Churches vs IRS: 501c non-profit status

[Polt]

Christianity has more than it's share of silly people. One example silliness I frequently run across is the claim that churches are government organizations because of their 501c status. And, so, your church should decline 501c status, they say.

501c means an organization is a non-profit. They don't have profits so they're exempt from income taxes. The difference between a church and other kinds of non-profits is that churches are given non-profit status without applying for it.

Look at what's going on with the IRS now vs. conservative groups. The IRS has been deliberately making itself very burdensome to these groups. It has been said that the power to tax is the power to kill. Add to that, the government can just harass you until you give up. And, the IRS is the part of the federal government in the best position to harass anyone. They can audit you at will and make you burn up your resources trying to meet their demands. And, in the end, they can pretty much tax you whatever they want (by disallowing expenses, deductions, and credits). Sure, you can go to court and fight them, but that's just another huge drain on your resources (time, energy, and money).

Congress granted churches 501c status as a way to protect churches from the IRS. Not as a way to control churches by the IRS. This shifts the burden to the IRS. As a 501c, you don't have to prove your innocence, but the IRS has to prove your guilt. And, they'll have to work hard to attempt to find evidence to use against you.

 

[Angelina]

I agree that Churches do not need to apply for a tax exemption status but what is going on here?
http://www.theglobaldispatch.com/steven-miller-refuses-to-condemn-irs-probe-into-content-of-church-prayers-as-part-of-irs-scandal-hearings-94910/

 

[Polt]

I agree that Churches do not need to apply for a tax exemption status but what is going on here?
http://www.theglobaldispatch.com/steven-miller-refuses-to-condemn-irs-probe-into-content-of-church-prayers-as-part-of-irs-scandal-hearings-94910/

The pro-life group is not a church, and therefore does not automatically gain 501c protection. As a non-profit, it can apply for that protection but Obama's IRS doesn't want to give conservative non-profits protection from the IRS.

"Their question, specifically asked from the IRS to the Coalition for Life of Iowa, ‘Please detail the content of the members of your organization’s prayers'."

This is an example of the IRS's capability to harass. They can demand any details they want, in any quantity they want, making it extremely costly and difficult to give the IRS all that they demand. And, in the end they can ignore everything that was provided them, as an organization seeks 501c status. And, without 501c protection, the IRS can tax these non-profits to death by taking a third of the money contributed to them, plus penalties, and also auditing the people giving the donations and taxing them on those donations.

Think about what's involved in detailing the contents of the members prayers. First, they're not recorded so you're not going to have that information. Second, short of providing transcripts of all the prayers, along with names and dates, the IRS could reply that your detail is insufficient.

 

[Arnie Manitoba]

Most people misunderstand the church "exempt status"

It does not mean that churches do not pay any taxes ..... they pay property taxes , employees including ministers pay income tax like everybody else , they pay sales taxes like everybody else.

The exemption has to do with "gross income" received by the church (tithes , offerings, gifts etc)

The church does not have to remit taxes on that "income" ..... it can sit in the bank to pay the staff and the missionaries and the light bill , or set aside in a building fund for the future.

There are rules and protocols to follow in all this ..... it is not a free-for-all .... and a church financial statement is fairly detailed.

If a businessman takes in a million dollars a year and has $250k left over at the end of the year he has to pay tax on the $250k because it is deemed to be profit.

if a church takes in a million dollars and has $250k left over it is not deemed as "profit" .... it is simply funds carried over to the next year.

Now if the church leaders wanted to spend the $250k to buy a Rolls Royce and take a trip to Vegas .... it would not be allowed because trips to Vegas and fancy cars are not seen as church related expenses.

Some super evangelists tried that but ended up in jail and owing $6 million to the IRS

But If the super evangelist took the $250k as "wages" ..... then paid his 30% personal income tax on it ..... he is free to do whatever he wants with the money just like you and I do with our paychecks.

But the church leaders also have to answer to the congregation who gave the money in the first place.

 

[Polt]

If a businessman takes in a million dollars a year and has $250k left over at the end of the year he has to pay tax on the $250k because it is deemed to be profit.

if a church takes in a million dollars and has $250k left over it is not deemed as "profit" .... it is simply funds carried over to the next year.

Now if the church leaders wanted to spend the $250k to buy a Rolls Royce and take a trip to Vegas .... it would not be allowed because trips to Vegas and fancy cars are not seen as church related expenses.

Ultimately, Businesses don't pay taxes on that $250K leftover, either. In future years, it will be spent and deducted from taxable income. Ultimately, only profits given to the owners are taxed. And, non-profits have no profits to give to the owners.

Businesses regularly take abusive deductions (and get away with it), like business meetings in Hawaii (for reasons other than doing business with Hawaii). Because there's no checks-and-balances between consumers and executives, businesses can get away with just about any unjustified expense they want. Secular charities that are a long way from their donors (e.g. the United Way) also get away with unjustifiable expense. But, churches are usually supported by people who are close to the church and so most ministers can't get away with abuses that others can get away with. Televangelists are guilty of more abuses because their donors are not close to them.

The IRS can limit excessive deductions, but that rarely happens. And, should a church not have 501c protection from the IRS, the IRS can unfairly limit deductions to hurt the church.

 

[Episkopos]

The real church is not a religious organization.

 

[aspen]

Presidents since Kennedy have allowed the IRS to go after groups they do not agree with - we need to stop this abuse of power.

 

[Polt]

The real church is not a religious organization.

Your meaningless nonsense aside, where two or three are gathered in His name, the government might consider that to be a religious organization.

 

[Brother James]

Actually, churches are not subject to most taxes but that is not a function of them being 501(c)(3) organizations. That is a constitutional issue. The church I attend in Florida, for example, runs a book store and does not charge sales tax on the items it sells. They also do not have to pay the employment taxes on the salaries they pay, although the burden passes to the employee instead (so many do pay the tax). 501(c)(3) status confers tax exemption to contributions made to the organization, so that people who contribute money to such an organization can take an itemized tax deduction for that amount. Churches do not need to apply for this status, they have it automatically, but some do in order to remove any doubt as to their status.

Personally, I don't think the church should be exempt from taxes. They use services like police and fire. I don't think contributions to the church should be taxed but I don't think it should be deductible since I believe in a flat tax with few deductions at all. Giving should be freely done, not to get a tax benefit.

The only IRS "harassment" of churches I've heard of is when churches start to endorse political candidates. Tax exempt organizations are not allowed to do that without losing their tax exempt status, nor should they. A pastor can endorse any candidate he wants to legally. He just can't keep his church's tax exempt status if he does.

 

[Polt]

Actually, churches are not subject to most taxes but that is not a function of them being 501(c)(3) organizations. That is a constitutional issue. The church I attend in Florida, for example, runs a book store and does not charge sales tax on the items it sells. They also do not have to pay the employment taxes on the salaries they pay, although the burden passes to the employee instead (so many do pay the tax).

The Constitution means nothing without the laws that conform to it. 501c is one such example. Also, churches get no tax breaks that any other non-profit gets. As I noted, the only difference between a church and any other non-profit is automatic inclusion in 501c.

You think churches should be taxed because they get fire and police protection? Why don't you just say that all non-profits should be taxed? Why do you single-out churches? While you're at it, why don't you demand government organizations, like public schools be taxed. They also use fire and police protection? For that matter, why don't you demand that the government stop supporting public schools? Whatever excuse you have, it's hypocritical.

Also, as I attempted to explain, the automatic inclusion in 501c protects churches from IRS harassment. So, don't sit there smugly proclaiming that churches don't need it because they're not harassed. All you're doing is drawing attention to the fact that it works. And, the recent IRS scandal shows that churches would be harassed without it.


BTW, the "flat tax" is stupid.

 

[Angelina]

Polt, you are welcome to express your opinion on this thread but please refrain from coming across as the only opinion that is credible. This is a discussion forum and as such, it is open for discussion. We are also a Christian forum, so we need to also remember to treat one another with a little common courtesy and respect.

Blessings!!!

 

[Episkopos]

Your meaningless nonsense aside, where two or three are gathered in His name, the government might consider that to be a religious organization.

The church is not supposed to be a business.

 

[Polt]

The church is not supposed to be a business.

Why is it so many Christians have [edit]?

First, I said "organization". If you object to that, then you must be an advocate of chaos, which is the absence of organization. The Apostle Paul strongly advocated for organization. And, as I indicated, it doesn't matter what [edit] thinks, it's what the IRS thinks.

Second, churches are businesses. They were businesses from the very start. They can't be anything else, because anything else is unworkable. Do you think when the old testament church collected tithes that they didn't keep an accounting of the collection and disbursements? Do you think they didn't run a fund to maintain the synagogues and to help the needy?

The Holman Bible is produced by the most mentally challenged collection of Bible translators to ever produce a translation. But, you probably don't care, so I'll appeal to their botched translation to appeal to you. Maybe [edit]. Acts 6:

There arose a complaint by the Hellenistic Jews against the Hebraic Jews that their widows were being overlooked in the daily distribution. Then the Twelve summoned the whole company of the disciples and said, “It would not be right for us to give up preaching about God to handle financial matters. Therefore, brothers, select from among you seven men of good reputation, full of the Spirit and wisdom, whom we can appoint to this duty. But we will devote ourselves to prayer and to the preaching ministry.” The proposal pleased the whole company.

See, the First Christian Church of the Apostles was a company that had an appointed board of executives to handle financial matters and distributions.

 

[Brother James]

Actually, Angelina, Polt has no idea what he's talking about. Churches are not 501(c)(3) organizations. They are exempt because the constitution prevents the government from passing any laws infringing on their rights to the free exercise of their religions. I hope nobody takes his boisterous proclamations and actually makes real-world decisions based upon them. The guy who shouts the loudest is not necessarily right, and in this case he's completely wrong. Most people understand this when people start telling other folks more knowledgeable than they are that they are stupid.

You know, I've stayed away from this site for a very long time because of the ugly nature conversations seem to take here between professing Christians. I come back, try to post information based on my expertise in the profession from which I earn my living, and look at the response. I'm an enrolled agent and I provide tax services to all sorts of organizations including churches and non-profits. There is a very ugly and unhealthy spirit to this site and I don't plan to return.

 

[Angelina]

I'm sorry to hear that James... :huh: You obviously have so much to share with us here and I hope that you will reconsider. Your concerns are noted....and are being addressed...

Bless you!!!

 

[Angelina]

Hmmm...
http://chalcedon.edu/research/articles/do-churches-need-501c3-status/

 

[Polt]

Hmmm...
http://chalcedon.edu/research/articles/do-churches-need-501c3-status/

"Churches were added to section 501(c)(3) of the tax code in 1954..."

501c3 is the exemption from taxes. Churches get it without filing for it. But, if they violate the rules of 501c3, their exemption will be revoked. It's an idea below competency that the IRS is directly following the First Amendment rather than the tax code.

"The lack of a 501(c)(3) designation does not exempt a church from any legal prohibitions against “politicking,”"

This should read, "the lack of an explicit 501c3 designation..." There's no explicit designation of 501c3 because they haven't filed, but they still must obey the rules of 501c3 to continue to be exempted from taxes. The legal prohibition against "politicking" is a 501c3 restriction. Churches have a presumptive 501c3 designation. Some churches file for an explicit designation (either out of lack of understanding that it's automatic, or to clear up doubts about their legitimacy as non-profit churches).

Non-profits have no profits to tax, so 501c3 is not saving them from taxes. It's saving them from the IRS presumption of taxes owed. It also allows donations to be tax deductible. Non-profits (charities, etc.) exists for community benefit and sometimes relieve the government of expenses (e.g. taking care of the poor, providing youth activities). All the money a church pays to employees for compensation is taxed to the employee as income, just the same as any an employee of any business. Also, the same amount of employment taxes, as with any employee of any business, is collected by the IRS for every church employee.

 

[Axehead]

Polt says, The Constitution means nothing without the laws that conform to it.

Actually, the constitution trumps laws that do not conform to it.

Episkopos is right. The church is not and never was a business. It is not an organization but rather an organism. A living, breathing organism, the Body of Christ.

Our house church is not 501c3, we do not pay salaries, we give in secret and do not care about a tax deduction. We are not a ward of the state and the state has no jurisdiction over us as a company of Believers.

When you accept 501c3 status you are potentially opening yourself up to intrusion by the state.

Conservatively speaking, there are about 20 million in America in House Churches.