The Theology of the Tax Exemption

Conservative Christians reacted predictably in response to the Supreme Court’s decision in Obergefell that ruled same-sex marriage constitutional. There was hand-wringing about the pseudo-persecution of Christians and faux outrage in response to fake articles that confirmed Evangelicals’ worst fears. Many conservative critics of the decision opined that this decision will lead to the curtailing of the freedom of religion in this country. It is true that the advent of nationwide same-sex marriage creates flashpoints between religion and the government where none existed before. It is true that Christian universities may have to deal with housing issues and that churches that hold out their space to the public for weddings may have to amend their policies. However, very few if any are asking the question of exactly how these flashpoints actually affect the constitutional right to the free exercise of your faith. It seems that the conversation jumps from mentioning these thorny issues to the conclusion that the right of free exercise is being curtailed.

The reason why the argument skips steps is because there is a logical, legal and theological fallacy occurring in the ether around this issue. To state it bluntly – the free exercise of religious institutions (churches, schools, etc.) will not be affected by the allowance of secular same-sex marriage. The government forces no minister or pastor to perform a ceremony that violates their conscience. No church will be forced to hold a wedding on their premises that violates their beliefs.[1] What frightens many who raise this objection is the loss of the charitable tax exemption. Currently, those who are deemed charitable organizations (and most churches fall under this designation) are not taxed. In return, those institutions cannot do things like discriminate in terms of their services, nor can they advocate for particular candidates in elections.[2] Advocates of “traditional” marriage believe that religiously affiliated organizations could lose their tax exemptions or lose the access to government funding now that the Court found in favor of a constitutional right to same-sex marriage.

From a legal perspective those who hold this view are correct. It is quite likely that courts will rule against churches who attempt to have their cake and eat it too by attempting to receive a government subsidy while shirking the terms by which the government grants that subsidy. In 1983 the Supreme Court ruled that the tax exemption is a subsidy to charitable organizations in the amount of the tax itself and then stated that there is no argument, “that First Amendment (Free Exercise) rights are somehow not fully realized unless they are subsidized by the State."[3] Although this case was in reference to political advocacy, it is not a stretch to believe that the Court would extend this principle to religious institutions that seek to discriminate against unions that the state has deemed constitutional. According to the Supreme Court, it is not the responsibility of the state to donate financial resources to those who do not share the state’s principles.

I believe the Court is correct in its constitutional understanding on this issue. What bothers me more, however, is the lack of a spiritual consideration amongst Christians who weep and gnash their teeth over the potential loss of a tax exemption. Has Christianity in America become so materialistic that we conflate our freedom to worship with our ability to save a dollar? I was under the impression that Christians are people of faith, and yet we show so little faith in the ability to continue to function without the benefit of a charitable tax exemption. We serve a God that we claim is omnipotent and omniscient. If that’s true then it seems mighty silly to complain about a lost tax exemption on the one hand and claim that God owns the cattle on a thousand hills on the other. That does not mean that there are not legitimate financial concerns. Unfortunately some of our ministries in some areas of the country could not function without government funding. It is true that some churches would have to close their doors without the money they save in the tax exemption. It is also true that giving itself might decrease when members are no longer able to claim their tithe and offering on their tax returns. I just think that says so much more about us then it does about America, the courts, or the free exercise of religion. We should ask ourselves where we are as Christians when we no longer believe that God can provide for our charities and keep our church doors open. As an institution we should be questioning our worth when the financial support of our members is dependent on the government benefits they receive instead of the blessings of a covenant with God.

Those who react like Chicken Little in the face of changing social mores on the question of same-sex marriage are wrong on both counts. As a constitutional matter, there is very little effect on religion as a result of this decision, and no right to a charitable tax exemption or government grants. As a spiritual matter, there is no theology of the tax exemption. What we do have is a commission to introduce the world to a Savior who longs for a relationship with each of us. Maybe we should focus on that and growing our measure of faith instead.

[1] Unless, of course, that church holds itself out to the public as a place where anyone can come and conduct a wedding.

[2] The prohibition on candidate advocacy is the Johnson Amendment passed in 1954. Liberty Magazine recently held an online roundtable on the constitutionality of the amendment. For more on the removal of tax exempt status because of discrimination see this discussion of the Bob Jones case.

[3] Regan v. Taxation with Representation of Wash.,461 U.S. 540, 544, 546 (1983).


This is a companion discussion topic for the original entry at http://spectrummagazine.org/node/6989
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This would be true if churches had to file form 1023 and become approved tax-exempt organizations. Some churches do this, and this fall under the same rules as a political group (501©(3)). That exemption is considered a subsidy. However, churches do not need to file a 1023, and those that do not cannot lose exempt status (501(a)) unless the IRS proves that they are not, in the main, religious organizations. This status is not a subsidy.

http://www.irs.gov/Charities-&-Non-Profits/Annual-Exempt-Organization-Return:-Who-Must-File

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Thanks for reading Kade! I think you raise something that I probably could’ve made more clear but I didn’t want to gum up the works of the piece so to speak. When I used the phrase religious institutions I didn’t mean churches themselves (which as you rightly point out are covered under 501(a)) but I was talking about religiously affiliated organizations, which are almost entirely covered under 501©(3). That was understandably confusing (because I used the word churches earlier in the paragraph) and so that’s my fault for not being more clear. I didn’t think to make the distinction because, as you rightly pointed out, many churches will fall under the concern I’m talking about anyway because they file under 501©(3) in order to engage in other charitable activities under the same umbrella that they usually cannot do if they rely solely on 501(a) for their tax exemption.

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It is the church institutions that have the most to lose, so to speak, over this issue. How do our universities and hospitals relate to their employees and students? If an SDA college were to deny admission to a transgender student, for instance, would they put in possible jeopardy the student loans and grants that finance many of the other students who attend their school? Thanks, Jason, for taking this conversation to the tax issue, and helping us to see our own self-interest more clearly.

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I believe it would be The Students who would be Receptive to a Transgender person.
I dont believe we would have to worry about them.
Our hospitals and Universities ALREADY have GL’s among their students and staff, and nobody protests.

It is the Old Men and the Old Women who operate our Universities who have “the problem” and are doing the protesting.
So if there is a “problem” it is Administration who caused it.
REMEMBER Andrews and the Homeless Issue.
It was ADMINISTRATION who caused it all to blow up!!
And only 3 or 4 at that, that gave every one else the same black eye, IN PRINT.
ALL the students were doing was trying to raise a few $$$s. BUT because Administration caused it to “blow up” out of proportion, the students DID raise a huge amount of money. MORE than they ever dreamed about.

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It think that probably what has generated so much “hatred”, if I may call it that, for “Churches” are these Independent Ministries that are NOT connected to any Denominational Organization.
You can look up a lot of these “ministries” and notice that many of these preachers live a very opulent life-style. Huge Estates [not just homes], expensive cars, some their own jets. It is BOTH White and Black preachers living the Large Life Style behind their “Church”.

And then we see what has happened to the Crystal Cathedral in my lifetime. I remember when he called for people to sponsor a chair. When it was built, and began broadcasting. He dies, there is a family squabble, there is a crashing of the Empire. All those who contributed see their money for Ministry lost.
It is true, the Catholics were able to purchase it and are using it, and it didnt become a “party palace”. But that can happen with other Independent Ministries. And has happened.

I can appreciate WHY there is so much “anger”.

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What are the legal possibilities for church-operated colleges and universities if they discriminate on same-sex married couples or same-sex dating? Will the government funding not be allowed if there is discrimination?

I believe that is correct, Elaine. Why should all US citizens subsidize, through their taxes, an institution that discriminates against some of them? And the funny thing is, many of our hospitals hire non-Adventist employees, who don’t keep the Sabbath and likely smoke and drink when they are off-duty, so if they don’t discriminate against them, how can they discriminate against LGBTI employees - or students?

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It is telling that these institutions that would discriminate against the LGBT community are more worried about losing money than the act of discrimination itself.

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I believe the question as you posit it in regards to the theoretical transgendered student would depend on what protections that individual would have as a federally protected class. I’m not sure this is a good apples to apples comparison.

Federal law prohibits discrimination based on marital status, but does little to protect the LGBT community from discrimination on the basis of sexual orientation and/or identity alone.

Good question though, I’m sure someone in these organizations is losing some sleep over it if they’re planning on discriminating against married same sex couples.

It may be interesting, but not the first time that the church has been made to obey the law against discrimination. It is hoped that they learned the costly example in the Merikay Silver case.

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Since so much missionary/social work is done through the religious auxiliary organizations to lose the 501 status would produce a disaster in meeting humanitarian needs. The US is basically the economic engine for missionary work at home and abroad. Due to decades of tax exemption for the fact of meeting social needs the structure is so integrated that to lose the tax exempt will be a full throttle disaster in the humanitarian work of religious organizations that have historical views on same sex activity. Mr. Jason is naive to think that it will be of no real consequence except to impact a materialistic peoples.

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Thanks for reading kjames. To be honest, I don’t know what you mean by “no real consequence except to impact a materialistic peoples.” Obviously there will be a monetary impact, but we should all admit that the impact will be strictly monetary. How is the tax exemption so integrated that it will have an impact beyond the fact that religious organizations will have to pay money in taxes that they did not have to pay before? I have never heard of a humanitarian organization whose aid was refused because they were not a tax exempt organization. Am I wrong about that? So, if the issue for the organization is primarily that of aid (which they will be able to continue giving), and the primary effect of the loss of the exemption is economic (which it is), then my piece is arguing that this then should become a matter of faith for these organizations. I would assume that religious organizations who now have a new expense could rely on God to make up the economic difference. But you’re probably right - having faith in God to provide for the humanitarian work that He called us to do is so naive.

God bless,

Jason

I think it simplistic, Jason. Aid is faucilitated by money and to have that cut as drastically as it could be would be to curtail their expression of faith. Certainly God can and does supply, but why should churches be penalized for their doctrinal belief? It’s a reverse discrimination as harmful to churches as homosexuals say they have been harmed. As it is the protected right of same sex is making religious rights also protected to be the step child in rights. Their is more than tax exempt or not.

I agree there has been great abuses under the exempt status, but to be penalized due to ones belief is also an abuse. This is more than monetary.

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OK this is my last comment because you clearly want me to talk about something my piece is not designed to address.

  1. You’re not being penalized for your doctrinal belief. The church would be penalized for discrimination.

  2. Reverse discrimination is a stupid and nonsensical term. You can’t argue that a penalty for your discrimination is discrimination. It’s a logical non-starter.

  3. Finally, I notice you really didn’t disagree with anything I said. If it is true, as you said, that “God can and does supply,” I don’t think anything else should matter.

Thanks again for reading,

Jason

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Charities need to be transparent by revealing their administrative costs and the amount given to the actual needs. Many so-called tax exempt charities use nearly all their donations on excessive administrators. And donors can deduct charitable donations from their taxes, also.

All requests for tax exemption should reveal this or be denied the exemption. Most churches comply but not many other charitable organizations. Recall the scandal a few years ago when the Red Cross was using most of the funds received for administrators?

Transparency should be fundamental and if not no exemption. Agreed.

Yes, I do disagree with what you said, Jason, but I can see it will be a waste of our time to debate it here.

Who would be the ones responsible for witholding all the amazing work of religiously affilitated non-profits? The ones that believed it was more important to marginalize GLBT people than to help the rest of the marginalized world.

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Jason, thank you for this insightful article. I’ve often wondered how long the tax exemption would be available for religious organizations (and parsonage allowance, for that matter, but that’s another topic). What I’m wondering is this: wouldn’t it be prudent for denominations such as the Adventist Church to start weaning themselves off of the tax exemption provisions now rather than waiting for some court ruling or other governmental decision? I can see where organizations without much in the way of property holdings would face a challenge in the way of reduced giving, but what seems even more impactful would be church organizations having to start paying property taxes along with the potential for reduced giving. Any thoughts on that? Thanks