Should Religious Organizations Benefit from Tax Breaks?

By Steve Major

As a kid, I once asked my father why churches didn’t have to pay taxes. He responded vaguely, saying that churches were considered beneficial to society in a way that justified their not being taxed.

“What about theaters?” I replied. “Surely one learns more about the world, and morality, and what kinds of choices each of us would make in difficult situations from theater than we do listening to someone lecture from a pulpit about what’s good and what’s evil.”

My father, who had given up on religion in college and stopped going to church when my mother kept making fun of him for it, wasn’t particularly predisposed to defend the tax laws set in place by many generations of politicians trying to pander for votes among a deeply religious electorate.

My understanding of the topic has gotten more nuanced since those early days. I know now, for example, that many regional theaters are tax-exempt nonprofits, though they need to demonstrate an educational component beyond the shows they put up. That’s why virtually all regional theaters have either children’s classes or free performances for local schools.

A key component to being a 501(c)(3) nonprofit is the need to demonstrate that it represents a clear benefit for society at large. The government doesn’t give them money, but nor do they need to pay taxes on the money they raise. Even better, people who donate to a nonprofit can pay slightly less on their taxes as well.

The American Humanist Association is a nonprofit organization, of course; as are a tremendous number of other very worthy organizations—groups that stand up for people who can’t stand up for themselves, or feed the hungry, or rescue kittens, or fund cancer research.

Some religious organizations do those things too, but that isn’t their primary mission, in the same sense that teaching kids how to act isn’t the primary mission of a theater. A religious organization’s primary mission is to interpret that group’s holy text for its members, and to helpfully remind them that their wise decision to choose that particular religion will provide them with the greatest and most comfortable afterlife available.

Frequently it turns out that to really ensure yourself a place in a post-death paradise it is essential to express your faith and devotion to the church in the form of money. A moral person gives to charity, after all… and it so happens that as far as the United States tax code is concerned, your house of worship qualifies.

There are those amongst the humanist community who are skeptical as to the benefits religious institutions provide to society, but since historically religion has helped fund a lot of great art, music, and architecture, I give them the benefit of the doubt and say that they’ve earned their nonprofit status.

The real problem is the degree to which religious organizations enjoy the largess of the government many levels beyond all other nonprofit institutions.

Unlike the rest of us nonprofits, who fill out special tax forms every year detailing all of our relevant financial information, religious organizations are allowed to keep their financial activities a secret. There’s good reason to make every legal organization explain where they’ve been getting their money and what they do with it, as it goes a long way to combat fraud and illegal transactions. I can think of several giant, obsessively secretive religion organizations whose lack of government oversight concerns me.

Members of the clergy frequently live in homes owned by the church, and are exempt from property taxes. Unlike a professor who lived in a home owned by a university, for example; that property would be considered outside of the university’s nonprofit mission, and would be taxed normally.

But it doesn’t end there. There is a price that the rest of us nonprofits have to pay to be tax-exempt institutions: we agree to play by the same nondiscrimination laws as regular companies. Religious organizations are free to discriminate to their hearts’ content.

I agree that the Catholic Church should have the right to refuse to hire a priest who can’t or won’t preach the Catholic gospel the same way that a farm has the right to refuse to hire a butcher who can’t or won’t slaughter its animals… but while that farm can’t refuse to hire a gay person, the church can; the farm can’t refuse to hire a woman, but the church can; the farm can’t refuse to hire a divorcee or a single parent, but the church can. Nor is the legalized discrimination limited to positions within the clergy: it’s not at all uncommon for teachers and nurses to get fired from Catholic schools and hospitals for coming out as gay; or for having a child out of wedlock; or even, as in a recent example, for  using artificial insemination in order to have a child with her husband.

The rest of us are required to pay employees a minimum wage or higher, and have to promise not to keep our workers trapped on boats for years at a time, working them to the brink of exhaustion for zero dollars an hour with the constant threat of isolation, ostracization, and torture. Certain highly litigious mega-cults feel differently however.

This discrepancy came to the forefront of the media’s attention earlier this year when the Catholic Church claimed that denying women health care was part of its religious mandate, and that making them follow the same rules as everyone else was an affront to their religious liberty.

501(c)(3) nonprofits are not allowed to get involved with political campaigns. Some religious groups skirt that line as closely as they can, and others brazenly cross it.  The Mormon Church spent millions of dollars on the anti-gay marriage “Prop 8” bill in California, a very obvious flouting of the “no political intervention” law.  If a nonreligious nonprofit had flouted that law so shamelessly it would almost certainly have lost its tax exempt status. It is no secret, however, that politicians are terrified of getting on the “wrong” side of any well-funded  religious group, and so the issue was left untouched. 

The American Humanist Association, in contrast, takes those laws very seriously; which is why I had to wait until Rick Santorum dropped out of the presidential race to say that he is a vile, smug, bigoted, hateful, taxidermied rodent in an ugly sweater-vest.

At their best, religious organizations provide comfort and community to their members. If they stopped being tax-exempt completely then a lot of beautiful old buildings would need to be sold and demolished rather than be charged property tax, which is not something I want. But their special privileges should be no greater or worse than those enjoyed by secular nonprofit organizations.

Buildings not being directly used for the public benefit, like ministry homes or office buildings, should be taxed normally. All of these organizations should need to prove to the state that they’re acquiring their money legally and spending it responsibly, the same way the rest of us do. And just as civil laws trump religious “law” (you’re not allowed to stone your neighbor, witchcraft or not) so too must civil anti-discrimination laws and health care mandates take precedence over religious bigotry.

Is it really so much to ask that churches and religious organizations be held accountable to the same laws as all other nonprofits?

Steve Major is the development associate for the American Humanist Association.