Chuck Grassley, the ranking member of the Senate Finance Committee, has been engaged in a probe of megachurch finances. See this earlier posting on ataxingmatter, Grassley Investigates Some Churches' Activities, Nov. 2007. As I noted there, Grassley's investigation of six mega-ministries is questioning whether these ministries are abiding by the tax laws governing religious tax-exempt organizations. There are certainly a number of anecdotes that suggest that the ministries may be taking advantage of people in order to finance a luxurious lifestyle for the "ministers."
Apparently, some of these ministries are cooperating with the probe and others are not, according to a July 7 press release about the investigation from the Grassley office (available here on the Senator's website). The release notes that Joyce Meyer and World Healing Center ministries provided "extensive answers" to the detailed questions asked in the November 2007 letters (and March 2008 followup). In contrast, Randy and Paula White of the Without Walls church provided "incomplete" answers, and Kenneth and Gloria Copeland of Kenneth Copeland ministries provided "unresponsive" answers and have stated they will not even respond to a subpoena for their records. World Changers Churches international have declined to answer at all.
Grassley's release also lists kinds of abuses that may be committed by churches, as follows:
- abuse of church status (claims to church status solely for tax exemption, for example)
- inurement and private benefit (excess benefits to a founder or leader of the organization, for example)
- entity taxes (failure to pay taxes on associated entities that are engaged in profit-making activities unrelated to the church purpose)
- employment taxes and parsonage allowances (failure to pay employment taxes, or identifying people as "ministers" in order to exempt their housing, or claiming a parsonage allowance for multiple residences for the same minister)
The release also indicates some of the preliminary staff questions as they begin to sort through what materials have been provided:
- there are more than 100 related entities to the six churches, but the committee has not received sufficient information to determine whether these related entities are complying with applicable tax rules;
- apparently the churches under investigation share financial and legal advisors, and there is some indication that an attorney who raised concerns about the level of compensation for ministers was fired for doing so;
- churches may be labelling employees as ministers to take advantage of the tax benefits accruing to ministers;
- some of the churches have confidentiality agreements with employees, making it hard for any oversight of the tax rules;
These are important issues, and Grassley's attempt to hold organizations accountable is a reasonable one. Churches should not be above the law, any more than Presidents should be.
If I were writing the tax rules from scratch, I'd make two changes (at least). First, I'd eliminate the exclusion for a housing allowance for ministers. There are simply too many problems, from valuation issues to the question of what is a minister or what is a religion. It invites tax sheltering activity like labelling yourself a church and then claiming an exemption for yourself, or establishing a church and labelling all employees ministers and claiming an exemption for all. Second, I'd tax all businesses run by tax-exempt organizations. The lack of accountability is again an invitation to tax sheltering activity that isn't sufficiently connected to the tax exempt purpose, and the determination of whether the activity serves the exempt purpose is fraught with difficulty. Any money-making business should pay its share of taxes, because it isn't fair to permit such businesses to compete with regular businesses with the tax subsidy. If a mega-ministry wants to run a shopping center and entertainment complex for the benefit of its members, that's fine. Let it. But let it abide by the same laws that any other business would abide by, including the tax laws and nondiscrimination laws.
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