Monday, June 29, 2015

Some Clarity on Tax Exempt Status, Part One

More than once in our not-so-small hamlet of Colorado Springs public initiatives have been launched to tax non-profits in order to make up for the revenue shortfall the city consistently faces. Each time it happens the public argument is something to the effect that churches need to pay their fair share. Currently, with the SCOTUS ruling on Same Sex Marriage (SSM), the argument is being made that religious organizations ought to lose their tax exempt status because they (in reality, many but not all of them) do not conform to the newly minted SCOTUS ruling. Again the point is made directly - churches need to "start paying taxes."

I think a little clarity is in order (though, I must admit to a great deal of skepticism about the effectiveness of argument in our highly emotionalized culture right now).

We Pay Taxes
I am a pastor of a church and I helped to start a charitable non-profit that provides long-term support, education, and ministry to girls rescued from human trafficking in the US. I currently run and have run non-profits that own property, operate under state and federal tax guidelines, and hire people. We pay several forms of taxes and our employees pay taxes. We are exempt from a fairly narrow set of tax categories for which charitable non-profits must apply and prove they are eligible, and for which churches agree to a trade-off with the Federal government represented in the restrictions of the Johnson Amendment.


Having said that, I will say that the exemptions we are eligible for are a great help to churches and non-profits. We often operate on smaller budgets and different income structures than a typical business, so several tax categories are a significant barrier to entrance and a barrier to efficient non-profit work. For example, many people who give to non-profits are careful to pick organizations who can prove that the vast majority of their gifts go to the work and not to overhead. Overhead includes things like staff, taxes related to hiring staff, office needs, and office space. If your favorite non-profit began paying property tax, the percentage of your gift going directly to the work would necessarily decrease, often significantly.

There Are More Non-Profits Out There Than You Know
Did you know that many non-profits are news organizations and journalists' offices? Are you cognizant of the neighborhood recreation centers that run on paper thin budgets and are non-profit? Do you know that universities and colleges (with very rare exceptions) are non-profits? So, returning to the well-meaning but ignorant people in Colorado Springs who sponsored those petitions to remove tax exempt status from non-profits, when confronted with these details they did not know that they would likely put the liberal Peace And Justice Mission office out of business or shutter the soup kitchens run by the Catholic church they supported so much.

This brings us to the present push and the inherent tyranny contained within it. The current proposal is to remove tax exempt status from religious organizations, and more specifically, religious organizations that do not tow the line on SSM. So maybe the neighborhood community center is not affected, but what about the Episcopalian church and Southern Baptist church across the street from each other? The current argument has the implication that one is favored over the other for an ad hoc reason. One accepts SSM and the other does not, and based on that alone proponents of SSM want to discriminate and do harm. Why SSM? Why not the SCOTUS rulings on gerrymandering? Or the SCOTUS rulings on abortion, Civil Rights legislation, campaign finance reform, and so forth? In other words, there are hundreds of issues that could be picked on to discriminate with the power of Federal and State taxation, but this one has been picked by people drunk with current cultural power and who want to strike while the iron is hot.

As this particular form of tax discrimination moves forward be attentive to this form of argument, "You can keep your tax exempt status as long as you agree with us about X." This is tyranny and coercion pure and simple, which brings us to our last point.

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