How Churches will Lose Their Tax Exemption

 There are a lot of churches that are concerned that at some point they might lose their tax exempt status.  And there are reasons to be concerned.

While most churches think the greatest risk to their tax exemption is getting involved in “political activity”.  In reality, it is far more likely that churches will lose their tax exemption as a result of voluntarily surrendering their influence in public policy.

Let me explain.

The chance of a church losing its tax exempt status for doing something “political” is basically zero.  The only thing the IRS says a church can’t do is endorse or give money to a political candidate.  Pastors can endorse or give money personally, and churches can give money to ballot issues without any concern.

Only one church has ever lost its tax exempt status because they did something political, and that was because a church in New York took out a newspaper ad campaigning against Bill Clinton.  So…unless you’re planning to spend church resources buying full page newspaper ads, you’re going to be fine.

Even though there is very little current IRS rules say you can’t do, the reality is that the IRS refuses to enforce the rule that it currently has—and for good reason.

It is likely that the IRS rules prohibiting churches from endorsing candidates are a violation of the First Amendment’s guarantee of Free Speech.  However, because the rule targeting churches is an IRS regulation rather than a statute passed by Congress, that rule cannot be challenged until the IRS tries to enforce it.

In attempt to create just such a controversy, since 2008 the Alliance Defending Freedom (ADF) (formerly the Alliance Defense Fund) has been conducting an annual event called Pulpit Freedom Sunday.  On the appointed day (this year it’s October 7th), churches all over America intentionally do things the IRS says they can’t do. Then, the churches print out transcript of the sermon, make a recording, and mail them to the IRS.

So far, the IRS has had no response. 

In some ways this is good.  Churches are slowly becoming aware of the fact that they really do have freedom of speech just like everyone else. The problem is, however, that the inability to actually take the issue to court keeps the rule on the books so enemies of churches and free speech can make baseless threats.

But none of this means that there isn’t a real risk to a churches tax exempt status. 

The irony is that the greatest threat to a churches tax exempt status has developed as churches have retreated from cultural discussions in an effort to protect their tax exempt status.

While churches have been sitting on the sideline of cultural and policy discussions, those discussions have been quickly creating momentum around the idea that churches who hold a biblical view on issues like marriage and sexuality are hate groups.

From their perspective, those who believe homosexuality is not in every way the equivalent of heterosexuality contribute to the suicide of young people.  It’s a real life and death issue.

The question churches need to ask is how long they think the radical left is going to allow “hate groups” to continue receiving tax-exempt status.  The answer should be fairly obvious…not very.

Consider how other institutions that hold these beliefs are being treated.

Earlier this week a story broke about a Catholic University that is being evaluated by the organization that accredits universities because of what this CATHOLIC school teaches about homosexuality.  As if the Catholic churches teaching on the subject is just being discovered.

Federal legislation known as the Employment Non-Discrimination Act (ENDA) would prohibit churches from refusing to hire practicing homosexuals.

Laws in Oakland, California, and New Jersey specify that a man dressing as a woman can use a woman’s restroom and that it is illegal to prevent that from happening.

The state of California is in the process of making it illegal for a licensed counselor to help someone with unwanted same-sex attraction from trying to overcome that.  

They don’t just disagree, they don’t think you have a right to act on your beliefs.  

So, from their perspective, it will be quite reasonable to make sure that organizations benefiting from tax-exemption agree not to propagate hate and encourage teen suicide.  After all, would we encourage people to give money to the Ku Klux Klan?

Should we reach that situation, hopefully churches will have the courage to surrender their tax exempt status before they surrender their beliefs.

Fortunately, we are not at that point yet.  Still, there are questions that must be answered.  Most significantly, whether churches care enough about what is taking place culturally to even attempt to prevent their government from declaring war on what the churches believe?  

If we lost that fight, the corresponding loss of the churches tax exempt status will be the least of their concerns.  


Posted by Mareli on October 7, 2012
The IRS prohibition on churches endorsing partisan candidates is not a violation of freedom of speech. If churches want to give up being exempt from taxation they can endorse whomever they want, but if they want tax exempt status they shouldn't expect taxpayers to pay extra so that churches can play partisan politics.
Posted by Bryant Adams on September 14, 2012
Excellent article, Joseph. The issue was well put.
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