Should Churches Reject Tax Exemption, As Huckabee Suggests?
Such a move might trade one set of potential problems for another.

Mike Huckabee raised an intriguing, provocative question on Monday while addressing pastors ahead of the Southern Baptist Convention annual meeting in Houston: Should churches reject their tax-exempt status as a way to break free of government oversight and restriction?

According to the Associated Baptist Press, the former Arkansas governor and presidential candidate said the unfolding Internal Revenue Service scandal should give pastors and church leaders pause:

"The recent revelations that the Internal Revenue Service has been targeting people of faith–people who are conservative, people who are pro-Israel–and have been picking out the parts of belief and speech and faith that government seems to approve and that which it doesn't approve has brought up a very important reality that I think, sooner or later, as believers, we need to confront," said Huckabee, host of a top-rated Fox News Channel weekend program.
"You may not clap real loud for this, but at least hear me out and think about it and pray about it," he said. "I think we need to recognize that it may be time to quit worrying so much about the tax code and start thinking more about the truth of the living God, and if it means that we give up tax-exempt status and tax deductions for charitable contributions, I choose freedom more than I choose a deduction that the government gives me permission to say what God wants me to say."
Huckabee said it may be time for churches to say: "Keep your deductions. Keep the exemptions. We stand more faithful with what God would have us to say, and we choose our freedom more than our financial benefit."

The Huffington Post's Politics section picked up on the story, and included a tweet made Tuesday by Huckabee reiterating his position.

IRS enforcement of its rules governing the tax exemption of churches, especially with respect to political speech, has been inconsistent, at best, during the past several years. Revocations have been few and far between, the most public case coming in the early 1990s, when a New York church was stripped of its exemption after paying for an ad opposing then-presidential candidate Bill Clinton.

More recently, the Alliance Defending Freedom's Pulpit Freedom Sunday has challenged IRS rules regarding churches and political speech, but no IRS action has emerged. That inaction, in part, prompted the Freedom From Religion Foundation earlier this year to file a lawsuit against the IRS, demanding the agency enforce its rules.

Meanwhile, the IRS halted audits of churches in 2009, when a federal court ruled the agency "wasn't following its own regulations," according to ChristianityToday.com, a sister site to ManagingYourChurch.com. A review of those regulations remains ongoing.

Regarding Huckabee's recommendation to church pastors and leaders, church law expert Richard Hammar says the potential negative consequences "must be carefully considered by any church considering revoking its exempt status." Those consequences, noted in Hammar's 2013 Church & Clergy Tax Guide, include the following:

  • The church's net income would be subject to federal income taxation.
  • The church's net income would be subject to state income taxation (except in the few states not having an income tax).
  • Donors no longer could deduct charitable contributions they make to the church.
  • The church would be ineligible to establish or maintain 403(b) tax-sheltered annuities.
  • The church could lose its property tax exemption under state law.
  • The church could lose its sales tax exemption under state law.
  • The church could lose its exemption from unemployment tax under state and federal law.
  • The church's status under local zoning law may be affected.
  • The church could lose its preferential mailing rates.
  • The church could lose its exemption from registration of securities under state law.
  • Nondiscrimination rules pertaining to various fringe benefits (including an employer's payment of medical insurance premiums) would apply.
  • In some cases a minister's housing allowance may be affected.
  • In some cases the exempt status of ministers who opted out of Social Security may be affected.
  • The significant protections available to a church under the Church Audit Procedures Act would not apply.
  • The exemption of the church under the state charitable solicitation law may be affected.
  • The exemption of the church from the ban on religious discrimination under various federal and state employment discrimination laws may be affected.
  • The exemption of the church from the public accomodation provisions of the Americans with Disabilities Act may be affected.

Our colleague Paul Pastor is troubled by the tax-exempt status that U.S. churches receive–but not for the same reasons as Mike Huckabee. Read his thoughts on our sister site Out of Ur.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations

Comments

Displaying 1–6 of 6 comments

David Adams

June 30, 2013  7:36pm

Can you really imagine the early church having this conversation? Apostle Paul, "Hmmm, how about those available Roman tax deductions? Good thing we have those, otherwise we would not be able to support God's work!" If you seriously look over the list of advantages, one by one, do we really think God will be hampered to do his work without them? I think we have convinced ourselves that these things are essential to God's work. I strongly disagree! We need more faith and reliance on Him and less dependence on the kingdom of this world. My two cents.

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Anonymous

June 18, 2013  2:02pm

I don't honestly think this proposal is worthy of serious discussion unless churches and denonminations are willing to come together, merge and consolidate under the banner of building the kingdom of God instead of their own brand.

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Rick Krietemeyer

June 18, 2013  1:59pm

Why can't we continue to enjoy the privileges and freedoms we've always enjoyed? Why would we place a hardship and a disadvantage on our people and our churches. The church can keep its tax exemption as long it remains apolitical. I do not want to get involved in partisan politics. I can still speak out on the moral issues of the day. The disadvantages of giving up tax exemption far outweigh the advantages. This would be financial genocide and suicide to many of our churches that are struggling to survive. All over, I'm finding contributions are down and churches are attempting to meet expenses that continue to accelerate. We all recognize God is our source but let's be practical, God works through people. If people are asked to give more they don't always respond to our requests for needed additional income. Many of our parishioner's budgets are stretched. I see in the future there will have to be more mergers and consolidations for the church to thrive.

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Gene Pike

June 18, 2013  1:09pm

According to IRS own documents churches are not required to file for 501 (3) c status. They are automatically exempt. Why are churches asking for an exemption from taxation when they are already exempt? Now that most churches have file and got permission to be exempt, they have given the IRS permission to govern them. Our founding fathers had no intention of the government interfering with the churches operations, nor to control what ministers said from the pulpit. In fact churches greatly influence the outcome of elections up until the 501 (3)c status was stressed as a government approval that the organization was a church. Since then churches have signed up so they could have a government document in their hands that said the government recognize you as a church. This was a big mistake in my opinion.

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Steve Skeete

June 18, 2013  12:01pm

Seventeen possible consequences are listed in regard to a church in the USA revoking its tax exempt status. All of them carry serious social and financial costs to which any church considering such action would have to give careful deliberation and consideration. However, the questions I would ask in relation to any such decision would be: (1) would giving up tax exemption make the church spiritually stronger and more capable of fulfilling its mandate - to 'go into all the world and make disciples'? (2) Would it make believers more aware of their responsibility to be 'salt and light' to their communities? (3) Would it help believers to become 'cheerful givers' to those in need. (4) Would it curb the excesses of some ministers and would we see less 'conspicuous consumption' among church leaders? (5) Would more church funds be directed to 'ministering' and less to entertainment and peripheral activities? (6) Would it cause the church to be more concerned about the dissemination of biblical truth and reaching the lost, than about establishing and maintaining grand, lavish, cavernous edifices, and monuments to human pride? If the answer to all of the is yes, then every Church should give up its tax exempt status immediately.

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Britt McCrimmon

June 13, 2013  10:54am

I can see the pros and cons. But when you listed the cons it seems like it would really change how the church operates in the US. If it is God's will so be it. I would advise church leaders to seriously pray about it. Doing so would really reform the church and weed out the converts from those who just go to church. Tough decision.

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