Thursday, October 14, 2010

Tax Exempt Status & Separation of Church & State

Over the past few years there has been a good deal of discussion regarding the tax exempt status of churches. The question came to the forefront when a number of conservative churches decided to challenge current law and publicly endorse candidates in both the '08 and '10 elections. They are framing the argument as a constitutional one. They are correct and they should win the argument.

I've heard many people argue that tax exemption is a benefit given by the government and the price for that benefit is the inability to make official endorsement of candidates or to lobby in a substantive way. Jim Evans in Ethics Daily goes on to argue that the genesis of tax exempt status of churches goes back to the days when churches were part of the state and it made sense that a municipality would not tax its own property. He sees this as an argument that the benefit is just that and that in order to enjoy the exemption, churches must "play by the rules." That this argument is irrelevant seems obvious to me. However the practice began, we have not had state sponsored or owned churches since the founding of the country. So what happened? At the adoption of the Bill of Rights, they forgot to tax the newly emancipated properties? Sorry, there must be some other justification that the tax exempt status was retained.

Then, there is the prohibition itself. Churches were allowed to endorse candidates until 1954. In that year, then senator Lyndon Johnson introduced a law prohibiting 501(c)(3) organizations from endorsing political candidates. At the height of the McCarthy era, he was trying to silence some of his critics as he ran for office. It was only by coincidence that churches were silenced as they fell under the same IRS code as his nonprofit enemies.

While it is accurate that churches receive their tax exempt status under Section 501 (c)(3) of the Internal Revenue code, I would argue that churches are not the same as other nonprofit organizations and in the end cannot be treated the same way. Other non-profits receive tax benefits because they provide needed services to the community. The issue is clearly seen as one of public benefit. It is a quid pro quo... the nonprofit provides services so the state helps it by removing the burden of taxes and provides that contributions are deductible on the giver's taxes. Nonprofits do not appear in the Constitution or the Bill of Rights. On the other hand, religious institutions fall under the First Amendment and the relationship between the state and religion is clearly and uniquely defined. The government does not give benefits to a religious group. There would be no constitutional justification for an act like that. They are tax exempt because they are religious organizations. period. The first amendment provides that the government will neither establish nor prohibit the free exercise of any religion.

Here is where the question of taxes comes in. The power to tax is the power to control. If the government can levy taxes on religious institutions and decide what those taxes will be, they can decide which institutions will be viable. Frankly, if the little church I serve had to pay property taxes, we would likely close. How can that not be prohibiting free exercise? And isn't telling a congregation that it cannot speak on any issue defining its ministry for it, again prohibiting free exercise? To allow that a church can say whatever it wants so long as it is willing to give up its tax exempt status establishes a multi-tiered system for religious institutions with some being able to speak and others not, this time based on their financial ability to pay taxes. Again, we are seeing free exercise attacked.

We must not forget that taxes and tax benefits have often been used as tools of influence by the state. How often does a municipality give tax benefits to entice a company to re-locate? To use this part of the IRS code to silence religious organizations from speaking on issues that they clearly see as part of their call is an example of the state using the tax code to prohibit free exercise of religion. What would stop a community from using taxes, if it were allowed to tax religious organizations, to keep a mosque from being constructed? Or a religious building of any sort that was seen as offensive to the powers that be?

There is no argument for taxing religious institutions or for prohibiting them from speaking on any issue in any way they believe their faith calls them to speak that does not conflict with the First Amendment. The government has no right to tax churches and therefor tax exemption is not a benefit the government can bestow or withdraw. That some religious organization will speak out in ways that you or I don't appreciate on political issues is part of the price we pay for religious freedom.


Matt said...

Hi Roy,

I think this may stem from my profound lack of understanding of the significance of the separation of church and state issue, but it seems that one could (and I think some do) make an argument that endorsing candidates from the pulpit is a violation of the separation of church and state. The arguments invoking such separation seem usually to be unidirectional; the state cannot meddle with the church, but the church can meddle where it likes. Both are rhetorical arguments, and vacuous ones.

However, I wholeheartedly agree with you that churches should be a place to discuss politics, or even endorse candidates or issues. On a more practical note, then, do you wait for the rules to change, or do you just endorse away because you know it is the right thing to do?

roy said...

Matt, you are correct re: many people's argument that endorsing a candidate is a violation of church/state separation. I would argue that the restrictions are unidirectional. The 1st Amendment restricts the state but says nothing restricting the activity of religious organizations. They are to be allowed "free exercise."

When we go back to the earliest and most vocal proponents of separation, mainly Baptists and Quakers, we see that part of their argument for separation was precisely so the church could speak out against the government. If the institutions were tied together, that would restrict the church's role as watchdog and critic. The churches needed to be free to speak without fear of reprisal. Of course, the other bit of their argument was to restrict the state from enforcing any religious standards of any kind... which comes out in a very similar place.

On the practical level, I haven't been in a situation where I felt I needed to break the current rules to be able to say what I needed to say. And secondly, I haven't been confronted by an issue that is clearly black and white enough to take that ind of a stand. So I raise the issues I think are important and I trust my congregants to make their own judgments regarding candidates and/or other political issues.

roy said...

So here's the next question... when we allow this level of freedom to religious institutions, how do we keep them from establishing a theocracy? It is built into the system. As long as the state is restricted from establishing a religion, public policy must have a basis in something other than religious belief.

An individual may push a particular agenda because of religious belief, but the government cannot adopt it if that is the only justification. Ex. we can prohibit murder without appealing to the 10 commandments because we can easily see reasons for the prohibition outside of any religious system. Resting on the Sabbath is an entirely different issue even though it too appears in the 10 commandments. Outside of religious justifications, there is no public policy argument for restricting activity on a particular day of the week. Here's a more complicated one - abortion. At its foundation, the question is what is the status of a fetus and what degree of protection does it deserve over and against the rights of the mother? The answer is either a religious or philosophical one and as a culture we do not have a consensus regarding the answer. Until or unless the state can come up with some other kind of answer to these questions, it cannot intrude upon the rights of a woman to choose for herself.

Michael Mahoney said...

Roy, this is well thought out, and well written. Let me add some more weight to the argument.

As leaders of faith communities, don't pastors have the responsibility to guide their congregation toward the issues that they stand for? For example, to bring up a candidate's record on abortion, capital punishment, gay marriage, religious liberty, fiscal responsibility (stewardship) or any other issue that particular community feels important. Isn't it our job as pastors to educate our congregations?

Also, I would submit that most (if not virtually all) churches provide services to the community - food pantries, afterschool programs, tutoring, keeping kids off the street, addiction programs, ESL classes, senior assistance, etc...

Unfortunately, our cash-strapped municipality is trying every avenue to tax churches. Rent your hall, they'll try and say you're a business. They tried to vote in an "assembly tax" on theaters, auditoriums and churches. They regularly send property tax bills to churches every new grand list, and we have to go fight it before the tax assessor every couple of years.

And what about politicians who use places of worship as campaign stops. No one complains when a candidate (or sitting official) speaks at a church or synagogue.

Chad Zaucha said...

1. On October 15, 2010 Roy Donkin and I were in complete agreement :)
A special day indeed!

2. Roy, you mentioned that if your church were taxed, it would have to close. But only the property and how you meet would be impacted. The church could meet without "owning" property (in homes?). Perhaps this kind of forced church reorganization is just what the church in America needs.

roy said...

Wow... in agreement with both Michael and Chad. Miracles do happen ;-)

True Chad re: loosing the property... but many churches would be unable to re-think who they are in that alternate reality. And yes, that may not necessarily be a bad thing either. As for home meetings, I would expect that in many areas, if the gathering was larger than about 10 people, they'd find themselves facing zoning issues and another fight... it would make for interesting times.

As it is, I don't expect tax exempt status to disappear for churches although I also don't expect the "rules" to change or the attempts to find an end around and extort money from churches anyway will stop.