Why are churches tax-exempt in the US?

[Rational BAC]

Has that always been true in American history? Did no state (county, city) at any time try to tax churches?

What is the basis for it? I don't see anything to justify such a concept in the Constitution. I don't see where the 1st amendment supports it in any kind of obvious way.

Has it ever been challenged before the Supreme Court? If so, what was the constitutional basis for the decision?

For example if the state of Florida (or any other state or any county or city) decided to tax all charities and churches-------what would happen exactly?--------an immediate Constitional challenge? Could you collect some big bucks in the interim while the issue went through the courts?

How many modern nations tax churches? All of them? None of them? Some of them? And how do they justify what they do?

A lot of questions I know. Just trying to learn.

Personally I think all churches and charities should be taxed-------as the essentially profit making businesses all of them are. And even if they cover their asses well enough to show there is no profit in the end ---------there still, in my opinion, is no justification for any kind of special status in this regard.

With our national debt soaring, and all the states in financial difficulty, we all sure could use a little help here. Lots of big bucks tied up in the charities and in the churches.

I am a theist, but I think the best church is a poor church. Money, like power, has a tendency to corrupt.

[Vylo]

I agree that churches should be taxed. I wouldn't be surprised that if they were, there might be enough right wing backlash in the form of chruch donations, that churches might actually become richer for a period of time.

[Corey Hammer]

They (mostly) are non-profits under section 501(c) of the U.S. tax code. All non-profit organizations do not pay taxes, examples including infidels.org.

There's no separation issue here...in fact, if they were the only non-profits being taxed, there would be a free exercise issue.

[DigitalChicken]

The question is what you tax them on. Income taxes require that you get involved with where they get their money and so forth. This potentially is a separation issue.

Property taxes do not require this excessive entanglement and tax values can be set without need for this. There is no reason not to at least have a property tax on churches.

BTW, the tax issue is another reason why non-believers should form their own religious groups.

DC

[Rational BAC]

Originally posted by Corey Hammer
They (mostly) are non-profits under section 501(c) of the U.S. tax code. All non-profit organizations do not pay taxes, examples including infidels.org.

There's no separation issue here...in fact, if they were the only non-profits being taxed, there would be a free exercise issue.

I think you are saying that there is no constitutional issue here. That any state, county or city or even the Feds could levy taxes on churches and charities any time any law was passed to allow that. And nothing could stop it. True or not?

If so I am going to propose that my county start taxing Church property. Should decrease my own personal property taxes considerably that way.

[Toto]

The Supreme Court has decided the issue.

WALZ v. TAX COMMISSION OF CITY OF NEW YORK , 397 U.S. 664 (1970) (http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=397&invol=664)

The Court held that tax exemption of churches was permissible and might even be required under the First Amendment to avoid "excessive entanglement" between church and state.

I haven't read the case in a while. You might want to compare it to more current cases.

But in any case, taxing churches and other non-profits is almost always a loser at the polls.

[GaryP]

President Grant would agree with taxing church property;

In 1850, I believe, the church property in the United States, which paid no tax, amounted to $87 million. In 1900, without a check, it is safe to say, this property will reach a sum exceeding $3 billion. I would suggest the taxation of all property equally.


http://www.positiveatheism.org/hist/quotes/qframe.htm

[Rational BAC]

Originally posted by Toto
The Supreme Court has decided the issue.

WALZ v. TAX COMMISSION OF CITY OF NEW YORK , 397 U.S. 664 (1970) (http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=397&invol=664)

The Court held that tax exemption of churches was permissible and might even be required under the First Amendment to avoid "excessive entanglement" between church and state.

I haven't read the case in a while. You might want to compare it to more current cases.

But in any case, taxing churches and other non-profits is almost always a loser at the polls.


I would agree that tax exemption of churches is permissable by the Constitution.

But that does not really address the subject------is taxing of the churches also permissable? Just need to pass a law allowing it? It is the "might even be required" part that needs to be decided.

(A loser at the polls? Maybe not. Should at least try it and see what happens.)-------------I think most people would vote for it.

[Gothic_J]

I would argue they should be taxed, for the most part - they are obviously a profit making business - a church in my area is spending 10 million for bigger grounds.

why tax the local 7/11 who wont clear 1% of that?

[Toto]

Originally posted by Rational BAC
I would agree that tax exemption of churches is permissable by the Constitution.

But that does not really address the subject------is taxing of the churches also permissable? Just need to pass a law allowing it? It is the "might even be required" part that needs to be decided.

(A loser at the polls? Maybe not. Should at least try it and see what happens.)-------------I think most people would vote for it.

There was a recent case in Colorado. It failed miserably. All of the non-profits worked against it.

I would argue that tax exemption of religion is either required by the First Amendment or a violation of the First Amendment - no middle ground.

But to test it, you would have to find a municipality or state that tries to tax chruch property, and would be willing to spend the enormous legal fees to take the issue to the Supreme Court.

[lisarea]

Here's a brief summary of the Colorado proposal:

Positive Atheism - Coloradans for Fair Property Taxation (www.positiveatheism.org/writ/churchtx.htm)

I don't have the exact numbers at hand, but it failed miserably.

And here's a discussion that touches on the economic aspects.

Discussion (http://www.positiveatheism.org/mail/eml9253.htm)

This is something I've been wondering about for a while now myself. I'd like to come up with some way of gathering the data on church property values in a given city, so that people could plug in their own property value and calculate exactly what it costs them to maintain the churches in their own community.

Unfortunately, the census bureau doesn't collect accurate statistics on religious institutions, so it ain't easy to get the information in the first place.

[ohwilleke]

Originally posted by Toto
There was a recent case in Colorado. It failed miserably. All of the non-profits worked against it.

To clarify, the Colorado case was a ballot issue to end property tax exemptions for non-profits, not a court case. It was issue 11 in 1996 and the vote was 1,211,637 to 242,543 against the proposal according to the Colorado Secretary of State (roughly 83% of those voting against).

The generalized notion of non-profit status probably does protect churches, since it isn't strictly a religion for dollars rule even though religious organizations receive a large proportion of the benefit.

The other case that comes to mind is a case that held that a tax on publishing newspapers, in Louisanna IIRC, a long time ago, was invalid as an undue first amendment burden. (Not the best reasoned case of all time).

Non-profits are not by the way exempt from all taxes. They must pay withholding taxes for FICA and income taxes on their employees wages (and a provisions exempting housing allowances for ministers was under attack in court last I heard). Also non-profits must pay an "unrelated business income tax", which means that if a non-profit operates a business, say a steel wholesale operation, unrelated to its reliqious purpose, that those profits are taxable as if the non-profit were a for profit corporation. Generally, excise taxes (gasoline, cigarettes and alcohol) do not have religious exceptions, even though general sales taxes usually do.

Honestly, the tax exemption for non-profits is not really where the money is. Even if all non-profit receipts were taxable income, their expenses for the most part equal or exceed their receipts. Few non-profits other than private foundations have gobs of unexpended cash. The real benefit is in the charitable contribution income tax deduction which reduces taxes by billions and billions of dollars, and in the estate tax charitable deduction, which likewise dramatically reduces the estate taxes due by rich people at death if they give their property to non-profits.

[Gothic_J]

on a small side note, could a president direct the irs to tax churches?

[Toto]

Originally posted by Gothic_J
on a small side note, could a president direct the irs to tax churches?

Nope. Congress has the power of taxation, and the IRS enforces the laws that Congress writes.

[ohwilleke]

Originally posted by Gothic_J
on a small side note, could a president direct the irs to tax churches?

A President could impose more administrative burden on churches than is now done (e.g. other non-profits must fill out forms to claim an exemption while churches don't), and could aggresively police churches for violations that cause them to forfeit non-profit status (unrelated business income, lobbying, certain kinds of discrimination).

[StrictSeparationist]

So it's only the churches that have the property tax exemption, right? Regardless of Walz, which I've always regarded as one of the most odious First Amendment cases of the post-Warren, "we love religion" era, the violation here is ridiculously easy to see. As has been said, it doesn't take much entanglement to assess a church's property value. The non-profit exemption is a completely different issue, and it seems that it would be a Free Exercise violation if the churches weren't allowed that tax break if secular charities were.

[Gothic_J]

Originally posted by Toto
Nope. Congress has the power of taxation, and the IRS enforces the laws that Congress writes.

-taps fingers- something to work on.

[john_v_h]

Originally posted by StrictSeparationist
So it's only the churches that have the property tax exemption, right?

Actually Walz v. Tax Comm'n upheld an exemption for ''property used exclusively for religious, educational or charitable purposes.''

[gilly54]

I don't think it is right that my property taxes go towards fire and police protection for non-tax paying churches. If they want these services, they should pay a monthly fee for them.

[StrictSeparationist]

Originally posted by john_v_h
Actually Walz v. Tax Comm'n upheld an exemption for ''property used exclusively for religious, educational or charitable purposes.''

Yeah, that's the Walz ordinance's language all right. I was really asking this in a broader sense though, to see if anyone knew the answer- do these property tax exemptions usually take the form of a law that only benefits religious organizations, or are they often written to cover a wide range of secular and religious non-profits? If the former, I would say once again that a constitutional violation is evident. However, if the norm is more the latter, I can see a secular purpose that I would say could probably pass Lemon muster.

Gilly: I feel the exact same way. The churches would be begging to be allowed to pay property taxes if we forced them to live in a manner befitting their parasitic status on the tax-paying public.

Edit: I have changed my mind about this (or, more accurately, I've picked up a bit of knowledge to temper my rhetoric ;)) after viewing this chart (http://www.cga.state.ct.us/2003/olrdata/fin/rpt/2003-R-0271.htm). It seems to indicate that there aren't any property tax exemptions on the books at a statewide level that apply only to religious organizations. The other question, is, of course, if the statutes are applied in a manner consistent with their facial neutrality. That sort of thing cannot, of course, be indicated by the simple use of a chart, but there must be some information out there about it.

[never been there]

It's not just the churches themselves being exempt, which I can accept if they're just considered another non-profit. It's the tax deduction the donors get for the "charitable" donation.

Churches organize charitable work, fine. They can separately incorporate their charitable finances and the faithful can divide their contributions between the tax-deductible feeding of the hungry and the after-tax money for the pastor's salary, propaganda, sound system, etc.

[StrictSeparationist]

Originally posted by never been there
It's not just the churches themselves being exempt, which I can accept if they're just considered another non-profit. It's the tax deduction the donors get for the "charitable" donation.

Churches organize charitable work, fine. They can separately incorporate their charitable finances and the faithful can divide their contributions between the tax-deductible feeding of the hungry and the after-tax money for the pastor's salary, propaganda, sound system, etc.

Which is where the permissible tax enforcement ends and the serious entanglement begins. Unless we're willing to take all church reports on what's "charitable" and what isn't at face value, we'll essentially be forced to send IRS agents to examine church finances and records. It would be a nightmare, and complicated by the fact that some churches would of course insist that purely religious work is in fact charitable, since they consider spreading their gospel of lies and hate a gift. It just wouldn't work out, but I have little problem with the government tax exempting churches just so long as it isn't only churches that are eligible for the exemption. Neutrality makes sense when it serves to keep government out of religious affairs.

[never been there]

Originally posted by StrictSeparationist
Which is where the permissible tax enforcement ends and the serious entanglement begins. Unless we're willing to take all church reports on what's "charitable" and what isn't at face value, we'll essentially be forced to send IRS agents to examine church finances and records. It would be a nightmare...

I think that's exactly why the idea is worth floating in a white paper or draft bill. Get the churches to do some serious thinking about what they might counter-offer. I don't see this as relevant to the US, since they could easily rouse a majority of the public on their side. Here in Canada, the same-sex marriage issue is costing them so much political capital, win or lose, that we could start the wheels turning on the tax issue.

[ohwilleke]

Generally, all non-profits get tax exemptions that religious organizations get. But, generally educational institutions (many of which are religiously affiliated) and churches are the main kinds of non-profits that own real estate.

Most non-profits don't have that kind of money.

[SLD]

Madison himself opposed tax exemption for churches. In his Detached Memoranda he specifically singled out Kentucky (IIRC) for exempting churches from state taxes as a bad example.

SLD

[Rational BAC]

What seems to be most striking about this thread is that it seems to be true so far that there is no real Constitutional issue here. That any county, city or state or even the Feds could tax churches any time they so pleased. Just pass a law to do that.

In that case, it is hard to imagine that no county government, consisting of county commisioners to decide things, has never just simply voted to include Church property into its tax base. This is a large country----no one county has just simply done it?

Why not? It is hard to believe that every county in the USA is so fearful and every county commisioner is so afraid of losing (what usually is just) a part time job would be so afraid of offending the church going people of America.

Especially when you are talking big property tax bucks.

What the hell------a majority of county commissioners some damned place in the USA starts taxing the property of Churches---just because they can and there is nothing to stop them until the next election---So what terrible thing could possibly happen? Can't throw them out of office until their term is up. And people probably would end up appreciating all the extra tax dollars coming in------and the prospect of their own personal property taxes coming down.

Something is missing here.

Are you all sure this is not a possible Constitional issue? That is the only thing I can think of that would scare off every group of local county commissioners everywhere from attempting such a thing in this big old nation.

[Toto]

I think that you underestimate the political clout of religious organizations.

A county commissioner who proposed a tax on churches would probably be recalled from office immediately, or would have good church going people contributing money to his opponent, if not firebombing his house.

And I think that the religious organizations would try to make an argument that taxing churches' income or property violates the free exercise clause. This might not win, but the very fact that it would tie up any tax measure in the courts for years would discourage anyone from proposing it.