Is Investment Income earned on Tithing still Tithing Funds?

[Amulek]

13 hours ago, CA Steve said:

I am convinced that income earned on tithing is not tithing.

Correct. Income earned on tithing is new investment income, not new tithing income.

 

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Therefore I will tell my bishop I intend to pay my tithing completely when I die.

Good luck with that.

 

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I will just keep track of what I owe in tithing using an accounting program and have those funds sent to the church upon my death. Meanwhile I will keep the profits from my tithing account for myself since it isn't tithing.

You'll have to pay tithing on your profits, as that is new income, but theoretically yes, that would be fine.*

For the sake of argument, let's pretend that tithing should be one-tenth of lifetime income, rather than one-tenth of your income annually.

Let's further assume that you make $100K a year from your job and that you are only going to live two years (sad, I know, but it makes the math easier to follow).

So you make $100K in income in year one, and you owe $10K in tithing on that income. If you were to die right then, that's how much you would have owed in tithing under either system.

But, fortunately, you've got another year to live (yay!). So, rather than pay your tithing at the end of year one, you put that $10K into an investment vehicle which earns 10% interest over the following year - which is great, even though it's kind of disheartening as, after all, it is your last year to live.

So, at the end of year two, you have now earned another $100K in income from your job plus $1K in investment income from your tithing.

So, for year two, you would owe $10K in tithing on your employment income and $100 tithing on your investment income. That would be a total of $10,100 for the year which, in turn, brings your lifetime total tithing debt to $20,100.

Now let's recap: Under the annual income system you would have paid $20K in tithing over two years ($10K annually). Under the fictitious lifetime income system you would have paid $20,100 (and left your family with $900 left over). 

Here's the thing though: in neither system would the full $1K in investment income be considered tithing. Do you think that it should be?

 

*For the record, I think this entire exercise kind of misses the point about what we are supposed to learn from God w/respect to tithing, but let's ignore that for the time being.

[Stargazer]

18 hours ago, HappyJackWagon said:

I don't think interest earned is the same thing as a donation, whether tithing, fast offering, whatever. However, I think the point the OP is trying to make is it is very difficult, if not impossible, to separate the funds if they are all held in common in the same account(s). I don't know if the church separates actual donated funds from any investment income. If it all happens to sit in an account together and then the church writes a check for $30 million for a mall or some other real estate investment I'm not sure how anyone would know whether or not tithing funds were used.

Well, yes, they might sit in the same account -- and why not let the accrued interest accrue its own interest?

We're not dealing with discrete identifiable packets of matter here. Even if the tithing was paid in Federal Reserve Notes with serial numbers on them, and are thus individually identifiable, they were likely not earned in that form. The money that is paid in tithing showed up either as an electronic transfer into a bank account, or as a paper check written on the payer's account with identifiers (printed bank routing, account, and check numbers) but as soon as it is deposited it loses its identity and it becomes one with the Great Link (Star Trek reference). It exists thereafter as a dimensionless number in some accounting system. And when it is transferred to another account, it is simply a mathematical operation carried out in a data retrieval system.

Ultimately, the money is stored on magnetic media in the form of magnetic dipoles. 

So, here is an example, $4.7 million (quantity pulled out of my hat) represented as a pattern of bits on a spinning magnetic platter. And perhaps backed up on a tape drive a continent away, just in case of a catastrophic accident. Well, what is going on with that numeric amount? It stays there, but there's a representation of a portion of it (say $200 thousand) that is sent off to another data processing system to be invested in a stock or bond. The $4.7 million principle amount is still kept track of, but with an entry constituting a placeholder for that $200K that was sent off for investment. So we know that we still "own" $4.7M, but it's a bit more fragmented now. A little time goes by, and surprise! our $200K "earned" $50K in the form of a dividend, and in this case the $50K gets sent back to where we "keep" track of the $4.7M. We add it to the $4.7M, but note in an index that $50K of it is not principal, but interest. I could go on, but I won't. 

Do you see what I'm getting at? Our money system occasionally uses identifiable cash for "live" transfers (e.g. coins into vending machine, buying a latte at Starbucks), but the overwhelming bulk of all money is held as electronic records in data storage facilities, and it is all very nebulous. We know exactly how much of it is "principal" at a given moment, and we know what its source is, and how much is "interest", because it gets labelled in the system. It's even weirder when it comes to cryptocurrency. How much Bitcoin do you own? I own 0.00166666 BTC at the moment -- with the fiat value of about $80. It has no physical manifestation at all. I have no freaking idea where it is "stored" except that it is on some blockchain somewhere. Whatever a blockchain is, I have no idea of that, either.

Everything is virtual. There is no such thing as "money" any longer. Well, there is, but most people wouldn't recognize it. Gold coins, perhaps. Oddly enough, there's a federal statute that says an evidence of a debt is not money of the US, but that's exactly what a Federal Reserve Note is -- evidence of a debt. Yet we still trade them around without a second's thought.

Trust me, I took Economics 101 once. It's not hard to label a quantity of "money" as accrued interest.

[Tacenda]

Saw someone post this on a private FB group. Do they have a point?

As stated on page2, point#7 in David Nielsen's declaration, the "Council on the Disposition of the Tithes" (the "Council") was/is responsible for approving any distributions and/or withdrawals of the tithing funds maintained by Ensign Peak Advisors.

QUESTION: Doesn't the fact that the "Council" approved the withdrawals for City Creek and Beneficial Life (see page3, point#8) confirm that the $$$ are considered "tithing"?

[Stormin' Mormon]

1 hour ago, Tacenda said:

Saw someone post this on a private FB group. Do they have a point?

As stated on page2, point#7 in David Nielsen's declaration, the "Council on the Disposition of the Tithes" (the "Council") was/is responsible for approving any distributions and/or withdrawals of the tithing funds maintained by Ensign Peak Advisors.

QUESTION: Doesn't the fact that the "Council" approved the withdrawals for City Creek and Beneficial Life (see page3, point#8) confirm that the $$$ are considered "tithing"?

The logical construction of "If A then B" cannot be reversed to make "If B then A"

If it's raining (A), then the street is wet (B).  That does not mean that if the street is wet (B), then it is raining (A).  There way be many other reasons for the street to be wet.  A recent street sweeper.  A broken water main, etc.

Here we have: If tithing (A), then approval from the Council (B).  That does not imply the reverse.  If the council is approving it (B), then it doesn't logically follow that it must be tithing (A).

[Analytics]

18 hours ago, smac97 said:

Meh.  You're just making this up as you go along.

If the Church receives $1,000, and then invests $250 of that donation and generates profits of an additional $250, then the Church has $1,250.  If the Church thereafter spends $100, and refuses to authorize any expenditure that would take the balance of the accumulated money below $1,001, then the principal remains untouched.

This is an example of a cognitive bias called Mental Accounting. It is irrational and leads to bad decisions.

Mental Accounting Definition (investopedia.com)

18 hours ago, smac97 said:

First you conflate tithing with profits generated from tithes as being indistinguishable from each other.

That is correct. Money is fungible.

18 hours ago, smac97 said:

This despite the fact that the IRS certainly doesn't view the two things and interchangeable.

Actually, the IRS does agree that money is fungible. 

To help clarify your thinking on the matter, consider the difference between a stock and a flow (in the rest of this post, when I refer to "stocks" it is in this sense). How much money the church has is a stock. 

18 hours ago, smac97 said:

 One comes from a donor, the other does not.  One comes from an investment in a farm or stock or piece of real estate or whatever, the other does not.  One is a charitable donation, the other is not.  

The IRS most certainly does not say one specific dollar in an account "came from" a donor while another specific dollar in the account "came from" investment income. Rather, the IRS sees these things as flows. They look at the flow of tithing income or the flow of investment revenue. That is why when you do your taxes, you don't base it on bank account balances which measure stocks. Rather, you base it on your W2 which measures the flow of income you had over a year and a stack of check stubs for your tithing that reflects the flow of tithing you paid over the year.

18 hours ago, smac97 said:

Then, you come along and say "none of the Church's money is 'tithing money' ... {and} none none of the money is investment income" "there isn't an asset called 'tithing money.'"

Exactly.

18 hours ago, smac97 said:

I'm not an accountant, and certainly no expert in tax law.  But your various statements on this issue are A) barebones, and B) facially nonsensical.  They only become coherent if and when their utility as brickbats against the Church are kept in view.

Stocks and flows are two fundamentally different things. Tithing revenue and investment income are flows. The assets of the church are stocks. Conflating the two is fuzzy thinking at best and deceptive at worst.

[Stargazer]

3 hours ago, Tacenda said:

Saw someone post this on a private FB group. Do they have a point?

As stated on page2, point#7 in David Nielsen's declaration, the "Council on the Disposition of the Tithes" (the "Council") was/is responsible for approving any distributions and/or withdrawals of the tithing funds maintained by Ensign Peak Advisors.

QUESTION: Doesn't the fact that the "Council" approved the withdrawals for City Creek and Beneficial Life (see page3, point#8) confirm that the $$$ are considered "tithing"?

Well, what @Stormin' Mormon said, but also, just because a regulatory body has a title that includes a particular function doesn't mean that's the only function it has. After disposing of tithes, might they not also dispose of fast offerings, humanitarian aid, and so on? Way back in 2012 my wife and I took a cruise and visited Cabo San Lucas. We noticed a US Coast Guard cutter tied up at the pier. This did not mean that Cabo San Lucas was now part of the US coast.

[Stargazer]

6 minutes ago, Analytics said:

Actually, the IRS does agree that money is fungible.

But even the IRS recognizes that interest or dividends generated from a principal are not the principal. As fungible as the money in the account is, the IRS does not tax the principal; only the interest. The IRS must therefore be able to distinguish one from another.

You can talk flows all you want, but the fact remains that the money received from members and designated by them as tithing is not identical to any interest generated from investing that tithing. 

I think you're relying too much upon a word that I am not sure you understand completely.

Fungibility refers only to the equivalence and indistinguishability of each unit of a commodity with other units of the same commodity, and not to the exchange of one commodity for another. Fungibility is irrelevant to accounting for the source of money, for example. Which is what we're discussing when it comes to tithing vs. the interest generated from tithing. In any given accounting system, you can't distinguish one dollar from another dollar (fungibility), but you can say that so much of the money in the system is principal, and so much is interest. And principal is not interest, even if they are both measured in indistinguishable dollars.

[Stargazer]

4 hours ago, Analytics said:

This is an example of a cognitive bias called Mental Accounting. It is irrational and leads to bad decisions.

I don't recall offhand what your profession is/was, but accountants are not committing mental accounting bias when they put money from different sources into different accounting categories. Nor are they doing it when they designate particular fractions of a particular accounting category for particular purposes, even all the fungible funds involved are in the same bank account -- this is called budgeting. And if I have designated X amount to be spent for groceries, and Y amount for fuel, am I exhibiting mental accounting bias if I run the grocery budget down to zero and then refrain from using part of the Y budget for groceries? I suppose I might refrain from doing so even if I run out of food, since food is likely more important than fuel. But is this a cognitive bias?

Edited August 31, 2021 by Stargazer
fixed contradiction

[smac97]

43 minutes ago, Analytics said:

This is an example of a cognitive bias called Mental Accounting. It is irrational and leads to bad decisions.

Mental Accounting Definition (investopedia.com)

That is correct. Money is fungible.

This seems like a shell game.

Yes, money is fungible, and yet money from one source is treated very differently than money from another source.

Tithes are charitable contributions from a donor to a donee.  Profits/interest generated by the donee investing a portion of those tithes are not charitable contributions from a donee.

Thanks,

-Smac

[Amulek]

44 minutes ago, Analytics said:

19 hours ago, smac97 said:

Meh.  You're just making this up as you go along.

If the Church receives $1,000, and then invests $250 of that donation and generates profits of an additional $250, then the Church has $1,250.  If the Church thereafter spends $100, and refuses to authorize any expenditure that would take the balance of the accumulated money below $1,001, then the principal remains untouched.

This is an example of a cognitive bias called Mental Accounting. It is irrational and leads to bad decisions.

Mental Accounting Definition (investopedia.com)

No, no it isn't. Mental accounting has to to with behavioral economics, not with any particular formalized system of accounting.

Please, for the love all that's good and holy, please stop trying to explain economics to people. You are making baby Adam Smith cry.

 

[Tacenda]

4 minutes ago, smac97 said:

This seems like a shell game.

Yes, money is fungible, and yet money from one source is treated very differently than money from another source.

Tithes are charitable contributions from a donor to a donee.  Profits/interest generated by the donee investing a portion of those tithes are not charitable contributions from a donee.

Thanks,

-Smac

Then why is Ensign Peak not paying taxes? 

Something hit me, I wonder how many charities have an "Ensign Peak" or do any investing like some churches. Would they be okay doing that, I wonder.

[Amulek]

2 minutes ago, Tacenda said:

Then why is Ensign Peak not paying taxes?

Because, as an integrated auxiliary of the church, they are also a non-profit organization.

 

[Tacenda]

11 minutes ago, Amulek said:

Because, as an integrated auxiliary of the church, they are also a non-profit organization.

 

They really shouldn't be un-taxed. Taxes help with so much in the world, and the money in Ensign Peaks isn't.

[Danzo]

1 hour ago, Analytics said:

This is an example of a cognitive bias called Mental Accounting. It is irrational and leads to bad decisions.

Mental Accounting Definition (investopedia.com)

That is correct. Money is fungible.

Actually, the IRS does agree that money is fungible. 

To help clarify your thinking on the matter, consider the difference between a stock and a flow (in the rest of this post, when I refer to "stocks" it is in this sense). How much money the church has is a stock. 

The IRS most certainly does not say one specific dollar in an account "came from" a donor while another specific dollar in the account "came from" investment income. Rather, the IRS sees these things as flows. They look at the flow of tithing income or the flow of investment revenue. That is why when you do your taxes, you don't base it on bank account balances which measure stocks. Rather, you base it on your W2 which measures the flow of income you had over a year and a stack of check stubs for your tithing that reflects the flow of tithing you paid over the year.

Exactly.

Stocks and flows are two fundamentally different things. Tithing revenue and investment income are flows. The assets of the church are stocks. Conflating the two is fuzzy thinking at best and deceptive at worst.

You really need to stop giving tax advice. This is getting dangerous.   you could really get someone in trouble. In all of the years I have been practicing, I have never once, in Tax Court or dealing directly with the IRS heard them use the term Flows or Stocks.

The IRS really does look at your bank statements.   I deal with IRS audits, as well as represent people in the US tax courts.  Bank balances are one of the first things the IRS looks at. Coroporations, partnerships and non profits  have to report the bank balances on their tax returns. (See IRS form 1120S part L, IRS 1120 Part L, 1065 part l or 990 part X)

Also, the IRS (and US Tax law) treats income differently based on the source.  Passive income, retirement income, social security income, active income, investment income, capital gains, wage income, self employment income, foreign income, divididend, qualified dividend, flow through income, municiple bond interest, etc are all treated differently acording to tax law. 

I know you don't like how the church spends or invests its money.  Thats ok, you don't have to like it, you have every right to not like it.  But please stop saying how the IRS treats things until you actually know what you are talking about.  

  

[Chum]

26 minutes ago, Tacenda said:

They really shouldn't be un-taxed. Taxes help with so much in the world, and the money in Ensign Peaks isn't.

I believe the Church has a civic duty to pay taxes, even when (often purchased) loopholes provide an legal escape from that duty.

[Danzo]

5 minutes ago, Chum said:

I believe the Church has a civic duty to pay taxes, even when (often purchased) loopholes provide an legal escape from that duty.

Do you itemize or use the standard deduction on your taxes?

If so, you are using a loophole to avoid paying taxes on your income.

Someone living on social security income alone is using a loophole to pay taxes on their income. 

Everyone uses loopholes to avoid paying taxes on their Income. 

[ksfisher]

42 minutes ago, Tacenda said:

Taxes help with so much in the world, and the money in Ensign Peaks isn't.

The money in Ensign Peak isn't just sitting there.  It is invested in companies that make products (that you probably use) and pay people wages (some of whom you may know). 

[Fair Dinkum]

15 hours ago, JustAnAustralian said:

The principle is tithing, the interest gained from it isn't.

If the investment matures (and made a profit), you still have your tithing principle, as well as extra money that wasn't in that initial tithing donation.

So the growth on money I put into my retirement account is not retirement money?

[carbon dioxide]

53 minutes ago, Tacenda said:

They really shouldn't be un-taxed. Taxes help with so much in the world, and the money in Ensign Peaks isn't.

Taxes help politicians spend on their pet projects to grow their political power.   Politicians like to declare all the great things they do in this world by spending other people money.  Taxing churches and things associated with them is an intrusion in the state in religion.  If there is a separation of church and state, that separation has to go both ways.  Religion has no right to the funds collected by the government and government has no rights to the money collected by religion.

Edited August 31, 2021 by carbon dioxide

[Tacenda]

10 minutes ago, ksfisher said:

The money in Ensign Peak isn't just sitting there.  It is invested in companies that make products (that you probably use) and pay people wages (some of whom you may know). 

Okay, then if it is the business side, why are they tax exempt?

[Amulek]

54 minutes ago, Tacenda said:

They really shouldn't be un-taxed.

So you believe churches should be taxed?

 

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Taxes help with so much in the world, and the money in Ensign Peaks isn't.

Including fund churches? Maybe in some countries, but not here in America.

 

[carbon dioxide]

44 minutes ago, Chum said:

I believe the Church has a civic duty to pay taxes, even when (often purchased) loopholes provide an legal escape from that duty.

I am happy it does not collect taxes.  Politicians have enough tax revenue.  They just need to control their spending more.  Giving more money to politicians to spend is like giving more alcohol to a drunk. It does not promote more responsible behavior. 

[Amulek]

51 minutes ago, Chum said:

I believe the Church has a civic duty to pay taxes [...]

If churches were to begin paying taxes do you think there would still be an obligation for them to stay out of government?

In other words, do you think there should be taxation without representation?

 

[Tacenda]

1 minute ago, carbon dioxide said:

I am happy it does not collect taxes.  Politicians have enough tax revenue.  They just need to control their spending more.  Giving more money to politicians to spend is like giving more alcohol to a drunk. It does not promote more responsible behavior. 

Does the church provide clean water, safe roads and bridges, free public education, law enforcement, fire fighter, fish and game, forest land management and so on? If the churches did, I'd be behind that. And the church doesn't supply welfare to the US population either, it may help somewhat, but I'm pretty sure I read that they will have members get welfare before getting funds from the church, I may be incorrect, but almost swear I heard/read that. So I don't believe your giving money to politicians, unless you're supporting their campaign.

[Stargazer]

2 hours ago, Tacenda said:

They really shouldn't be un-taxed. Taxes help with so much in the world, and the money in Ensign Peaks isn't.

There are legitimate arguments for untaxing churches, and we can debate the merits, but the idea that taxes help with so much in the world is not a legitimate argument for this. Governments can provide needed services that would be difficult or very problematic for private individuals or small organizations to provide (national defense being one of them). But give the government more money than it needs to do those essential things, and guess what, they will find non-essential things to do with it, and some of those things will not be in the best interest of society. This becomes a very political topic, so best we don't raise it here, but just to give you an example of things some governments do with tax money that they shouldn't do, consider the secret police forces that have existed in the past and continue to exist now in some countries. The people in those places basically pay for their own oppression.