Recently, the Trump administration has indicated the desire to do away with the “Johnson Amendment,” a law enacted in 1954 as part of the Internal Revenue code that prohibits tax-exempt organizations from engaging in strictly political activities. These activities include contributing to campaign funds or publicly taking a position for or against a candidate or piece of legislation.
Opponents of repealing the Johnson Amendment argue that since nonprofits are tax-exempt, they should not participate in political debates. Essentially, they argue that repealing the Johnson Amendment would allow nonprofits, particularly churches (which seem to be the prime target of civil liberties groups), to endorse candidates and positions at taxpayers' expense. Thus, such a repeal would violate the separation of church and state.
But what about the tax-exempt status of churches in general? In recent years, the debate over the 200-year-old tax-exempt status of churches has lifted its ugly head. Opponents of continuing the tax-exempt status for churches argue that with all the money collected by churches and the fact that they occupy valuable real estate in many high-cost cities, it is only fair they pay taxes, including federal income taxes and state/local property taxes.
There are many reasons they should remain tax-exempt. First, defining the “profit” of a nonprofit church would be difficult. The IRS already has in place exceptions where nonprofits can be taxed, such as if an organization rents out space for an event not related to its purpose or earns income in any other non-related activities.
However, because churches are not selling a “consumer good” per se, it would be nearly impossible to tax them as a regular for-profit business. For the IRS to determine what assets and income of a church would be taxed would involve excessive meddling in church affairs, which would likely be unconstitutional.
Salaries earned by church employees are already taxed at the individual income tax level, and revenues spent on operations and fulfilling their mission would be considered expenses in the for-profit business world. While there has been some media spotlight on “mega churches” that pay their pastors and top-level employees exorbitant salaries, the amount of money spent on salaries by a nonprofit should be debated by a church’s own governing board and its membership, not through the government.
Second, churches provide goods and services to communities that would otherwise be neglected or inefficiently and expensively provided through government. Thus, donations should be used for those goods and services, not to pay taxes. If donors knew some of their contributions were allocated to pay taxes instead of providing services, they may be less inclined to donate. Furthermore, these services vary greatly by church and by community, from building homes in underserved communities to providing food, clothing, educational scholarships and health care.
Despite media reports that focus on large, wealthier churches, most of them are not; indeed, some of them struggle to keep the doors open. Thus, they can ill afford to waste the money of their parishioners. Besides not having the luxury of providing goods and services with taxpayer dollars that flow endlessly, churches must carry out their missions through the tireless work of volunteers. This is a far cry from the bureaucrat sitting at the welfare office who receives a salary regardless of who he helps or how effective he is. Churches not only provide services more efficiently than government, church members often form relationships with the people they are helping, which gives the recipient a sense of purpose and dignity, something that government is unable to do.
Third, requiring churches to pay taxes would essentially give them free speech rights — something that many who support upholding the Johnson Amendment while hypocritically calling for the taxation of churches would hate. As taxpaying organizations, churches would be able to then support candidates’ campaigns and pastors could endorse candidates from the pulpit. While some parishioners might like the idea of their church’s involvement in politics, others may well be turned off by pastoral politics in a culture that is already saturated in partisanship.
Despite the increasing secularization of America, attempting to change a status that has been in place for over 200 years will be a losing battle and public relations campaign for legislators. Let’s leave America’s 350,000 religious organizations alone and let them do what they are called to do — being salt and light in a cynical world.
Pamela Villarreal is a senior fellow at the National Center for Policy Analysis. She wrote this for InsideSources.com.