Some faith-related issues are so steeped in tradition and sentiment they cause near-instant polarization. Chief among these topics is the tax-exempt status conferred to religious organizations.
The U.S. Bill of Rights reads, “Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof.”
Although tax forgiveness for churches also was common at the United States’ birth, it wasn’t formally outlined in our nation’s framing documents. Exemption from reporting income and paying federal taxes became official in 1894. Likewise, donations are tax deductible, and all 50 states release churches from property taxes.
Church tax exemptions help good people and support good work. They’re a tradition. Are they fair?
Tax-exemption supporters argue that the provisions remove government from church affairs and prevent persecution. Opponents say the opposite is true, noting exemptions require a government to determine legitimacy. (The “IRS Tax Guide for Churches and Religious Organizations” uses “church” to describe any type of worship center, regardless of religious affiliation.) Churches with deep pockets can --- and have --- asked to be granted tax exemption status in exchange for dropping their costly lawsuits against the U.S. government.
Often, religious centers add value to communities. However, the same can be said for individuals, secular nonprofits and others. (Unlike religious organizations, secular nonprofits must file and report income to the Internal Revenue Service.)
Consider taxpayers like home and business owners. Their financial holdings run the gamut. The same is true for tax-exempt “churches,” which can be anything from fledgling startups to billion-dollar corporations.
As a result, “church property” is a loosely defined term. For example, hotels, farms and pay parking lots are among Wisconsin’s $4.2 billion in tax-exempt religious property, notes Tax the Churches.
According to the organization, tax exemptions for churches are “unconstitutional, unfair and costs everyone else billions. And as your right as a citizen to practice the religion of your choice must be respected by all other citizens, so too must you respect every other citizen's right not to support your chosen religion with tax subsidies.”
Church income is tough to track, but regulatory enforcement costs and real estate holdings add perspective. U.S. churches own as much as $500 billion in untaxed property, according to a report by White House senior policy analyst Jeff Schweitzer.
In terms of financial impact, consider the most populated U.S. metropolitan area. New York City boasts more than 9,500 churches with tax-exempt status. If they paid property taxes, it would add $627 million per year to the city's coffers, according to the New York Independent Budget Office. Nationwide, the “parsonage exemption” results in hundreds of millions more in lost tax revenue.
Some opponents say the church tax exemption forces taxpayers to support beliefs they find unconscionable. I disagree; wholesale endorsement of every service is an unattainable goal. My taxes are an investment. The funds help bolster the lynchpins of a viable society --- education, the arts, eldercare, law enforcement, human services and others --- regardless of whether I see a direct link to myself.
We must continue our national tradition of providing tax exemptions to nonprofits. Application of services should be the focus; the religious test should not.
Golden writes the Courier’s weekly faith and values column. E-mail her at email@example.com.