Struggling Cities Eye Taxes, Fees for Churches

Like countless other municipalities throughout the country, Fort Wayne, Indiana, is struggling to find ways to bridge the gap between declining tax revenue and the costs of maintaining infrastructure and services.

What makes Fort Wayne stand out is the city's mayor, Tom Henry. Henry is leading the charge for the Urban Mayor's Caucus of Indiana to tax nonprofit and church-affiliated ministries to help solve his region's revenue shortfall.

Nearly every town in America is feeling the strain of the economic crisis. As a result, while becoming a 501(c)3 is a relatively simple process, maintaining a completely tax-exempt status may become increasingly difficult for churches.

Salt Lake County officials in Utah recently considered a proposal to charge businesses, homeowners, organizations, and churches with a "police protection fee" to help cover the costs of a new Unified Police Department. In Ohio, the state's supreme court recently rejected an appeal to a ruling subjecting a denomination's administrative offices to property taxes.

As local governments desperately seek ways to cover budget deficits, the debate about taxing nonprofits and churches will only heat up, says Dan Busby, president of the Evangelical Council for Financial Accountability and an Editorial Advisor for Your Church.

"With federal, state, and local budgetary shortfalls in abundance, we should expect to see increasing pressure on churches and other charities to help bridge the funding gap," Busby says. "For example, a proposal was recently made and defeated in New Jersey to tax charities $100 per employee per year. Encroachment on property tax exemptions will likely be an area where government will become the most aggressive."

Busby's advice: "Churches and charities should be proactive in sharing the good they are accomplishing in the community."

Paula Hughes, a county council representative in Fort Wayne, recently made a similar case in response to Henry's effort. In a recent editorial for Fort Wayne's Journal Gazette, Hughes, who likely will try to unseat Henry in the 2011 mayoral primary, voiced her strong opposition to Henry's proposal.

"It is shortsighted and bad policy to think of taxing the entities that provide the services governments cannot and will not effectively provide," Hughes says. "These services aren't just nice for the community; they are basic and vital."

She continues: "As jobs have become scarce and many people who once felt secure in their employment and finances find themselves out of work, not for weeks, but for months, it is our area's nonprofits that have stepped up to help despite severe cuts in funding from their members, donors, and state and national governments."

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."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.


If you found this article helpful, subscribe to for access to more articles like this one.

Become a Church Law & Tax Member



Experience a whole new way to set compensation. Eliminate the guesswork – get access to detailed compensation reports in just minutes.

Essential Guide to Church Budgeting

Essential Guide to Church Budgeting Member access only

Good budgeting will help your church stay financially healthy.
Best Practices for Receiving Charitable Contributions

Best Practices for Receiving Charitable Contributions  Member access only

Practical help and clear understanding on issues surrounding charitable contributions.