Opinion Columns & Blogs

James L. Evans: Tax exemption is not a right

An Oklahoma church may be in jeopardy of losing its tax-exempt status. Ironically, that is exactly what the pastor wants.

Fairview Baptist Church pastor Paul Blair deliberately broke the law on Sunday, Sept. 26 by endorsing a candidate for governor from the pulpit. The part of the tax code that provides tax exemption for churches and other non-profits specifically prohibits partisan political endorsements.

Blair is part of a small national movement of religious leaders seeking to challenge this law in court. These religious leaders want to be able to endorse candidates from their pulpits as a matter of free speech and as an expression of the free exercise of their faith.

The problem with all this is that there is nothing to stop them from exercising their freedom of speech or the free exercise of their faith except for the fact that they are tax exempt. Tax exemption is not a right but a privilege. And in order to enjoy that privilege, it is necessary to play by the rules. If endorsing candidates is more important to these religious leaders than the tax-exempt status they enjoy, all they need to do is give up tax exemption.

This is one of the least understood and yet most widely debated social issues church leaders and members will ever encounter.

The whole concept of tax exemption for religious institutions is rooted in our history. During the colonial period, churches were part of municipal government, and municipalities do not tax their own property. Consequently, church property was exempt from property taxes. Additionally, ministers were paid out of tax money that was collected by citizens for municipal services.

Of course, not everyone was happy with this arrangement. In 1778, 18 Baptists in Northampton, Mass., were arrested and put in jail for their refusal to pay the taxes that supported the local congregational minister.

After the adoption of the U.S. Constitution and the resulting disestablishment of state-supported religion, most local governments continued the practice of exempting churches from property taxes. It followed that churches and other religiously affiliated institutions would also be exempt from income tax.As the income tax became more and more complicated, eventually even the gifts given to religious institutions were exempt from taxes. That’s how we came to have charitable deductions on our annual tax returns.

In time, lawmakers established in the tax code provisions for non-profits that were not necessarily religious. This includes entities like credit unions and civic organizations. These non-profits serve the common good, receive tax deductible gifts, and do not pay tax on their income. They are governed by section 501(c) (3) of the tax code.

In the 1950s lawmakers added a provision to the tax code that prohibited these 501 (c) (3) non-profits from participating in partisan political activity. Non-profits may involve themselves in issue activism, but only if they do not devote the majority of their time and resources to these activities. What they can never do is endorse candidates.

While it is true that most churches have never formally filed for 501 status, the law has determined that this is the portion of the tax code that governs religious institutions.

To continue enjoying this privilege, churches must avoid endorsing candidates. They can hold candidate forums, voter registration, issue education, and even serve as polling places.

What they cannot do is take sides. Unless, of course, they are ready to surrender the privilege of tax exemption.

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