Photo by Sebastian Pichler on Unsplash
As we’re all very aware, questions of financial transparency have recently become tremendously salient to the church and its members.
There are, of course, ways to remedy the issue of financial transparency. The church could voluntarily release financial information. Or Congress could change U.S. tax law to require churches—like virtually every other tax-exempt organization—to file a Form 990, which would then be released to the public.
NonBelief Relief wanted to help spur this second option. NonBelief Relief was a charitable organization formed by the Freedom From Religion Foundation. Its charitable mission was to provide humanitarian-style aid, improving the world and the situation of people here. It also had a secondary purpose: to challenge the constitutionality of the tax law requiring non-church tax-exempt organizations to file information returns, but exempting churches from that requirement.[fn1]
And how did it plan on doing that? Well, a tax-exempt organization that is required to file a Form 990 and fails to do so for three straight years automatically loses its exemption. So NonBelief Relief refused to file a Form 990 for three years, and automatically lost its exemption. It proceeded to file suit in the D.C. Circuit, requesting that the court hold that (a) the church exemption from filing was unconstitutional, and (b) its exemption had been unconstitutionally revoked.
About two weeks ago, the court dismissed its complaint. The reasons are fairly technical, so I’m not really going to go into them. It’s enough to say that the law makes it really hard to challenge the constitutionality of tax laws without some kind of very specific injury, an injury the court said NonBelief Relief was not currently facing.
The court went on to suggest how NonBelief Relief could have standing to challenge the constitutionality of the provision. The court essentially said NonBelief Relief would have to pay taxes it owed, sue for a refund, and, in that suit, make its constitutional claims. And maybe NonBelief Relief will follow that path, though I’m not convinced that, as a legal matter, they would win the suit.
Effectively that means that, if we want churches to face the same disclosure requirements that other tax-exempt organizations face (and we do. Really), it’s going to require legislative change. I suspect the judiciary isn’t the way we’re going to get there.
[fn1] You may remember that the Freedom From Religion Foundation did its share of constitutional litigation. Notably, I blogged A. Ton. about its (ultimately futile) challenge to the parsonage allowance.
By Common Consent, a Mormon Blog 
As long as we’re talking about getting rid of archaic things: religious organizations also shouldn’t be exempt from local property taxes, at least for things like emergency services. My ward definitely is calling the city fire department if the electrical panel catches fire because there are too many Crock-Pots plugged into a single circuit; property taxes provide a huge chunk of the fire department’s operating budget.
I don’t think I grasp their strategy. They don’t claim to be a church, so by failing to file they seem to be arguing that non-church non-profits shouldn’t have to file 990s. Why is that relevant to whether churches should have to file?
With apologies to Sam for the diversion:
Hepta…, Some have thought my ward had/has too many crackpots plugged into a single circuit, but those who were all fired up over it generally don’t come any more. No [volunteer] fire department succeeded; I think its just going to have to burn itself out. :) I wonder if that can happen.
Wondering: Dad, it’s time we talked about finding you a place where you can get the help you need, that we your children clearly can’t provide to the level you deserve.
“The court essentially said NonBelief Relief would have to pay taxes it owed, sue for a refund, and, in that suit, make its constitutional claims.”
Sam, Isn’t that essentially the same response they gave with the case about claiming direct missionary payments as a tax deduction (If I’m remembering that part of God and the IRS correctly).
Hepta,
I, for one, support laws that exempt churches from most taxes (including and especially income tax, but that’s in part because I think that people, and not organizations, should generally pay income taxes, but that’s another issue entirely). But I agree that property taxes are not among them. Perhaps the rate or assessed value could differ from other classes of property, but any occupied property ought to pay for the roads, utility infrastructure, and public safety services that they use.
This brings up another question: how is a “church” defined for tax purposes, as distinct from a typical secular non-profit charity? Many churches (like LDS) have humanitarian or charitable arms, or at least conduct charitable outreach of some kind. A few churches (like the Salvation Army) have charity as a central purpose and mission. And some “churches” enjoy tax-exempt status while contributing not one iota of goodness to humanity (like Westboro Baptist).
Can any non-profit just call itself a church and become financially opaque?
Yes. Scientology became a “Church” in the ’60s for this reason.
The IRS has a 14-criteria facts-and-circumstances test it uses. Some courts use that test, while others don’t. Largely, whether an organization is treated as a church depends on how much it looks like what we think of as a church (though note that the Satanic Temple and the First Church of Cannabis are both exempt as churches, for whatever that’s worth).
Sam: would the Church of the Subgenius qualify?
Kevin nailed it. I would think their own situation is different, and they wouldn’t have standing to challenge another type of organization’s requirements. That is what I assumed the reason for tossing the case would be.
Maybe if enough Latter-day Saints wrote to the apostles requesting a release of financial information about what the church does with THEIR donations, we might see less secrecy and more transparency. I’ve paid tithing my whole life but have no clue what the church is doing with that money. Other than vague statements about all the good the organization is doing. Let’s see the numbers. When the church states that it is not a secretive organization, that is disingenuous to the max. Financially, it is opaque as any organization this side of the Trump syndicate.
Hepta,
Don’t you think that the members of a religious organization or community already pay significant property tax for the fire department? Why tax them twice for collectively building a religious edifice such as a mosque or temple? I sincerely doubt your proposal that government should get into taxing what is essentially a “free exercise” of religious beliefs would be efficacious.
Before taxing religions, let’s remember that the social benefits of active religious organizations (although I am unsure about the Church of the Subgenius) are incalculable. You likely already know that religionists donate a larger percentage of their incomes to charity than secularists and their organizations like the “NonBelief Relief” organization mentioned in the Op. I have lived in several LDS wards in which the total humanitarian relief (not tithing) provided by members annually easily exceeded the yearly total of relief or grants provided by NonBelief Relief. Not only that, “Atheists don’t have no songs” (just ask Steve Martin).
Wally,
Comparing the LDS Church with the Trump organization… Seriously? I wonder if President Trump has replaced Hitler in the new Godwin’s Law for online discourse. Makes sense I guess. Instead of “Reductio ad Hitlerum” we’ll call it “Reductio ad Trumpum.”
Kevin and Don, their argument is essentially that requiring non-church orgs to file a 990, but not requiring it of churches, violates the Establishment Clause. The problem (for them, at least) is that the Tax Anti-Injunction Act makes it really hard to challenge the tax law unless you claim you’ve been assessed (and perhaps paid) a tax and are requesting a refund.
The court, in dicta, suggests that, if NonBelief Relief can get into court by claiming an assessment of tax was excessive, it also has the ability to challenge the constitutionality. I’m not completely convinced by that argument, but I suspect that if they do it, the district court, at least, will let them have standing to challenge the provision.
Old Man, I’m in California. People in my ward who bought their houses in 1972, or inherited their parents’ house and got to carry over the valuation under one of the successors to Prop 13, are paying $400/year in property taxes. (Same deal in Arizona and a few other states, BTW.) Additionally, what happens when you have a situation where the jurisdiction in which a religious edifice is found is not the one in which most of its attendees live? Should the City of Newport Beach, which has its own fire department instead of contracting for service with the Orange County Fire Authority, start billing the other cities in the Newport Beach Temple’s district–and then maybe also Long Beach and Corona since people there find it easier to go to Newport than to their respective assigned temples in Los Angeles and Redlands? Shall Los Angeles send a bill to Bakersfield, San Luis Obispo, and Ridgecrest?
Don’t give me that tired argument about how much more generous religious people are with their giving, either. Most of the tax-exempt donations made to religious organizations go to either buildings or the salaries of clergy and staff. (The inevitability of priestcraft means that this isn’t even enough: I live across the street from an African-American pastor who did a year in Los Angeles County Jail for, in cahoots with the church board, embezzling $2 million from his Baptist congregation in Compton. He’s back on his bull**** again with another congregation a few miles away in North Long Beach, driving cars costing significantly more than the annual household incomes of most of his flock.) Jon Huntsman Sr. had a good term for that: “country club dues.” There is no public purpose there that justifies a tax exemption, which is why in most countries donations to religious organizations are not deductible from income from purposes of determining tax exposure. I don’t want to live in Israel, where the haredim say that they should be exempted from military service and receive massive welfare payments to read the Torah all day, because their prayers are what protect the Jews from their enemies.
Would I prefer the church disclosed more of its financial position in the annual report? Yes. Do I want an organization that is so opposed to religion in general to force the issue because they want to end tax exempt status for all religions? No, I do not.
Of course, I can see their point, with the Last Week Tonight episode on how easy it is to make yourself a religion, it’s easy to see why some people, reasonable or not, want to end this kind of con job that some of these “institutions” are. It’s just that I’d prefer a better litmus test about what is an exempt religion–like say, how much money gets passed through to the individuals controlling it.
Perma Banned, I’m not sure what you read, but it’s not the post that I wrote. (Among other things: legislation from an activist judiciary?!?)