Should churches in America pay taxes?

dies-l · Oct 15, 2012

Uphill Battle said:
tax exemption for that particular church should be revoked.

I agree with that. Any church that expressly endorses or opposes one candidate or another or a particular position on a ballot initiative is no longer acting as a non-profit and should not be treated as one. My own pastor has skirted this line more closely than I am comfortable with, but has stopped short of telling use which candidate he believes will steer us in the wrong direction (though he has made it clear that he believes one will much more than the other, and anyone who knows him knows who he is referring to, and FTR, I strongly disagree with his opinion in that regard). But, those pastors who snub their nose as the IRS and say "vote for _______" or "don't vote for ________" should promptly have their tax exempt status removed.

Uphill Battle · Oct 15, 2012

MachZer0 said:
The link is about Pastors who are rightfully challenging the current law which I hope is ruled unconstitutional eventually.

keep hopin'. In the meantime, they should have their tax exemption revoked.

dies-l · Oct 15, 2012

MachZer0 said:
The link is about Pastors who are rightfully challenging the current law which I hope is ruled unconstitutional eventually.

I figured that my agreeing with you would have to come to an end eventually, but there is nothing that is even arguably unconstitutional about the IRS policy in question. The IRS says, if you exclusively serve the function of a non-profit organization, then you are exempt from paying taxes, but if you serve an additional function, such as supporting a political candidate or party, then you are no longer exempt from paying taxes. The end result of what these types of churches are doing is to place the idea of tax exemptions for churches and other non-profits in serious jeopardy.

MachZer0 · Oct 15, 2012

dies-l said:
I figured that my agreeing with you would have to come to an end eventually, but there is nothing that is even arguably unconstitutional about the IRS policy in question. The IRS says, if you exclusively serve the function of a non-profit organization, then you are exempt from paying taxes, but if you serve an additional function, such as supporting a political candidate or party, then you are no longer exempt from paying taxes. The end result of what these types of churches are doing is to place the idea of tax exemptions for churches and other non-profits in serious jeopardy.

So what you have is the IRS, i.e. government dictating what a church is and what kind of church then has religious liberty. I think that is specifically what the First Amendment is supposed to prevent

dies-l · Oct 15, 2012

MachZer0 said:
So what you have is the IRS, i.e. government dictating what a church is and what kind of church then has religious liberty. I think that is specifically what the First Amendment is supposed to prevent

That is not what the IRS is doing. It is defining what a non-profit is for IRS purposes. If a church wants to operate outside of that definition, it is free to do so; but, by doing so, it gives up the favorable treatment that the IRS offers to non-profits.

No establishment of religion is respected by the policy, so long as it is the non-profit activities of the church, and not the fact that it is a church, that is the basis for the tax-exemption. No religious is prohibited by such a policy. Freedom of speech is not abridged by such a policy, nor is the press, nor the right to peaceably assemble, nor the right the petition Government for a redress of grievances.

All that is taken by such a policy is the privilege of being granted favorable treatment by the IRS, which is not a right protected by the 1st Amendment.

MachZer0 · Oct 15, 2012

dies-l said:
That is not what the IRS is doing. It is defining what a non-profit is for IRS purposes. If a church wants to operate outside of that definition, it is free to do so; but, by doing so, it gives up the favorable treatment that the IRS offers to non-profits.

No establishment of religion is respected by the policy, so long as it is the non-profit activities of the church, and not the fact that it is a church, that is the basis for the tax-exemption. No religious is prohibited by such a policy. Freedom of speech is not abridged by such a policy, nor is the press, nor the right to peaceably assemble, nor the right the petition Government for a redress of grievances.

All that is taken by such a policy is the privilege of being granted favorable treatment by the IRS, which is not a right protected by the 1st Amendment.

Kind of an odd definition of non-profit. How exactly does endorsing a candidate turn a profit for a church?

cow451 · Oct 15, 2012

Here is some information from the IRS website.

"On the other hand, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention."

dies-l · Oct 15, 2012

MachZer0 said:
Kind of an odd definition of non-profit. How exactly does endorsing a candidate turn a profit for a church?

The term "non-profit" is itself somewhat of a misnomer. After all, technically speaking a successful church or charity does in fact generate a profit. But, what distinguishes them from a business is what they do with it. A business uses it to enrich its ownership. A church or charity uses it to achieve some theoretically benevolent purpose. And, then there is a third category, that being political organizations that use their profits to assist a political candidate in winning an election. The IRS has decided, for whatever reason, that the benevolent deeds of a church or charity ought to be treated differently for tax purposes than should assistance given to a political candidate. When a church or charity enters into the realm of advocating for a political candidate, it brings itself outside of the category of conduct that is given favorable treatment by the IRS. There is nothing unconstitutional about that. But, if there were, the easiest remedy would be to remove the favorable treatment for churches and charities, which I'm sure we would both think is a bad idea.

dies-l · Oct 15, 2012

One thing that I will add to this discussion (excuse me if it has already been brought up) is the idea of housing allowances for pastors. Essentially, under IRS rules, the church can designate a portion of the pastor's salary as a "housing allowance", which is not-taxed by the IRS. There is a part of me that thinks that this is problematic and should be eliminated, even though I would stand to reap the benefit of it once my wife completes seminary.

MachZer0 · Oct 15, 2012

dies-l said:
The term "non-profit" is itself somewhat of a misnomer. After all, technically speaking a successful church or charity does in fact generate a profit. But, what distinguishes them from a business is what they do with it. A business uses it to enrich its ownership. A church or charity uses it to achieve some theoretically benevolent purpose. And, then there is a third category, that being political organizations that use their profits to assist a political candidate in winning an election. The IRS has decided, for whatever reason, that the benevolent deeds of a church or charity ought to be treated differently for tax purposes than should assistance given to a political candidate. When a church or charity enters into the realm of advocating for a political candidate, it brings itself outside of the category of conduct that is given favorable treatment by the IRS. There is nothing unconstitutional about that. But, if there were, the easiest remedy would be to remove the favorable treatment for churches and charities, which I'm sure we would both think is a bad idea.

Which brings us back to the government determining what is free for religion and what is also free speech. Interesting concept

dies-l · Oct 15, 2012

MachZer0 said:
Which brings us back to the government determining what is free for religion and what is also free speech. Interesting concept

Like I said, since nothing is being prohibited or endorsed by government, the First Amendment doesn't come into play. If it were, however, the remedy would be easy: no tax exempt status for anyone, regardless of whatever benevolent purpose an entity might have.

eldermike · Oct 15, 2012

The government making money from churches………..is this a good idea?
The government could run adds to increase church attendance and giving, it would be worth billions to the government. It could become a plank issue with the parties, a promise to increase church attendance by say 20% if I am elected……….We could even borrow money from China and give it to church planters, sort of like green energy but in this case it’s holy revenue.

It’s a not so well thought out idea, but a fun debate I guess. Our founders were bight guys for sure.

PreachersWife2004 · Oct 15, 2012

dies-l said:
One thing that I will add to this discussion (excuse me if it has already been brought up) is the idea of housing allowances for pastors. Essentially, under IRS rules, the church can designate a portion of the pastor's salary as a "housing allowance", which is not-taxed by the IRS. There is a part of me that thinks that this is problematic and should be eliminated, even though I would stand to reap the benefit of it once my wife completes seminary.

Trust me, housing allowance is not the income boon some people seem to think it is. If you factor my husband's salary at a per/hour rate, the time it takes him to compile all the necessary documents for the housing allowance is time taken from him doing regular pastoral things like visits, writing sermons, etc...y'know, the things he actually gets paid to do but isn't because he's too busy trying to crunch numbers.

I long for the days when I could fill out a 1040EZ form and be done with it...

dies-l · Oct 15, 2012

PreachersWife2004 said:
Trust me, housing allowance is not the income boon some people seem to think it is. If you factor my husband's salary at a per/hour rate, the time it takes him to compile all the necessary documents for the housing allowance is time taken from him doing regular pastoral things like visits, writing sermons, etc...y'know, the things he actually gets paid to do but isn't because he's too busy trying to crunch numbers.

I long for the days when I could fill out a 1040EZ form and be done with it...

My pastor gets about $20,000 a year tax free. I don't know what rate he is taxed at, but on payroll tax alone, that is a $3,000. I would guess that he saves another $2,000 in income tax. That's nothing to sneeze at. On the other hand, his total compensation package is radically insufficient considering his education, experience, and workload. It is a nice tax benefit, just not quote sure if it is proper for the government to take on that role.

PreachersWife2004 · Oct 15, 2012

dies-l said:
My pastor gets about $20,000 a year tax free. I don't know what rate he is taxed at, but on payroll tax alone, that is a $3,000. I would guess that he saves another $2,000 in income tax. That's nothing to sneeze at. On the other hand, his total compensation package is radically insufficient considering his education, experience, and workload. It is a nice tax benefit, just not quote sure if it is proper for the government to take on that role.

We don't get near $20,000.

We routinely PAY $2,000 or more in taxes. And that's with six of us in the house and even when I wasn't working. Granted, that amount started off at around $6,000.

When I was a single mom working and making $40k+, I got back around $3000 from the IRS.

I guess the moral of the story there is don't marry a pastor...

dies-l · Oct 15, 2012

PreachersWife2004 said:
We don't get near $20,000.

We routinely PAY $2,000 or more in taxes. And that's with six of us in the house and even when I wasn't working. Granted, that amount started off at around $6,000.

When I was a single mom working and making $40k+, I got back around $3000 from the IRS.

I guess the moral of the story there is don't marry a pastor...

I think you misunderstood my figures (sorry if I was unclear). Our pastor gets a housing allowance of $20,000. Any other wage earner would be taxed on what they earn and pay for housing expenses, but pastors get the benefit that their housing allowance is tax free. Payroll taxes are 15% from the first dollar earned, so that $20,000 housing allowance yields a tax savings of $3,000 + whatever he would normally pay in income tax (presumably in the 15% range, but I deduct for the possibility that a portion of that would be swallowed up by deductions anyway, so I estimate 7-10% instead). This yields a net tax savings of $5,000 or so less than what a comparable 1099 worker would pay. That's a pretty substantial benefit if you ask me.

Now, I can't complain too much, because our entire pastoral staff is so severely underpaid, they deserve whatever benefits they can get. I'm just not sure that the government should be involved in providing that.

PreachersWife2004 · Oct 15, 2012

dies-l said:
I think you misunderstood my figures (sorry if I was unclear). Our pastor gets a housing allowance of $20,000. Any other wage earner would be taxed on what they earn and pay for housing expenses, but pastors get the benefit that their housing allowance is tax free. Payroll taxes are 15% from the first dollar earned, so that $20,000 housing allowance yields a tax savings of $3,000 + whatever he would normally pay in income tax (presumably in the 15% range, but I deduct for the possibility that a portion of that would be swallowed up by deductions anyway, so I estimate 7-10% instead). This yields a net tax savings of $5,000 or so less than what a comparable 1099 worker would pay. That's a pretty substantial benefit if you ask me.

Now, I can't complain too much, because our entire pastoral staff is so severely underpaid, they deserve whatever benefits they can get. I'm just not sure that the government should be involved in providing that.

I understood your figures. We don't get near $20,000 for housing allowance. I know exactly how clergy taxes work. The benefit you speak of is pretty much swallowed up by everything else. The time it takes to document everything in order to receive the housing allowance is a pain in the butt and takes a very long time.

dies-l · Oct 15, 2012

PreachersWife2004 said:
I understood your figures. We don't get near $20,000 for housing allowance. I know exactly how clergy taxes work. The benefit you speak of is pretty much swallowed up by everything else. The time it takes to document everything in order to receive the housing allowance is a pain in the butt and takes a very long time.

Do you live in a parsonage? If so, that is a pretty big untaxed benefit (in the market I live in, that is easily a $15,000 - $20,000 annual value). If not, then it sounds like your not getting anywhere near the tax benefit that you should be.

keith99 · Oct 15, 2012

Sophrosyne said:
Until you can prove a "church" organization is a profitable business if falls well within the non profit organization status. If you want churches to be taxed then we might as well tax ALL non profit organizations including planned parenthood, NAACP, ACLU, and all sort of non profit PACs, even tax public tv and NPR too.

And your kid's soccer, baseball of football team.

Sophrosyne · Oct 15, 2012

keith99 said:
And your kid's soccer, baseball of football team.

Yes, any group that takes money in and spends it as a group could be taxed.... on the money received that they spend on uniforms and equipment if you were to go that far.

Should churches in America pay taxes?

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