A Case Against Tax-exemption for Churches

Tax exemption, churches

Recently the increasingly desperate Democratic presidential candidate Robert Francis “Beto” O’Rourke lashed out at Christian churches and some other non-profit organizations who oppose same-sex ‘marriage.’ While appearing on CNN’s ‘town hall’ about LBGTQ+ ‘rights,’ on October 10, 2019,

O’Rourke was asked, “Do you think religious institutions like colleges, churches, and charities should lose their tax-exempt status if they oppose same-sex marriage?”

“There can be no reward, no benefit, no tax break, for anyone or any institution, any organization in America that denies the full human rights and the full civil rights of every single one of us,” the former Texas 16th district congressman replied. “So as president, we’re going to make that a priority, and we are going to stop those who are infringing upon the human rights of our fellow Americans.”

His statements have received significant pushback and O’Rouke will ultimately regret his response, if he isn’t doing so already. The majority of his critics have honed in on this as an attack against religious freedom.

I do not believe this is properly characterized as a threat to religious liberty. The question asked was too narrow in scope and O’Rourke’s response was far too broad for such to be the case.

A Threat to Christian Churches, Colleges, and Charities

Inset.1.10.17.2019It is noteworthy that the question put to O’Rourke focused on removing the tax-exempt status of “religious institutions like colleges, churches, and charities…if they oppose same-sex marriage,” without including other institutions such as mosques, synagogues, and non-religious colleges that also receive tax breaks and exemptions. O’Rourke decided that his response shouldn’t name those institutions, so he simply included “anyone…any institution…any organization…” that “are infringing upon the rights of our fellow Americans.”

However, the context of the question shows that O’Rourke was leveling his threat in the church’s direction, in agreement with the questioner. He enlarges the spectrum to provide political cover if he needs to adjust his views later to answer other questions.

The general response from the conservative community was in agreement that O’Rourke launched an attack on religious liberty.

Luke Goodrich, vice president and senior counsel at Becket, a religious liberty law firm, called it “blatantly unconstitutional,” adding “it’s also foolish because those groups provide billions of dollars in essential social services to their communities. Churches and ministries should be allowed to hold centuries-old beliefs without fear of government retribution.”

However, I submit that this is not the case. The threat to deny tax-exempt status is not a threat to religious liberty, but it is a test of the integrity of the Christian church in America.

What the State Gives…

Religious liberty is recognized as an inherent individual right by the U.S. Constitution, not a right which is granted by the state, aka the government. Thus, religious liberty can’t be legally taken away from any American by the state.

However, the same is not true of tax-exempt status. It is established with legislation passed by Congress and signed into law, beginning with the Tariff Act in 1894, and can be repealed by legislation as well.

There have been 17 ‘updates’ to this legislation since 1894. Since this was in place before the IRS came into being, the benefit of deducting charitable donations from one’s income tax was one of those changes. More about that later.

Inset.2.10.17.2019

In other words, what the state gives, the state can take away and tax-exempt status for churches is not exempted from that rule. Churches who accept it from the state must also accept whatever restrictions the state may require to keep such status.

Christian churches, like most other 501(c)(3) non-profits, generally apply with the IRS to be initially recognized as having tax-exempt status. Usually, this is done whenever a new church incorporates as an official organization recognized by the government.

However, churches are not required to do this. If they do not apply, they are automatically considered as tax-exempt and remain so unless they violate certain requirements mandated by the state.

To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organizationi.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.

Churches must also file some variant of IRS form 990 each year which asks detailed questions about the activities of the organization to confirm it complies with the requirements of tax-exempt status. If the church fails to do this, steps will be taken to rescind the government tax breaks for that church.

The Anti-Christian Left Use Tax-exemption as a Weapon Against Churches

During my time as a pastor, there were amazingly blessed days of service to God’s people, contrasted with other sad and frustrating days trying to be faithful to the calling. The Christmas and Easter seasons always brought a mix of both kinds of days.

Those were very important times for the church congregants and I with a wonderful host of volunteers strove to make them exceptional and special. It was an annual set of opportunities to reach people with the gospel who only went to church during those seasons.

However, those annual celebrations also brought forth the ire of anti-Christian groups against anything resembling a public display of Christian faith, even as is true today. Organizations such as the Freedom From Religion Foundation, or FFRF, and the ACLU lead the way in Nativity Scene display battles each yuletide season.

 

Unabashed AtheistThe threat that a church might lose tax-exempt status is used to dampen the potential for expression and outreach at those times. This threat is more direct in election years, and letters are sent to churches from non-religious groups like FFRF warning against any political activity lest they lose tax-exemption.

What many may not realize is that these kinds of warnings also come from religious organizations against churches of the same denominational affiliation! A group which is known as the Baptist Joint Committee for Religious Liberty takes it upon themselves to caution certain Baptist denominations against politically offensive conduct during election years using the tax-exempt status as a cudgel to attempt beating the church into silence.

Moreover, in many cases, pastors are under pressure to preserve the tax-exemption from within their own congregations. There are members who give significant amounts to a church budget who stridently object to removing the tax deduction for charitable giving which would ensue if tax-exempt status were revoked.

Tax-exempt Status Is a Road “Paved with Good Intentions”

There is a very old saying; “The road to hell is paved with good intentions.” The idea of allowing tax breaks for churches and charities was to accomplish the ‘good intention’ of encouraging giving to institutions that worked toward individual and societal good.

However, as is often the case with good intentions, they fail because of reliance upon human wisdom instead of Divine counsel. Human wisdom is far too frail to avoid foolishness and sin without the power and righteous wisdom of God to direct it.

The founders of America realized this early on. They knew that the American experiment into self-government would never work without individuals who could exercise self-control of the kind which only results from submission to God’s rule.

As John Adams noted,

Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.

When the people of America began to forget this truth, the potential harm of such things as a tax-exempt status for churches became more of a reality than ever. The solution to this problem is quite simple, but it is definitely not easy to accomplish.

The simple part is determining what to do in the face of ever-increasing threats to revoke tax-exemption. The solution is for the church(es) to refuse a 501 (c)(3) designation by public declaration.

Inset.4.10.17.2019That would, of course, mean the church would have to pay taxes on items it purchases, as well as requiring donors to forego the tax deduction for their contributions. This is the ‘hard’ part of such action because it would require significant sacrifices from churches and their congregants.

However, I submit the sacrifice would be worth it, even if tax-exempt status was not being weaponized against Christian groups. The fact is that as long as this carrot is held up by the state, and as long as churches chase it, the likelihood is that the churches will grow dependent upon tax breaks.

When that happens, then the church will begin to slough off its mission to preach the gospel and teach the whole Word of God to enable discipleship for fear of losing the state’s favor when it demands, as it will surely do sooner or later, that the church restricts its activities in the public square until it essentially becomes the slave of the state.

The biblical injunction to the church can never include total obedience to anyone or anything in place of the LORD Jesus Christ Himself. If any Christian group desires to remain free in America to follow Christ alone, they should consider dropping the non-profit 501(c)(3) designation and accepting the financial loss from the state.

Today’s restrictions on churches with tax-exempt status are relatively light, and much can be legally done in the political arena under them. However, the relative freedom Christian organizations experience today is still freedom with conditions imposed by man and not by God.

saying, “We strictly charged you not to teach in this name, yet here you have filled Jerusalem with your teaching, and you intend to bring this man’s blood upon us.”
But Peter and the apostles answered, “We must obey God rather than men.” Acts 5:28-29 [ESV]

D.T. Osborn

Sources: The Holy Bible, English Standard Version, Crossway Bibles, 2001

Featured and Top Image courtesy of Min Lee’s Flicker page – Creative Commons License
Inset Image 1 courtesy of DonkeyHotey’s Flickr page – Creative Commons License
Inset Image 2 courtesy of Uwe Schroder’s Flickr page – Creative Commons License
Inset Image 3 courtesy of Wil C. Fry’s Flickr page – Creative Commons License
Inset Image 4 courtesy of Simon Cunningham’s Flickr page – Creative Commons License

All other sources linked or cited in the text

Originally published in TIL Journal

 

 

 

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