Saturday, October 04, 2008

Churches and Tax Exemptions

I just read an interesting article about a group of pastors who have joined together to commit "civil disobedience" in order to challenge the idea that the tax exemption enjoyed by churches and other religious organizations ought to be contingent on their willingness to refrain from endorsing particular political candidates. Here's a link to that article.

Tax exemption for churches is something we tend to take for granted in this nation. Many seem to feel that such an exemption is absolutely essential if churches are to perform their mission. Personally, as a person who is passionate about my commitment to Christ, I think it's great that our nation's government has long recognized the importance of the church insofar as its contributions to society are concerned, to the extent that the government is willing to effectively subsidize the work of the Church by offering such tax exemptions. But I think that it might be overstating the case to say that tax exemptions are essential for effective ministry. I seriously doubt that any of the churches during the first several centuries of the Church's existence received tax exemptions. Yet, they prospered anyway, and they even managed to fulfill their mandate to take care of the needy. When Christians treat such exemptions as though they are morally entitled to receive them, it undermines their credibility in the eyes of unbelievers.

If indeed one of the essential societal functions of the church is to serve as a prophetic voice, and if indeed that voice is stifled as a result of attempts to conform to the requirements of the IRS, then perhaps the price of tax exemption is too great. Our first priority as Christians ought to be to speak the truth. If Christians living during the first several centuries of the Church were so dedicated to the truth that they were willing to be martyred by being fed to lions, surely it is not out of line to suggest that Christians ought to be willing to give up their tax exemptions rather than allowing the content of their sermons to be monitored and controlled by the state.

There are other issues involved, too. For example, my own vision for a Christian arts ministry includes the sales of numerous art-related products for the purpose of funding the ministry. This aspect of my vision is not merely peripheral to the overall vision. Part of the reason for the existence of the organization will be to overcome the barriers which have prevented many artistically talented Christians from being able to make a living, without compromising their beliefs, by selling their artistic creations. Selling Christ-centered art and music and videos on behalf of independent artists who are struggling financially will serve as a means of overcoming those barriers.

It may be possible to structure my Christian arts organization in such a way that the IRS will be satisfied that the organization meets the requirements for a nonprofit group in spite of such sales, particularly if it can be demonstrated that the funds which the organization receives from such sales are being used primarily or exclusively to subsidize activities which would ordinarily be tax-exempt. If not, it may be that it will be possible and necessary to have a specific division of the organization which will be taxed, without jeopardizing the nonprofit status of the larger organization as a whole. (I have read some books which suggest that some nonprofits do sometimes become involved in taxable business endeavors as one way to raise funds for the organization, without forfeiting their tax-exempt status. And I know of some specific nonprofit organizations which are heavily involved in product sales which are used to support the missions of those organizations.)

If neither of the aforementioned scenarios is feasible, however, it may be that my Christian arts organization will need to forfeit its tax-exempt status in order to achieve its goals.

The drawback of doing so is that some people are reluctant to make direct donations to groups which lack 501(c)3 tax-exempt status. Such reluctance might be attributed to wrong motives (i.e., to the fact that they are donating money or goods primarily so that they can get a tax break, not so they can help worthy ministries or organizations); or it might be attributed in other cases to the erroneous belief that lack of tax-exempt status automatically means that the organization is unworthy of their donations.

Another drawback is that certain forms of assistance, such as grants from certain foundations, are only available to IRS-certified tax exempt organizations.

Consequently, it will be important to weigh the various options in order to determine the wisest course of action, not only in terms of the most effective way to raise funds without running afoul of the law, but also in terms of the best way to insure that the integrity of the organization is maintained, and that its ultimate goals are not hindered or compromised by such considerations.

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