Why Religious Institutions Aren’t Taxed

In “Religious Non-Profits, Plan Now for Tax-Exemption Battles,” Leslie Loftis explains why religious institutions aren’t taxed:

The actual quote, from one of our earliest and most consequential Supreme Court opinions, McCullogh v. Maryland (1816), states, “The power to tax implies the power to destroy.” That mere implication of destruction defeated the government’s right to tax a federal bank in its borders.

Now, 199 years later, a different superior right—citizens’ First Amendment right to free exercise of religion—faces threat of taxation and the implication of destruction.

The argument we must make is rather simple. Take the Religion Clauses of the First Amendment: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof,” and then take this passage from McCullough v. Maryland: “All subjects over which the sovereign power of a State extends are objects of taxation, but those over which it does not extend are, upon the soundest principles, exempt from taxation. This proposition may almost be pronounced self-evident.”

That government may make no law establishing religion or prohibiting the free exercise thereof is a clear statement that the power of government does not extend over the subject of religion. Therefore, religious institutions are exempt from taxation, not by tax code, but by self-evident, sound principles. 

Religious institutions are exempt from taxation because our government has not been given the power to govern religion. This is an expression of the basic principles behind the founding of this country—that is, there is an Authority above the government that has established rights apart from the government, including free speech and freedom of religion. Since these rights were not created by the government—and, in fact, existed before any government existed—our government is restrained from infringing on these natural rights. There are things that are simply not rightly under any government’s control. To reverse this long-standing practice of tax exemption is to wrongly place the government in authority over religion.

It’s not by accident that the question about the tax-exempt status of religious institutions has been raised in connection with the government’s attempts to remake another pre-political institution: the family. When once a government starts gobbling up other spheres of authority, its appetite for control over competing institutions will only grow.

As Loftis explains, the coming debate will center around whether tax exemptions are subsidies, which would violate the Establishment Clause (and also imply the government owns our wealth), or whether taxation would violate the Free Exercise Clause because of its power to destroy. Then, she says, there’s the question of what qualifies as a religious institution. There’s a long road ahead of us. 

(HT: Joe Carter)

Comments

[Trent Collicutt]

"Religious institutions are exempt from taxation because our government has not been given the power to govern religion."

I think that says it all.

Unless you are of the opinion that the government has the right to tax anything, for any reason, then they only have the right to tax what they have control of or a legal right to.

If you support control of religion, then why not all expression of opinions OF religion rather than just BY religion? Why restrict to religion? Tax blogs and Facebook posts. If government can tax for no reason, why not? I have tax on my phone bill and mail.

For most churches that I have had any affiliation with, this may not be much of an issue depending on the rules in the US on donations. They do not deal in enough money that there would be any difference between them and a standard non-profit. If you don't make enough profit to pay taxes, it doesn't matter much if you are taxed. And depending on how it is structured, I know the dues I pay to my professional association (a non-profit) are tax deductible.

[Richard Hidalgo]

The problem is that Christian leaders have and are not well organized. The beginning of this problem originated when then Senator Johnson in 1954 was able to pass an amendment that changed the U.S. tax code. This change prohibited tax-exempt organizations from endorsing or opposing political candidates. There was very little opposition by any leaders from the Church. This was the beginning of government monetary power over religion.

[Phillip A]

Invoking "the power to tax is the power to destroy" in regard to 501(c) exemptions, is a little facetious; after all, for-profit newspapers are not tax-exempt, and the government certainly does not have the power to destroy those. And, as the Bob Jones decision makes clear, the IRS has the power to revoke tax exemption for conduct which is not necessarily illegal. No, section 501(c) of the Internal Revenue Code is by no means constitutionally required, and the special consideration given to churches and church auxiliaries is a matter of convenience, not right.

[Chris Morasch]

There are more issues/topics contained herein than a simple question of who or what has authority to Tax.
With regards to a Tax; A Right cannot be subject to a Tax or License. A church is nothing more than a gathering of people with the Right to assemble. Until you "create" a CHURCH that is a business, at that point the "CHURCH" is under the STATE and IRS, because the people with in the "church" asked permission to be under the jurisdiction of the STATE when they incorporated. Thus turning there church into a CHURCH=Corporation (Note all companies/corporations are legally recognized by it's name in all CAPITAL LETTERS). Then when they filed for a 501 3c, it again asked for permission giving their authority over to an entity other than God.

And that only scratches the surface.

Richard Hidalgo said it perfectly almost. Not only Christian Leaders, but every other Leader dropped the ball.

Freedom exists, and lasts, to the exact extent that the seven kinds of leaders are all doing their role in society. When any of them fall short, freedom declines. When any of them rise above and control the others, freedom declines. Freedom could easily be defined as the state of balance between all seven kinds of leadership.
The seven kinds of leaders are:
1. Family Leaders
2. Religious/Ethical Leaders
3. Business Leaders
4. Educational Leaders
5. Media/Artistic Leaders
6. Community Leaders
7. Government Leaders
Freedom Matters ~ by Oliver DeMille p 21

[Mike]

Sure, churches operate on a non-profit basis, so there's not much to tax, even if the government could tax churches.

I think the real issue is whether donations to churches must remain constitutionally deductible for personal income tax purposes. I have my doubts.

[Steve Wright]

The IRS differentiates from a church and a 501-c3 religious corporation. Today it is far easier for a church to have bank accounts, own property and so forth with a tax ID number and there is no downside. Most churches are 501c3 corps today for that reason, but most would then chuck that to the curb if required by a change in the law. Churches, by definition are not taxed on profits and tithes are deductible...even without a 501c3

[ron watson]

There would be no threat of taxation if christians meet in homes like the early church. But,no we have to have our church buildings with built in cafes,health clubs ect.

[Phillip A]

@Chris Morasch

Wow - "freemen on the land" pseudolegal theories and "Seven Mountains" theology - all in one comment!

[Edy Meredith]

The problem is when churches or church entities are primarily made up of For Profit Businesses like the mormon church.

[kpolo]

@ron, I think Churches could meet in buildings, but you are dead-on about cafes, health clubs (really? I've not heard of that), gyms and super-expensive audio-video setup (what happened to the "word")?