a mess of taxes

Let’s take a quick look at the restrictions on nonprofits incorporated under 501(c)(3) of the U.S. tax code:

To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.

Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.

The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.

Section 501(c)(3) organizations are restricted in how much political and legislative (lobbying) activities they may conduct. For a detailed discussion, see Political and Lobbying Activities. For more information about lobbying activities by charities, see the article Lobbying Issues; for more information about political activities of charities, see the FY-2002 CPE topic Election Year Issues.

I think this is quite clear, and very logical & fair. If an organization is not paying any taxes to the government, then in return for that non-interference, it can’t in turn interfere with the government. Does this sound familiar? It should! The separation of church and state as envisioned by our founding fathers was precisely to keep religion out of the government. In the 18th century, people were very well aware of the abuses occurring under church domination of government. Such domination also prevented people from worshiping as they felt best. For these reasons, the U.S. government was also famously prohibited from making laws with respect to religion. This is why, for example, it is prohibited to require a politician from “passing” a religious test in order to discharge his or her office. That’s how we avoided the situation Britain had for centuries where Catholics were not permitted to take up public office merely for being Catholic. This is also how we avoided having the situation — which persists to this day in some European countries — of having the government forcibly collect the “state church’s” tithes from your income — whether or not you are a member of that church!

But it must be quid-pro-quo. I cannot overemphasize this enough. Why do churches think they have both the right to be tax exempt and interfere with the government, impose their values on the government? If you open that door, then which religion? Which values? Do we ban pork consumption (Seventh-day Adventists)? Allow bigamy (Latter Day Saints (fundamentalists))? Enforce sex only within marriage (most religious organizations)? Limit marriage to a select set of people (many different religions have different rules for who may marry; even besides the current same sex marriage debate). Who wins? Whoever does — becomes the de facto state religion. I cannot overemphasize that point. Religious people should be as alarmed at the prospect of some other religion — especially one hostile to theirs — becoming ascendent because of political and legislative manipulation. Manipulation which is sensibly prohibited of nonprofit organizations.

All of these are basic human and civil rights that are being interfered with. It is one thing if you voluntarily choose a particular church and choose to abide by its restrictions. It is altogether a different thing if you wish to enforce those beliefs and practices on another person who does not believe the same way as you do, whether because that person adheres to a different church with different practices, or because that person does not adhere to any church at all.

Interestingly, many churches do incorporate under IRS Code 501c3. But in actuality, they are exempted from such incorporation, being automatically considered tax exempt. Why do I say that churches are exempt? Check this out: § 508. Special rules with respect to section 501 (c)(3) organizations. Note IRS Code § 508(c)(1)(A):

Special rules with respect to section 501(c)(3) organizations.

(a) New organizations must notify secretary that they are applying for recognition of section 501(c)(3) status.
(c) Exceptions.

(1) Mandatory exceptions. Subsections (a) and (b) shall not apply to—

(A) churches, their integrated auxiliaries, and conventions or associations of churches.

This is referred to as the “mandatory exception” rule. Thus, we see from the IRS’ own publications, and the tax code, that it is completely unnecessary for any church to apply for tax-exempt status. In the IRS’ own words a church “is automatically tax-exempt.” It gets worse. What about tax-deductibility? Doesn’t a church still need to become a 501(c)(3) so that contributions to it can be taken as a tax deduction? The answer is no! According to IRS Publication 526:

“You can deduct your contributions only if you make them to a qualified organization. To become a qualified organization, most organizations other than churches and governments, as described below, must apply to the IRS.”

So, in the IRS’ own words a church “is automatically tax-deductible.” Wow. So they can grab tax free donations from their followers, and interfere with the U.S. government and the rest of us, without paying anything in taxes. This is dangerous and irresponsible.

While many of us are under the impression that churches must be incorporated under 501(c)(3) — and many actually are — it isn’t required. So why do we see mention of churches and religious organizations in the 501(c)(3) code? The answer is that this is a relatively new development, introduced by (then Senator) President Johnson in 1954 to try and regulate churches under nonprofit rules (see the intro here: Charities, Churches and Politics).

Since churches aren’t actually required to incorporate under 501(c)(3) rules according to the loopholes above, that is why the Mormon Church can get away with playing a huge lobbying role in pushing Proposition 8 through in California in 2008 — which actually resulted in depriving a group of people of their rights! Think about what other rights a religious organization might want to deprive you of! The right to choose when and how to have children, perhaps. The right to choose which church (if any) to attend. The right to choose who to marry. The right to choose what you wish to eat, who to associate with, what to read. The sort of sex you might want to have. The kind of reproductive health care you can obtain. The list is endless, which is why our founding fathers shoved them out of the nascent government to begin with.

The Catholic Church regularly lobbies on legislation regarding funding of reproductive health care. Not just abortion, but contraception and even simple, basic gynecological care. The list is long and numerous, and clearly in violation of the above description of conduct expected of nonprofits. And that is because religious organizations and churches are mandatorily exempted from being taxed. They are not actually required to incorporate under 501(c)(3)! And that is why these churches — especially the larger and wealthier ones, who would like to impose their values on everyone else — can “get away” with political lobbying. They are tax-exempt, but not under the 501(c)(3) code. Now, some churches are incorporated under 501(c)(30 and are duly investigated for political lobbying, but larger ones are not. And they are the ones who are a growing & continuous problem in this country.

Is this fair? I think not. Let’s look at another aspect of this, which is currently gaining a lot of traction: the UK/US UnCut movements. Here we have (huge for-profit) companies who are intimately and thoroughly involved in national politics — influencing and lobbying our politicians with obscene amounts of money that most individuals could never hope to match — to ensure their own private interests. One result, of course, being that these companies frequently wind up paying no taxes whatsoever.

This chart was produced last year, and this column is as true today as it was last year (except that we lost the fight to let the Bush tax cuts expire on the the top 2% of the wealthy, leading to the current budget fights). For an eye popping list of the consequences of allowing companies to simply NOT pay taxes at all, or to pay less than you & me (are you earning billions of dollars in profit? I’m certainly not!), look here: Infographic: Corporate Tax Cheats Are Bankrupting America

What is the common thread of unfairness here, between meddling churches & religious organizations, and obscenely profitable companies and the hyperrich dictating the course of our government (which I remind you that in the United States is “of the people, by the people and for the people”)? The common thread of unfairness lies in how these organizations are siphoning off resources, grabbing advantages, dictating to the rest of us what kinds of resources and social fabric we “deserve” while giving the government… NOTHING. Whether they pay no taxes because of some archaic quirk of history or because they’ve essentially remodeled legislation to their advantage, the bottom line is that THIS IS NOT FAIR.

You play, YOU PAY.

Hey, if the Mormon Church is going to get its feet dirty with politics, then that’s fine. Strip it of its tax exempt status and make it pay up. All those obscenely profitable companies dictating to our politicians what to do? Make them pay up on all their taxes. At least then that money can be used to some actual good, like medical care for children, creation of jobs, protection of the sick and elderly in our society — while these churches are sidetracked by playing politics instead of actually doing the work their own holy books and traditions says they should.

Government isn’t for churches nor for greedy wealthy companies. Government is the means by which we, the people, protect our interests. So it’s time to wake up and hold all NON PERSONS accountable.

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