Tax exemption for churches

[JAHS]

A fairly good explanation on why churches should be exempt from taxes:

Church Tax Exemption: An Explainer

[LoudmouthMormon]

But... But... The CoJCoLDS has TOO MUCH MONEY for that!   It should be exempt from being exempt from taxes, because it doesn't operate the way I think it should!!!   Plus, imagine all the (drool) things that I could do, I mean, the church could do with that money, if it only did what I want it t, I mean, if it only did what reasonable organizations that follow secular best practices do!

[pogi]

Here is what Sam Brunson said in 2019 as to whether he thought the church had evaded taxes:

Quote

It’s not clear,” said Sam Brunson, who teaches tax law at Loyola University in Chicago.

Ensign Peak Advisors Inc. is not a charitable organization on its own, the Latter-day Saint attorney said, since managing money doesn’t qualify as a tax-exempt purpose.

“It has to distribute some of that money to the church [to use for charitable pursuits],” Brunson said. “But the IRS does not dictate how much. Ten percent may not be enough, but it almost definitely has to be more than zero.”

If the whistleblower is correct and Ensign never sent any money back to the church, he said, then there is a “legitimate question about whether it is tax exempt.”

Brunson said few churches have a big enough nest egg to worry about these distinctions, but such questions have long been raised in the context of large universities such as Harvard.

The ambiguity around Ensign is “because it’s a tax-exempt organization separate from the church,” the professor said. “If the advisers operated within the church’s Presiding Bishop’s Office [which oversees the faith’s vast real estate, investment and financial operations], there would be no problem.”

https://www.sltrib.com/religion/2019/12/17/lds-church-we-obey-all/

The question isn't whether or not the LDS church should be tax exempt, it is whether the EPA is meeting requirements for tax exempt status. 

Edited March 6, 2023 by pogi

[rockpond]

14 hours ago, JAHS said:

A fairly good explanation on why churches should be exempt from taxes:

Church Tax Exemption: An Explainer

It's a good article and while I hadn't heard of Sam Brunson prior to the church/SEC issue, I like his approach.

I don't think that religious organizations in the US are in danger of losing their overall tax-exempt status.  My concern is that in seeing a church that collects billions in tithes and then uses a significant portion of those for purchasing investment real estate (non-church related) and equities, politicians might feel that some tax should be levied on those investment activities (aside from the property tax already paid).

[Teancum]

2 hours ago, rockpond said:

It's a good article and while I hadn't heard of Sam Brunson prior to the church/SEC issue, I like his approach.

I don't think that religious organizations in the US are in danger of losing their overall tax-exempt status.  My concern is that in seeing a church that collects billions in tithes and then uses a significant portion of those for purchasing investment real estate (non-church related) and equities, politicians might feel that some tax should be levied on those investment activities (aside from the property tax already paid).

I think the biggest risk the Church has, as well as other religious organizations, is the accumulation of large amounts of wealth and using it the way you described. IRS typically does not go after churches and what little I know about their attempts to cause tax exempt status threats to Scientology did not go well.  I think that there is a small risk that congress could propose tax law changes that would require church's with large accumulation of funds like the LDS Church has to to distribute a certain % of the assets every year.  A private foundation has such requirements and honestly EPA seems more like a private foundation.  I wonder how endowment funds of colleges and other large NFPs are handled.  I doubt there is tax on such endowment funds but such endowment funds likely are putting more of their assets to use than EPA has since it seem EPA has only distributed fund to two for profit business deals that the church has, and well now $$ for a fine.  But I highly doubt that congress will act on such in idea for religions.

Edited March 6, 2023 by Teancum

[webbles]

2 hours ago, Teancum said:

I think the biggest risk the Church has, as well as other religious organizations, is the accumulation of large amounts of wealth and using it the way you described. IRS typically does not go after churches and what little I know about their attempts to cause tax exempt status threats to Scientology did not go well.  I think that there is a small risk that congress could propose tax law changes that would require church's with large accumulation of funds like the LDS Church has to to distribute a certain % of the assets every year.  A private foundation has such requirements and honestly EPA seems more like a private foundation.  I wonder how endowment funds of colleges and other large NFPs are handled.  I doubt there is tax on such endowment funds but such endowment funds likely are putting more of their assets to use than EPA has since it seem EPA has only distributed fund to two for profit business deals that the church has, and well now $$ for a fine.  But I highly doubt that congress will act on such in idea for religions.

Quick look at Harvard's endowment - https://finance.harvard.edu/endowment

Quote

As a general rule, Harvard targets an annual endowment payout rate of 5.0 to 5.5% of market value.

They have >$50 billion and distributed $2.1 billion last year.

[The Nehor]

Currently the IRS has a high standard in order to conduct an audit of a church or affiliated entity. In addition the IRS budget has not been growing enough to match even inflation and has even decreased a few times due to manufactured scandals. Without the resources to investigate churches and needing high-level clearance to proceed (someone has to stick their neck out) I would guess the IRS is not going to investigate the church.