Should Churches Pay Taxes

Currently, religious organizations are classified as non-profit organizations (because they are) and do not pay taxes. There are a good number of people who don't understand what churches are, how they function, and what their purpose is who believe that this is wrong and proceed to argue that a non-profit organization that is funded by the donations of the public should pay taxes.

Let's start with what a non-profit organization even is:

There are legal definitions, including 26 types of nonprofits recognized by the IRS...

A nonprofit is a tax-exempt organization that serves the public interest. In general, the purpose of this type of organization must be charitable, educational, scientific, religious or literary. ... The public expects to be able to make donations to these organizations and deduct these donations from their federal taxes.

Legally, a nonprofit organization is one that does not declare a profit and instead utilizes all revenue available after normal operating expenses in service to the public interest. These organizations can be unincorporated or incorporated. An unincorporated nonprofit cannot be given federal tax-exempt status or the designation of being a 501(c)(3) organization as defined by the Internal Revenue Service. When a nonprofit organization is incorporated, it shares many traits with for-profit corporations except that there are no shareholders.

When starting a nonprofit corporation, the organization must file articles of incorporation with the state in which it resides or decides will be its jurisdiction for legal purposes. This is the same process a for-profit corporation must follow. Each state has various rules and regulations, but most require officers of the corporation, a board of directors, by-laws and annual meetings. Most states also require nonprofit organizations to register with state charity bureaus or other agencies and adhere to reporting requirements particularly involving fundraising operations.

When a nonprofit corporation is given tax-exempt status, it is exempt from paying federal corporate income tax. While these types of organizations also are often exempt from paying state and local sales tax, property tax and taxes on other assets, this is not always the case as states have different rules. ...

Nonprofit organizations have paid and volunteer staff, but employment taxes and federal and state workplace rules are generally no different than those imposed on for-profit organizations. A perception is that salaries in the nonprofit world are low and while this is generally true, the type of nonprofit organization can make a huge difference in how closely it compares to a for-profit business.

Universities, hospitals and large national charities are examples of organizations that can be "nonprofit" but have salary scales on par with almost any for-profit corporation. CEOs of major hospitals can commonly earn salaries and bonuses of $500,000 to over $1,000,000. University presidents can have similar scales. ...

A nonprofit organization can have clients, can offer products and services, will need revenue, should market itself, and must be concerned about customer satisfaction whether in those assisted or those who contribute donations in support of operations, programs or services. It is a business that must serve the public interest and it will succeed or fail as any business will, depending on how well it is operated.

I was unable to cut out a lot from this lengthy explanation because it is all rather relevant. Summarized:

A Non-Profit organization is the same as a For-Profit organization with two major exceptions: 

• It is not allowed to distribute profits to anyone, no matter how much money it makes. That means no dividends for shareholders.
• There are no shareholders. Nobody owns the company. It has trustees, who run the company - but they cannot sell their "trusteeship" to anyone else.

What does this mean? Essentially - 100% of the money which a Non-Profit makes is re-invested in the company. Additionally, Facebook can't buy the company - because there is nothing to buy. It's a legal entity which nobody owns.

You can learn more from a very appropriately named website, http://nonprofitanswerguide.org/.

Let's start from the top: a church is a nonprofit organization. As long as a church fits into these legal qualifications of a nonprofit organization, then it is a nonprofit organization. Nonprofit organizations are tax exempt organizations. Therefore, churches should not pay taxes. If you want to argue that churches should pay taxes, then you must argue that all nonprofit organizations must pay taxes. Or, perhaps you'll attempt to argue that churches are not or should not be considered nonprofit organizations. In this case, you'd have to change the legal criteria for what a nonprofit organization is in some way that would only affect churches (only possible through explicit bias against religious organizations, which would be unconstitutional), or simply arbitrarily declare that any organization that is religious in nature cannot be a nonprofit organization because reasons. All of these arguments are bunk - if it walks like a duck and quacks like a duck, it's a duck. A church is a nonprofit organization.

So what we have from people who believe that churches should pay taxes is actually a misunderstanding of what a nonprofit organization is and why a church is one. We'll take a look at some reasons people think churches should pay taxes.

Some arguments for the idea that churches should not be considered nonprofit organizations are that they have paid employees, or the pastors earn wages, sometimes significant ones. As we see, whether or not the people employed by or operating the organization earn enough money to buy a nice house and food for their family has no bearing on the classification of the nonprofit organization. If we want to use this qualifier, we must also declare hospitals and universities to no longer be nonprofit organizations. Maybe you're okay with that, but don't worry because there's more.

An important distinction for a nonprofit organization is that they serve the public interest - they fulfill the services expected of them by the public because the public wants them to exist. In the case of a church, it is run by the donations - in the form of tithes - of the people attending it. If people did not attend it and did not pay tithes there, that church would not exist. Therefore, churches exist because people want them there. They are paying their tithe to God, but a rational person understands that the church would not exist without their donations. By declaring that churches should pay taxes, you are essentially insisting that the government takes some of the money that I chose to pay to my church, my original income having already been taxed by the government. Basically, you want the government to take more of my money in the form of taking it from my church after I gave it to them - freely, as a donation - because I wanted them to use it to fund the charitable things they do that I like. No thanks. We could have an entirely separate discussion about taxes in general, but full disclosure: I'm not a fan.

Now, churches can be bad churches, and it's possible that instead of putting abundance of tithes toward things like ministries and charities, the lead pastor may take home more money than God might want him to. That doesn't make that particular church a nonprofit organization and it doesn't make churches as a concept nonprofit organizations. It's not something to ignore if the church isn't performing the functions that it's biblically responsible to perform - this is, however, not your or the government's problem if it's still legally a nonprofit organization. The only discussion to be had is between the congregation and the church leadership. There is nothing exactly acceptable about this, but it doesn't make it liable for the removal of its nonprofit status unless it breaches legal standards.

Some people think churches shouldn't be nonprofit organizations and should pay taxes literally just because they have a bias against religious institutions. While this is a position you can have, it has no affect on reality - there is no actual argument to be made here. Your argument is literally that religious organizations are different from other nonprofit organizations because they are religious organizations, and that somehow means they should pay taxes. Because reasons. There are nonprofit organizations that promote atheism, which is notably different from the vast majority of existing nonprofit organizations. Should those atheistic nonprofit organizations pay taxes because they are atheistic and other nonprofit organizations aren't? No, because it's legally a nonprofit organization. You are taking a personal bias against a thing and declaring that they should pay taxes because that's how you feel about it. That's not the kind of argument that holds up in court.

And yet, somehow, I see people sneak a "separation of church and state!" in here.

There is some kind of argument that the government subsidizes churches. I guess it's derived from the fact that donations the public makes to churches can be put on their personal taxes as deductions:

A subsidy is a sum of money that the government grants to a business so that the price of a commodity or service it has can remain low or competitive.  By making charitable donations tax deductible, the government is effectively subsidizing donations by giving people a return on their donations through their taxes instead of using that money on its own expenses.  Therefore, charitable donations are subsidized by the government.

What is being said here is that the government is indirectly "subsidizing" nonprofit organizations by giving tax breaks to the individual people who are making donations to those organizations. This means that the government is in fact not actually paying churches anything, but people - this is trying to play a semantics game. When you say the government "is paying" subsidies, you are misconstruing reality in order to suit the argument you wish to make. The government taking less of my money for taxes because I donated to a nonprofit organization does not mean that someone who hasn't donated money to a church is paying for the church through their taxes. That is not what is actually happening. It is "effectively" happening because if we ignore from where the money and taxes are coming and going, we can pretend like people who don't go to church are "paying" for the government "subsidizing" churches, but that's not actually how that flow of events is occurring. The government "is subsidizing" churches because they are giving tax breaks i.e., taking less of someone's money, to people who donate to churches. There is no payment being directly made to anyone, the thing that is literally happening is that specific people are allowed to keep more of their own money that the government never had in the first place.

There is the argument to be made that this is "taking potential money" away from the government, because the government would have gotten more money if this person hadn't gotten a tax break from making a charitable donation. But how relevant is this to whether or not churches should pay taxes?

An important thing here is that, notably, this applies to all nonprofit organizations. When you donate to save kittens, the government gives you a tax break. If you want churches to pay taxes because the government give tax breaks to people who tithe to that church, then you must also argue that the government must tax organizations that take donations to save kittens because of tax breaks given to the people who donated to that organization.

It's an important thing to note, too, that...

The government provides subsidies for nonprofits because they can provide a greater public good than that which the government could provide on its own.

The arguments that we should tax churches in order to do "good" things...

falls apart in light of this statement. The government specifically gives tax breaks to church tithers, "effectively subsidizing" them, on purpose because the government itself believes that nonprofit organizations can do a better job of doing good than the government can.

But wait, some people think that the donations to churches only help the churches and the church members, thereby giving those people tax breaks doesn't actually help do social good!

In the book Giving Well, the authors point out that government subsidies of charitable donations to churches only benefit members of those churches, not society as a whole; this would seem unfair given that all taxpayers contribute to the subsidy.

First of all, this is entirely false. Churches do more good for our society as a whole than the government does - and that's even if you ignore that Jesus is the only name that saves. While there are church ventures that give aid to people outside of our own country, which could be argued to be a "poor use" of funds because we could have used them to help our own people, without churches, our homeless and hungry would be much, much worse off. I'm not sure where anyone gets the idea that churches don't do social good outside of the congregation as the church is the biggest source of social good in our nation - it's simply ignored, downplayed, or lied about by people who have an ideological and irrational hatred of religion. And, no, the charities and ministries that churches do for the hungry and homeless do not exclude non-Christians - the entire purpose of those ministries in the first place is to spread the gospel, which means the non-Christians are going the be the first people these ministries try to reach. Again, this stems from a misunderstanding about what churches even do in the first place.

But wait, there's more.

By the same logic, government subsidies towards donations to Planned Parenthood and its support for abortion rights is unfair to pro-life Catholics.

If it is somehow wrong that the government gives tax breaks to the donors to organizations you don't like, why does it suddenly become fair for the government to give tax breaks to the donors to organizations that I don't like? This author goes on to argue that...

Due to this dilemma, some would argue that a tax subsidy on charitable donations is unfair to taxpayers and should not exist.

The argument to be made here isn't whether or not churches should pay taxes, it's whether or not the government should give tax breaks to people who tithe at churches. If you think it's unfair that the government "subsidizes churches" by giving tax breaks to their donors, then, like I said before, you must argue that it's unfair for the government to give tax breaks to donors to any nonprofit organization. This is a position you can have - please note, of course, that this has literally nothing to do with whether or not the church entity itself should be taxed - only about the tax breaks because of charitable donations to the individual public citizens who are donating their money to the organization.

And, if I can be honest, the tax break system itself is unfair. People in lower tax brackets - i.e., people who make less money - actually don't get these tax breaks from their charitable donations! The government still takes all of my money that it wants to even though I tithe to my church because of obtuse tax laws that make me use a certain form that excludes deductions for charitable donations. But that's a different conversation entirely. So sure, make this argument against tax breaks, but it makes no difference as to whether or not the entity itself should pay taxes.

But what about that separation of church and state, that "religious institutions lobbying funds," that is somehow misappropriation of charitable funds? Is that a worthwhile argument?

Turns out, all nonprofit organizations can lobby to some extent. Other nonprofit ideological entities like Planned Parenthood lobby, which again - why is it unfair for churches to lobby because you don't like them, but it's okay for pro-abortion organizations to lobby even thought I don't like them? Whose feelings matter more?

As for a "misappropriation of charitable funds," it would go to argue that people who are donating to a church believe in the mission and mandate of that church... and would probably be a-ok seeing the things they believe in being lobbied for in the government.

What do we find ourselves in again? Not an argument for whether or not churches should pay taxes. We have now stumbled across an argument for or against the act of lobbying itself. Whether or not it's okay for churches to lobby falls into the same jurisdiction as to whether or not it's okay for any other nonprofit organization to lobby - and the act of lobbying itself, whether you agree with that or not. This all has literally nothing to do with whether or not churches should pay taxes. You are, again, making a separate argument for a different thing entirely!

So we covered why a church is a nonprofit organization, why it's okay for the pastor to feed his family, and why government subsidies and lobbying have nothing to do with whether a church should be taxed or not. What other arguments are there?

While the vast majority of arguments can be dismissed due to the reality that churches are nonprofit organizations, people still try to make them.

Peppered among the entirely nonsensical and completely misled arguments that are easily dismissed by pointing out things we already talked about, there are a few arguments that have somewhat of a basis, so I'll go into a few.

One prevalent argument appears to be that churches "have become" political, and because they are involved in politics, they should therefore pay taxes. This argument is... interesting. It's interesting foremost because of the idea that churches have become political. It's just as interesting that an organization "being political" has some bearing on whether or not they should pay taxes. Should a for profit organization that does not support or proclaim any political opinions not pay taxes? If I have no political beliefs, can I not pay taxes? Political beliefs, agendas, proclamations or support do not dictate whether or not someone pays taxes.

If the argument is actually that it is no longer a nonprofit organization because it has political beliefs, what constitutes as a political belief? Abortion is a pretty political topic - even though it's actually a moral question. Should Planned Parenthood pay taxes? What really happened is that the beliefs the church already had, forever became political topics. Churches do not back a certain presidential candidate, they do not register for a political party (unless The Party for Jesus was a political party), and they themselves as entities cannot vote for anything or pass laws or do anything like that. They have "political beliefs" in the loosest sense of the phrase, because they've always had their beliefs, and then people came around and turned those beliefs into a political discussion.

Therefore, what argument can be made against nonprofit organizations having political beliefs? If your nonprofit organization is literally an organization that focuses around, lobbys for, promotes, and supports abortion - and nothing else - is that not political? Or can we just rightly conclude that this "being political" argument is a bunch of nonsense?

Another prevalent argument is that churches exist to perform good. Our taxes support the well being of our country (arguable), and that taxes pay for things that we all use. Churches should want to pay taxes for the good of the country (arguable), because paying taxes would be paying their fair share to support things like education, roads, fighting hunger, and providing for victims of disasters. Churches not paying taxes is therefore an active rejection of our country and its citizens.

This discussion is interesting due to the implications about what our taxes do and what they are used for. Taxes, as a concept, are a forced fee that the government imposes on citizens and businesses. They then use this money collected from people and businesses to pay for whatever they want to use it for, without the people who pay those taxes having a say in what their money goes to or who benefits from it.

Sure, we have representatives and vote for people - we don't have "taxation without representation," but from an individual person to person basis, no, we do not have a say in what our taxes go toward. I don't get to send my taxes into the IRS with a note that says "please only use this money to feed the homeless! Thanks!" With the state of our government, the programs it supports, and the fact that many of these things can in fact be in opposition to the beliefs of individuals and churches, paying taxes is not anymore "good" than the church just using the funds it's getting to perform its own good in the first place. Which is what it does. Furthermore, "good" to church very importantly includes spreading the gospel, which the government specifically does not do!

Furthermore, the church doesn't use roads, bridges, or public facilities. It's an entity - the people within the church use those things, and, whoa, those people pay taxes. It's not the people in the church who are not paying taxes, it's the entity of the church, the money made from the tithes of the people who support that church, which like I noted earlier already had taxes paid on it. I paid taxes on my income. I then took part of my remaining income and gave it to the church. I am a part of the church, but I'm not the entity of the church.

The idea that the church should want to pay taxes to support government run programs that are specifically and purposefully secular - like public education - stems from a very basic misunderstanding about what churches are and what they do. It seems that the majority of people who argue that the church should pay taxes don't actually understand what churches are, which is where the majority of these bad arguments stem from.

Another argument is that the bible says the church should pay taxes. Interesting - and yet another case of taking the bible out of context as well as the nonreligious telling the religious how they should behave based on things they don't even believe. Hypocritical, obviously, but we still need to explain why it's wrong.

We see two main passages quoted in this argument. Matthew 17:24-27 and Matthew 22:15-21. Here are those two passages:

When they came to Capernaum, the collectors of the two-drachma tax went up to Peter and said, “Does your teacher not pay the tax?” He said, “Yes.” And when he came into the house, Jesus spoke to him first, saying, “What do you think, Simon? From whom do kings of the earth take toll or tax? From their sons or from others?” And when he said, “From others,” Jesus said to him, “Then the sons are free. However, not to give offense to them, go to the sea and cast a hook and take the first fish that comes up, and when you open its mouth you will find a shekel. Take that and give it to them for me and for yourself.”

Then the Pharisees went and plotted how to entangle him in his words. And they sent their disciples to him, along with the Herodians, saying, “Teacher, we know that you are true and teach the way of God truthfully, and you do not care about anyone's opinion, for you are not swayed by appearances. Tell us, then, what you think. Is it lawful to pay taxes to Caesar, or not?” But Jesus, aware of their malice, said, “Why put me to the test, you hypocrites? Show me the coin for the tax.” And they brought him a denarius. And Jesus said to them, “Whose likeness and inscription is this?” They said, “Caesar's.” Then he said to them, “Therefore render to Caesar the things that are Caesar's, and to God the things that are God's.”

Here is the long and short of these passages: Jesus is declaring that the people pay taxes. He Himself paid the temple tax because He is a person and He set the example for his disciples. He declares that we, as individuals render unto Ceasar what is his - and most importantly, to God the things that are God's. Here is the big hint: the tithe is "what is God's." The bible would not insist, and does not, not even a second, that what is God's must be taxed and paid to Ceasar. The tithe is not just a donation or something we feel like giving the church, we pay the tithe because it is God's - and God does not pay taxes. This argument is actually rather blasphemous at its core. God does not answer to Ceasar - it is quite the opposite. God does not owe anyone, anything. What is God's does not get taxed from a biblical standpoint.

The most prevalent argument, however, is something something separation of church and state!!

I keep seeing this. Apparently, a supposed argument against churches paying taxes is that it wouldn't be a separation of church and state. Churches paying taxes would tie the church to the government. This argument, while it claims to support my own belief, is not very good. The vast majority of arguments therefore for the taxing of churches is that churches paying taxes would not be a failure to separate church and state. The reasons for this vary, though the argument is mostly that separation of church and state is actually violated by the government giving "special treatment" to churches. This is all, however, entirely irrelevant. Considering that the argument of separation of church and state in regards to why the church shouldn't pay taxes is not our best argument, then debunking that argument is... pretty useless. We're at square one. Square one being where I challenge you to either contest that all nonprofit organizations should pay taxes or that churches are not nonprofit organizations. The government is not giving special privileges to churches because they are churches, but rather because they are nonprofit organizations.

From people not understanding that churches are not the only entity that doesn't get taxed, to a false belief that the government somehow pays churches to exist, to not understanding what the church does with the money it gets or how it gets that money, all of these arguments for taxing churches are rooted in ignorance. Before you try to argue that churches should pay taxes, ask yourself: does my argument prove that churches are not a nonprofit organization? If your answer is no, then save yourself the energy.

However, if we did come to a point where the government did decide that no organization could avoid paying taxes by being nonprofit or otherwise, or just that religious organizations had to pay taxes, I would still contest that churches should not pay taxes. This is of course due to the biblical reasons stated earlier: the tithe is God's, and God does not answer to the government - God does not pay taxes. If the government did begin to tax churches, it would cause quite the ruckus for this very reason.