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Wednesday, July 30, 2008

The Church and the IRS - Part 2

I am very pleased to see that my blog entry last week has sparked replies both on the blog site and via email. I very much appreciate the feedback and encourage other users of our site to feel free to join in the discussion as well. I list below some of the points I have made in the email and blog exchange regarding this issue:

[In my last blog entry] I was indicating what I consider to be basic common sense. We believe that donors to all public charities should be well informed before they give, so it seems wrong (to my common sense at least) when the lion’s share of private contributions goes to entities that have no obligation to inform their donors. I see no downside to this or infringement on the freedom to worship as one chooses. I believe that there is a veil of secrecy here, under the guise of separation of church and state, that needs to be removed for the good of all.

Anyway, in answer to the question of why “churches” (i.e. houses of worship) are not required to file (BTW, religiously affiliated organizations in most cases ARE required to file which is why we have a section on our web site for religious organizations), I am currently reading up on the history of this myself. However, I suspect it gets back to the separation of church and state. There are various interpretations as to the meaning of this and my opinion is, the “church” should be free from any state encumbrance in regards to how it chooses to worship (as long as it does not violate laws of public safety), but as a tax-exempt public charity, they should have an obligation as all other such charities do, to provide an informational report as to their finances [if their annual revenues exceed $25,000].

Regardless of historical rationales for the right of privacy to extend to church finances and the legal interpretation (Lord knows we have changed our legal interpretations over time) by some of the possible violation of the First Amendment, it doesn’t make sense. I believe it just makes plain sense that an entity with tax-exempt status should disclose its financial information to the IRS. I think one of the hallmarks of our country has been that, at the end of the day, common sense often wins out over a certain philosophy or specific political viewpoint.

Furthermore, back when this was all first set up, the money involved was minuscule by comparison to today’s record-breaking amounts over $100 billion. Circumstances change and our policies should change accordingly. Continuous improvement of our policies as a nation!

The fact that SOME churches do provide SOME financial information to their congregants (or some leadership body) does not eliminate the need for the standardized reporting I suggest. This is an added layer of information and transparency that can be more broadly scrutinized and reviewed.

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Michelle Cubillas Hogan said...

I am definately just an average layman when it comes to these issues (which may be good or bad) but as an average citizen who contributes to a house of worship, I can specify a concern or two of government oversight on our church's spending. If our church chose to pay for travel to a foreign country to spread the gospel, might that not raise eyebrows to those who don't believe? Really, our church would not send a team anywhere just to talk, without having a focus on also meeting a real physical need. But I firmly believe in a separation of church and state, to protect the church. It's one of the foundations of our country. How else could a nation like ours control faith based organizations but through finance? Just because the US government is not likely to have a communist like chokehold on the church anytime soon, does not make any control OK. I believe, that when I give to my church, in my heart that money is going back to God. I trust the leadership in our church to be good stewards. Not to mention that with detailed budgets, checks/balances, and quarterly business meetings all members can see exactly what happens with the money.

Admin said...

I think churches should have to follow the same tax laws as other tax-exempt organizations. I don't see why churches should be treated as special.

TV evangelists bring in big money, but how much of that money is used for charity, and how much is used for glutiny?

Unknown said...

I realize I'm posting kind of late, but I was left wondering... do the tax codes actually categorize religious organizations as charities? I just googled around and found this page
and that didn't seem to be the case... but I'm no expert in these areas...

Limey said...

The current IRS te/ge climate with all their questions and time it takes to respond to Form 1023 applications doesn't sit very well with Churches wanting to be dragged thru the process of filing
Furthermore only according to your view and the view of the IRS that filing the 990 would facilitate a better understanding and transparency (and to go as far as quoting the IRS "it's a free advertisment"!!)
Management can rarely be bothered with forms like those, and next you'll be demanding Single Audits for every Church.
Bottom line current state and federal law DISCOURAGE all filings
You cant treat every organization as if it is a Fourtune 500 company
Small organization dont have the time or resources to pacify evry whim of the public and are bogged down by paperwork as it is.
Yes, you can shock everyone with your figure of 14th biggest and $860million but all you are gonna hurt are the little guys.

Unknown said...

@michelle (no last name)
That's entirely my point. If my understanding is correct, the tax codes do not have a section for "tax-exempt organizations" - they refer to charities and churches - *separately*. I think you're getting confused because both may be tax exempt. This is like saying that because I pay taxes, and my employer pays taxes, I am now a corporation...
A church and a public charity are *not* the same thing. Why should they be treated the same? For those wondering why a religious organization should be a special case - We have a history going back further than the inception of our country with regards to religion being a special ideal, free from any government interference or oversight. As Ken notes, this is in the Constitution...

Last note - just because a religious organization is tax exempt *does not* mean its members are. An evangelist making millions of dollars has to either a)pay taxes on his income, in which case the government gets their share or b)launder it through his church, which, while hard to catch, would be illegal