Myra Jolivet, SMPS

If it acts like a for-profit, political organization and talks like a for-profit, political organization; isn’t it a for-profit, political organization? And is it then tax exempt? The answer may surprise you.

The Internal Revenue Service makes clear on its website, the rules of tax-exemption:
Churches and religious organizations can receive tax-deductible contributions like 501(c)(3) organizations, as they follow these IRS requirements:

The organization must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes
Net earnings may not inure to the benefit of any private individual or shareholder
No substantial part of its activity may be attempting to influence legislation
The organization may not intervene in political campaigns
The organization’s purposes and activities may not be illegal or violate fundamental public policy.

The 501(c)(3) rules double down on barring political activity

“Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.”

And here’s what they can do:

Voter education activities … activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.

You can thank the Romans for this…

Under Emperor Constantine, (306-337), the Christian church had complete exemption from all forms of taxation on church property used for religious purposes. This was after Constantine’s conversion to Christianity. The justification was that churches performed some government functions and should receive a benefit.

What’s the saying about God giving with two hands?

While the Catholic church didn’t pay taxes, it levied a tax of its own in the Middle Ages. Called a tithe, people had to give one-tenth of all their earnings to the church. The priests and bishops held on to the funds in a tithe barn. Those who didn’t pay up were dropped from the church or excommunicated. (Source: Wikipedia)

And as the Europeans who landed on this continent espoused a separation of church and state, the colonies gave a form of property tax relief to houses of divine worship in 1777. These exemptions survived presidential opposition by James Madison, James Garfield, and Ulysses S. Grant. Grant told Congress that tax exempt church properties back then amounted to about $83 million.

By 1894, the federal income tax exemptions were solidified by the Tariff Act which provided tax exemptions to “corporations, companies, or associations organized and conducted solely for charitable, religious, or educational purposes.”

Fast-forward to 2018, Congress made it more difficult for the IRS to revoke tax exempt status from churches. The IRS must show that an “appropriate high-level Treasury official reasonably believes, on the basis of facts and circumstances recorded in writing, that an organization claiming to be a church or convention or association of churches may not qualify for exemption….”

So, while as citizens we might feel it’s time for some churches to pay taxes, our lawmakers have gone to great lengths to make sure they don’t.