what is Caesar's?"

Jesus, "What do the Scriptures say?"

IQ, "Ah, Psalms 24:1 says, "The earth is the LORD's, and everything in it."

Jesus, "You have answered well my child."

IQ, "But what then is Caesar's?"

Jesus, "The rest is his."

IQ, "I don't get it."

Jesus, "Neither did Caesar. But don't feel bad, Christian-church scholars have been misinterpreting these explicit words of mine for 17 centuries, ever since their church was enthralled by Rome and they began to receive a share in the booty. I told them they could only serve one master, but, nooo, they were loyal, patriotic citizens of the State. Even when their other master turned them into tax slaves they remained loyal subjects, if rather pathetic ones. There's just no accounting for the depth of stupidity among those who try to serve two masters."

http:www.jesus-on-taxes.com/