Rules Are for Schmucks: The Tax Bill’s Hidden Gem

Last year’s thousand-page tax bill, on balance, probably did America a lot of harm. Your great-grandchildren will still be paying off the added federal debt burden it creates. However, most undertakings of this magnitude are neither 100 percent good nor 100 percent bad. When you navigate through this particular morass, you’ll find one little nugget that’s a real beaut.

Unless you overlook it—like so many incompetent God lobbyists did. They were so obsessed with their campaign to repeal the never-enforced Johnson Amendment that they didn’t bother with the little nit saying that all employers, not just profit-seeking corporations, have to start paying taxes on the value of free parking they provide to their employees.

“All” as in “all.” No exceptions for religious employers, who are exempt from everything else under the sun.

Oops.

The amount of tax most church employers will have to pay on the parking places they provide to their employees will not be large. What’s important is that they will have to complete a tax return—Form 990­—to report to the government how much tax, if any, they owe.

Nonprofit organizations, including the American Humanist Association, fill out a Form 990 every year. It provides a detailed report on the financial operations of the organization that the government can use to determine whether it continues to deserve its nonprofit status. All nonprofits, that is, except for churches. Their lobbyists have been slick enough to get them exempted from the Form 990 requirement for decades. So no one has any clue about what’s going on with their finances, except for what they choose to reveal (which may or may not bear much relation to the truth). By some estimates, approximately $100 billion of annual church income is thereby shielded from public scrutiny.

Shielded and hidden, that is, until now. The employee parking tax tail is suddenly wagging a very large dog. Churches are going to have to start coming clean.

Aaack!

What will this mean for churches? Here’s one little anecdote that provides a clue. The late Rev. Billy Graham, for all his faults, did have at least one positive foible. He wanted his financial operations to be transparent and above reproach, unlike those of many of his competitors.  To that end, he deliberately set up his operations in a way that did not qualify for the church reporting exemption, and he filed his Form 990 every year.

Graham eventually grew too old to preach, and turned over management to his son, Rev. Franklin Graham. Those curious about such things noticed on the Form 990s filed for 2015 that Franklin earned nearly a million dollars in salary alone from two of his organizations, nearly double the average salary of CEOs of the top fifty US charities. That figure doesn’t include any royalties, speaking fees, or investment income he may earn on the side. When some folks began citing that nasty “camel through a needle’s eye” Bible verse about that kind of money, Franklin responded decisively—not by reducing his pay, but by reshuffling the empire’s corporate structure so it could qualify for the religious exemption from Form 990.

Mega-salaries aside, the religious world is rife with financial crime of all varieties. Just last week, the Michigan attorney general acted to shut down a “charity” purportedly providing assistance to impoverished priests due to an utter lack of financial oversight from its putatively independent board of directors. Basically, the charity was accused of raking in lots of money, and giving most of it to the two staffers who founded the charity rather than to needy priests. The week before that, also in Michigan, state police discovered $63,000 in cash concealed above ceiling tiles in the million-dollar home of Rev. Jonathan Wehrle. The cash was bound in bundles by bands reading “For Deposit Only-St. Martha Parish.” The ceiling cash was part of over a million dollars that has been recovered from Wehrle, though five million seems to be missing.

Requiring churches to file a Form 990 each year will not put a swift end to such shenanigans. But there is much wisdom in Justice Brandeis’s dictum: “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.” It will certainly be much harder for religious crooks to steal worshipers’ money if they need to file a return each year, under penalties of perjury, in which the numbers need to add up properly.

On top of the fraud-fighting benefits of this missed subsection, there are further uses for the soon-to-be collected financial information. We recently learned that indicted Russian agent Maria Butina was working through right-wing Christian organizations. Wouldn’t it be cool to know what churches she or her front organizations were funneling money through, and what they were using it for? Wouldn’t it be fascinating to scope out just how big of an iceberg she’s the tip of? Form 990s would provide a valuable roadmap as prosecutors explore these connections, if only such forms existed. Now, perhaps, they will.

At least a few honest church leaders welcome the new rule. Rev. Frank Benson Jones, in his book Stop the Prosperity Preachers, argues that “Requiring churches and religious organizations to file an IRS form 990 would in no way impede the constitutionally guaranteed freedom of religion, but it would help to expose those greedy preachers who are using the Constitution to conceal their improper accumulation of wealth at the expense of American citizens.”

Don’t hold your breath waiting to take your first look at these forms, though. The lobbyists have finally awakened to the terrible threat that financial openness poses to God, and are working feverishly to prevent it. Already over two-thousand churches have signed a petition to thwart commie tyranny by repealing this rule. Most major tax bills have a “technical corrections” follow-up bill a year or so later to deal with little glitches, and the rushed 2017 law needs fixing more than most. The tax-writing congressional staffers are already hard at work on such a bill, with a decent chance of passing it later this year. Anyone willing to take my bet that either through technical corrections or administrative fiat the new financial transparency requirements for most churches will quietly disappear, please contact me at once. I’ll give you terrific odds.