September 27, 2008
And More Politics
The Chicago Tribune reports on questions raised after the head of an Indianapolis nonprofit appeared in an ad for Mitch Daniels, Indiana Governor and a candidate for re-election. In the ad, Sharon Pierce, the president and CEO of the Villages, an organization that provides child and family services throughout Indiana, speaks about the incumbent governor's support for child protection. During Gov. Daniels' administration, the Villages received a two-year, $12 million contract.
The news article does not specifically describe the content of the ad, but it sounds like Pierce's connection with the Villages was used in the ad. The article does say that nothing in the ad clearly indicates that Pierce is speaking in her individual capacity, but it also sounds like Pierce does not say that she's speaking on behalf of the organization. Although Pierce's participation may by ok under a strict reading of the rules against participation by charities in political campaigns, the decision to appear in the ad seems ill-advised. The resulting bad publicity may hurt her organization, even if the IRS is satisfied that the ad did not violate the 501(c)(3) rules.
Policitics and Charities, Again
The L.A. Times reports that St. Hope Academy, based in Sacramento, CA, will lose its federal funding effective immediately. Questions about fiscal and operational improprieties in the Academy-run Neighborhood Corps volunteer program led to an investigation. One of the allegations is that volunteers were used to campaign for school board members. Although the investigation has not been completed, the Corp. for National and Community Service, which oversees Americorps and is involved in the investigation, concluded that suspending funding immediately was necessary. St. Hope Academy is run by Kevin Johnson, a Sacramento Mayoral candidate. The Johnson campaign suspects political motives in the decision to suspend funding immediately, before the completion of the investigation.
House Passes Charitable Tax Provisions
The Chronicle on Philanthropy reports that the House of Representatives on Friday passed the tax bill that had already cleared the Senate. The tax bill extends some of the charity tax breaks due to expire. Because the House bill is different from the Senate bill, the ultimate fate of the bill remains uncertain.
Church Leaders (a few) Take on Political Speech
In the lead-up to Sunday's event, the New York Times published an editorial today suggesting that the 33 ministers who have pledged to violate Section 501(c)(3) by making political statements from the pulpit are wrong. A group of other clergy, more concerned with being spiritual leaders than being political leaders, have joined in opposition to speaking politics from the pulpit. As the editorial points out, an attempt "to dash the pillar of church-state separation" should be a concern to taxpayers of any faith.
And of course, any organization willing to give up its tax-exempt status can say whatever it wants about politics.
See the blog posted on Thursday, Sept. 25, for more information about the Sunday protest. And read the New York Times Sept. 26 report on the planned event. For earlier bolg coverage of this issue, see here and here.
September 26, 2008
What Some Nonprofits Are Doing To Stave Off Financial Disaster
The Chronicle of Philanthropy has an interesting story describing what some nonprofits are doing in an effort to prevent the financial collaspe from damaging or destroying their charitable operations:
The downturn has already caused some charities to change their fund-raising approach. Bruce Flessner, a Minneapolis fund-raising consultant who works with many of the country's largest charities, said that one of his clients recently decided to delay a big event to announce a new capital campaign. He declined to name the organization. "They wanted to change the [event's] tone and flavor to be less flamboyant," he said. "A couple of their best donors are getting kicked" by troubles in the financial industry. Charities in New York City, especially those that receive a lot of support from financial companies and their employees, are the most directly affected by the turbulence of the past few weeks. Gordon J. Campbell, president of United Way of New York City, said he is unsure exactly how much his organization will lose. While the United Way has received big gifts from Merrill Lynch in the past, he noted, it also benefits from long-term support from Bank of America, now in the process of buying Merrill Lynch. To sort out its options, the New York United Way plans to hold a "regional summit" with other local charities to discuss problems such as government cuts resulting from shrinking tax revenue and possible solutions, including mergers and efforts to diversify sources of revenue.
Jones on the Private Benefit Doctrine and HMO Membership Requirements
Today, at the University of Iowa College of Law's Faculty Speaker's Forum, yours truly will discuss whether the private benefit doctrine precludes tax exemption for nonprofit contract model HMOs that arrange for health care services for their members. Earlier this year, the 9th Circuit Court of Appeals ruled that the membership structure utilized by most, if not all HMO's prevents nonprofit HMOs from attaining or retaining tax exempt status. The gist of my argument (set forth in my petition in support of VSP's cert petition (Download jones_amicus_brief_5.DOC) (Download vsp_cert.Petition.pdf ) is this:
This case involves a matter of extreme importance to the entire nonprofit health maintenance organization (HMO) industry. The court below held, based upon an unexplained and misunderstood application of the private benefit doctrine, that an HMO operating under a membership structure primarily served the private benefit of its subscribers and, therefore, is not entitled to tax exemption under section 501(c)(4) of the Code. It is true that the private benefit doctrine is implicated when a nonprofit organization confers private benefit on non-charitable recipients, such as the members of the HMO. The private benefit doctrine, however, does not preclude an organization from economic dealings with a non-charitable class of persons when doing so is necessary to accomplish its charitable or social-welfare purpose. For example, nonprofit hospitals routinely provide “profits” in the form of compensation to physicians and other service providers that they employ to achieve their charitable healthcare goals. Likewise, nonprofit HMOs cannot possibly achieve their charitable purpose without a membership form of organization.
Nonprofit Leadership and Compensation Gender Gap Narrows According to Guidestar Report
A new Guidestar Report concludes that women are continuing to to make inroads against the nonprofit "glass ceiling," according to a report in Market Watch:
Women led a greater proportion of nonprofits in fiscal year 2006 than FY 2005, the "2008 GuideStar Nonprofit Compensation Report" shows. In FY 2006, women headed 55 percent of organizations with budgets of $1 million or less, a 5 percent increase over FY 2005. The proportion of women who led nonprofits with budgets greater than $1 million grew 2 percent, from 34 percent in FY 2005 to 36 percent in FY 2006. As has been the case in the past few years, in 2006 female CEOs at larger organizations made slow but steady progress at closing the gender gap when it comes to compensation. Incumbent female CEOs at organizations of most sizes had a slightly higher median compensation increase from 2005 to 2006 than males. Despite these gains, women's compensation continued to lag behind men's in FY 2006.
September 25, 2008
Campaign Intervention Showdown on the Horizon
The Los Angeles Times reports today about the plans of many religious leaders to intentionally violate the prohibition against campaign intervention in an effort to force a test case:
Setting the stage for a collision of religion and politics, Christian ministers from California and 21 other states will use their pulpits Sunday to deliver political sermons or endorse presidential candidates -- defying a federal ban on campaigning by nonprofit groups. The pastors' advocacy could violate the Internal Revenue Service's rules against political speech with the purpose of triggering IRS investigations. That would allow their patron, the conservative legal group Alliance Defense Fund, to challenge the IRS' rules, a risky strategy that one defense fund attorney acknowledges could cost the churches their tax-exempt status. Congress made it illegal in 1954 for tax-exempt groups to publicly support or oppose political candidates. "I'm going to talk about the un-biblical stands that Barack Obama takes. Nobody who follows the Bible can vote for him," said the Rev. Wiley S. Drake of First Southern Baptist Church of Buena Park. "We may not be politically correct, but we are going to be biblically correct. We are going to vote for those who follow the Bible."
Houses of worship that flagrantly violate federal tax law by taking part in a Religious Right-led effort to politicize America’s pulpits this Sunday will be promptly reported to the Internal Revenue Service, says Americans United for Separation of Church and State. The Alliance Defense Fund (ADF), a Religious Right legal group based in Arizona, is urging pastors to endorse or oppose candidates from the pulpit on Sept. 28, even though IRS regulations forbid tax-exempt groups from intervening in political campaigns. Reportedly, about 30 churches will participate. “Taking part in this reckless stunt is a one-way ticket to loss of tax exemption,” said the Rev. Barry W. Lynn, executive director of Americans United. “We’ll be watching, and pastors who violate the law can expect their churches to be reported to the IRS the first thing Monday morning.”
Lloyd Mayer on Religion and Politics
Lloyd Mayer recently posted his article, The Pulpit, Politics, RFRA, and Institutional Free Exercise. Here is the interesting abstract:
More than fifty years ago, Congress enacted with little deliberation a prohibition against political campaign intervention for all charities, including churches and other houses of worship. For many years the prohibition lay mostly dormant, invoked only rarely by the government and never against a house of worship for statements made from the pulpit. That period of relative peace is now over, however, as the government has begun a systematic enforcement effort and both religious liberty groups and houses of worship have reacted with increasing defiance. Yet predicating the ultimate result of this conflict is complicated by the shifting sands of free exercise of religion law, including still unsettled issues arising out of the Supreme Court's landmark Employment Division v. Smith decision applying the First Amendment and Congress' enactment of the Religious Freedom Restoration Act (RFRA) in response.
This article navigates that legal landscape, identifying and attempting to answer the open questions that courts may need to resolve to address this almost inevitable conflict. Those questions include the scope of the various exceptions to the rule announced in Smith and what exactly it is that the Religious Freedom Restoration Act restored. This exploration reveals that the First Amendment as currently interpreted by the federal courts is unlikely to prevent the government from applying the prohibition to sermons, but that churches and other houses of worship have a strong argument that RFRA does block the prohibition in the unique context of in-person, in-service sermons. This exploration also uncovers another possible line of argument for houses of worship - that, the First Amendment and the RFRA protect "institutional free exercise" as well as individual free exercise. Building on the existing but still somewhat incoherent church autonomy doctrine, an institutional free exercise approach would protect all religious communications between the leaders of a house of worship and its members from the reach of the prohibition under both the First Amendment and RFRA.
September 24, 2008
Point-Counterpoint: Erik Stanley and Barry Lynn Debate Church Tax Exemption
Yesterday's Los Angeles Times contained an interesting point-counterpoint debate regarding the justification for church tax exemption and the extent to which government may exercise oversight over that grant. Nobody called anybody an "ignorant slut" (as used to be the case on old Saturday Night Live episodes), but both sides made interesting points:
Erik Stanley: In its 1970 opinion in Walz vs. Tax Commission of the City of New York, the high court stated that a tax exemption for churches "creates only a minimal and remote involvement between church and state and far less than taxation of churches. [An exemption] restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other." The Supreme Court also said that "the power to tax involves the power to destroy." Taxing churches breaks down the healthy separation of church and state and leads to the destruction of the free exercise of religion.
Barry Lynn: When any group accepts a tax exemption, it agrees to play by certain rules and accept a certain degree of oversight. Federal law actually makes it more difficult for the IRS to audit churches than other charities. In addition to this modest "no electioneering" rule, for example, tax-exempt groups cannot collect money for a "charitable" purpose and then use it all for the personal benefit of the director and her family (or the pastor and his family). Do you seriously believe that the IRS and possibly even criminal investigative bodies have no right to try to scrutinize possible misbehavior?
Interesting Case Study on Private Benefit and Quid Pro Quo Charitable Contributions
There is an interesting article in today's Wall Street Journal that provides useful context for a discussion of several tax exempt doctrines (including the private benefit doctrine, private inurement and the meaning of charitable contributions for purposes of IRC 170). According to the article, many large corporate retailers, like CVS Caremark Corp. (a national drug store retailer) hold "charity" events through their charitable organizations. Those events are typically attended by donors who are also wholesalers hoping that the retailers will purchase their goods for retail sale:
Access to company decisionmakers is a hallmark of the CVS Caremark Charity Classic, the drugstore chain's annual golf tournament, which this year featured golf pros Nick Faldo, Rocco Mediate and Davis Love III vying for $1.55 million in prize money. Held each year at the Rhode Island Country Club, the four-day event attracts scores of donors, many of them CVS vendors. Companies that underwrite the event are granted time with top CVS officials, including department heads and executives who make important purchasing decisions. Generous contributors are rewarded with rounds of golf at the tournament with CVS employees. Top sponsors get fairway-view pavilions and private visits by company officials. The highlight of the event's gala dinner is an auction where this year, KKM bought one of the seven vacations for golf, game fishing, riding or yachting. Each auction lot included high-level CVS executives as guests; one promised a day of golf with the company's CEO. "I take advantage of this Classic, asking the different manufacturers I work for if they want to participate," said KKM's president, John Malmborg. "They all chip in and we work to get to a high level of participation and have access to CVS executives on an informal basis. It really is helpful."
The article goes on to explain that only a relatively small percentage of the "donations" go to charity in the case of CVS's annual event. Other retailers that have set up charitable organizations also rely on donor's implicit hope of more business but which direct more on the scale of 60% to charitable operations. Do the benefits derived by the executives constitute private inurement? Does the fact that the charitable events serve as venue to attract new vendors mean that the charitable organizations are operating for private benefit? And do the donors' expectation of a quid pro quo disqualify the donations from being classified as charitable contributions? And assuming the organizations are private foundations, to what extent are the private foundation excise taxes implicated by the cozy business relationships fostered by the charitable events? Regardless, this is a good news article to stimulate classroom discussion of a host of issues pertaining to the grant and retention of tax exemption.
Jon "Barry" Forman on Letting the Sun Shine on Nonprofit Executive Comp
Jon Barry Forman has published an op-ed piece entitled IRS lets the sun shine on tax-exempt organizations, The Journal Record, September 22, 2008, at 6A. Here is an excerpt:
Unlike tax returns filed by individuals, the tax returns filed by these 500,000 tax-exempt organizations are open to public inspection. That way, we get to see what benefits these organizations provide in exchange for their privileged tax-exempt status. Form 990 has not been overhauled since 1979, and, according to the IRS, the old form “no longer adequately served the Service’s tax compliance interests or met the transparency and accountability needs of the states, the public, and communities served by the organizations.” The new Form 990 requires tax-exempt organizations to provide more information about their governance, executive compensation, and relationships with insiders and other organizations.
Clinton Global Initiative Conference Opens in New York
The Clinton Global Initiative Annual Conference opened in New York yesterday. According to a New York Times article, (which quotes Professor Harvey Dale) the attendees are increasingly concerned with the Wall Street crisis:
Preparing to open his annual philanthropy gathering here against the backdrop of historic upheaval on Wall Street, former president Bill Clinton expressed concern Monday that the economic downturn could undermine major charitable investments around the world just when help is particularly needed. Clinton called on businesses, foundations and other benefactors to increase their giving to combat climate change, alleviate poverty and expand access to education and health care in the developing world, saying that philanthropy "is even more important over the next two or three years than it would otherwise have been."
The 2008 CGI Annual Conference program is available here. Here is the description of one special session entitled, "Overcoming Poverty in Challenging Environments:"
Despite historic gains in poverty reduction in countries such as India and China, endemic poverty persists as a central challenge in much of the developing world. In many impoverished nations, efforts to stimulate development and to fight poverty are undermined by conflict, disease, corruption, and weak institutions. Overcoming challenges in these difficult environments requires innovative approaches to strengthen governance, empower local communities, and ignite private-sector growth. This special session will feature world leaders who have developed and implemented innovative approaches to poverty alleviation under exceptional circumstances. The discussion will focus on critical areas for engagement and action by CGI members in the midst of today’s most challenging economic and political circumstances.
Tony Blair, Former Prime Minister, United Kingdom of Great Britain and Northern Ireland
Helene D. Gayle, President and CEO, CARE USA
His Excellency Ernest Bai Koroma, President, Republic of Sierra Leone
Surin Pitsuwan, Secretary-General, ASEAN
His Excellency René Préval, President, Republic of Haiti
September 23, 2008
Hillary Clinton Does Not Equal Sarah Palin for 501(c)(3) Campaign Intervention Purposes
An interesting post over on MSNBC describes how a tax exempt Conference of Presidents of Major Jewish Organizations "disinvited" Vice Presidential candidate Sarah Palin from yesterday's anti-Iranian UN protest for fear that the organization would be accused of improper campaign intervention. The organizers, a prominent member of whom is a Palin campaign advisor according to MSNBC, had also invited Senator Hillary Clinton a long time ago (perhaps based upon their own prediction of the primary races). "Unnamed sources" say Clinton backed out once she found out that Palin was scheduled to speak. Whatever. But this is a good "teaching point" for those of you teaching tax exempt organizations this semester. Why is Clinton not equal to Palin for 501(c)(3) purposes? The answer is somewhere in the black hole definition of "candidate:"
The term "candidate for public office" means an individual who offers himself, or is proposed by others, as a contestant for an elective public office, whether such office be national, State, or local. Activities which constitute participation or intervention in a political campaign on behalf of or in opposition to a candidate include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.
Treas. Reg. 1.501(c)(3)-1(c)(3)(iii). Isn't Clinton, like all democrats and republicans not nominated this year, already running for office next time? Let's face it, the whole lot of them are perpetual candidates! Consider the Joint Committee's definition of a "candidate:"
Clear standards do not exist for determining precisely at what point an individual becomes [or is no longer] a candidate for purposes of the rule. On the one hand, once an individual declares his candidacy for a particular office, his status as candidate is clear. On the other hand, the fact that an individual is a prominent political figure does not automatically make him [or her] a candidate, even if there is speculation regarding his possible future candidacy for particular offices.
Joint Committee on Taxation, Lobbying and Political Activities of Tax Exempt Organizations, 54 (1987). I think the same reasoning might apply to hold that just because an individual has conceded a race for political office does not make her a "non-candidate." According to the blog, Hot Air, Democrats used the the "improper campaign" alarm to cause the exempt organization to pull the rug out from under the pitt bull in lipstick. I've no doubt this is true, as politics is a rough business and too often the Democrats have played nicey-nice (thas' just my own opinion, mind you!). On the other hand, Commentary's Blog claims Palin was disinvited along with all other politicians because Biden turned down an opportunity to appear as well.
Be that as it may. In any event, would Palin's presence -- unbalanced by the presence of a democrat of her stature [or, dare I say, lack thereof] necessarily mean that the organizers are engaging in improper campaign intervention? I don't think Palin's presence at the event would have constituted intervention if only a few well placed disclaimers were used and posted around the event (or on the Web page advertising the rally), particularly if an invitation had been made to Biden as well. Where are the aggressive tax exempt advisor-types? But then again, I am not so risk averse as other advisors to exempt organizations.
$9 Million Verdict in Split-Dollar Charitable Contribution Dispute
When charities have more than a charitable interest in their fundraising outcomes, it should come as no surprise when dissatisifed donors start treating charities as vendors rather than facilitators. Such is the case with the National Heritage Foundation, a Virginia charity that aggressively marketed split dollar life insurance policies as a vehicle for charitable giving. According to an article in the Chronicle of Philanthropy, a Texas jury has recommended $9 million in damages be paid by National Heritage Foundation for its part in a split dollar life insurance plan:
A Texas court is poised to rule on a lawsuit against the National Heritage Foundation, a Virginia charity that was one of the leading promoters of a controversial giving technique that was effectively abolished by a 1999 law. The lawsuit claims that the National Heritage Foundation misled a Texas couple who had donated to the organization through the questionable giving scheme, failing to carry out the couple’s financial plans or charitable intent. A 12-person jury issued a verdict last week following a nine-day trial, siding with the plaintiffs, Juan J. and Silvia Mancillas, and recommending the charity pay the couple $9-million in damages. Judge Abel C. Limas, who is not bound by the jury’s decision, is expected to decide the case in the coming weeks.
As it turns out, NHF is no stranger to controversy. It appears to be a family run community organization that, according to one critical article, exists to enrich its own founders by managing small private foundation like organizations. NHF issued a press release in response to the adverse jury verdict, stating:
National Heritage Foundation, Inc. was established in 1994. Since its inception, it has helped make numerous charitable projects a success. By establishing a subfoundation at the National Heritage Foundation, a donor can assist their favorite charity or local community need and take part in making a difference.
Between 1997 and 1999 National Heritage Foundation participated in a number of charitable split dollar plans. At that time, these plans were recognized and approved by the IRS, tax planners and tax attorneys alike. In a nutshell, under the plans, a donor could make a donation to a charity, and if the charity used the money to pay premiums on an insurance policy insuring the donor’s life, the charity could split the death benefits with the donor’s chosen beneficiary. In 1999 a law was passed that essentially prohibited the “split benefit” between the charity and the donor’s chosen beneficiary.
In 2005, NHF was sued by a Texas couple in connection with charitable split dollar plans. In 1997, the plaintiffs created Trusts that participated in the split dollar plans. When the law changed, their estate planning attorney, who was the Trustee of their trusts, transferred the ownership of the policies to NHF, in order to benefit a local order of nuns, the charity that the plaintiffs had designated as the cause they wished to support. Under the new law, a private person could no longer be a beneficiary on an insurance policy owned by a charity. Therefore, as owners of the policies, NHF first changed the beneficiary to NHF, and ultimately changed it to the order of nuns selected by the plaintiffs.
In their lawsuit, despite the fact that they had at their disposal the advice and counsel of their estate planning attorney, financial planners and CPA, the plaintiffs claimed they were unaware of the change in law and their Trustee’s transfer of the policies to NHF for the purpose of transferring the beneficiaries in order to eliminate the IRS issues. They further claimed that their donations were not donations, but were only payments made for their insurance premiums. However, from 1997 through 2003, the plaintiffs took charitable deductions on their tax returns and represented to the IRS that the donations were “unrestricted” contributions. Consistent with its charter, at all times, NHF’s primary focus and concern was for charity, and all actions taken by NHF were for that very purpose.
In a split 10-2 verdict, despite significant evidence to the contrary, the jury found in favor of the plaintiffs. NHF respectfully disagrees with the verdict and plans to appeal its findings. NHF is hopeful that the appellate court will address significant legal and factual issues raised in this case that will alter the outcome. While that appeal is pending, NHF remains committed to its core philosophy of supporting charitable endeavors on behalf of its many committed donors.
NPR Reports on Effects of Government Scrutiny on Donations to Muslim Charities
NPR reported last Friday on the effect of increased government scrutiny of muslim charities on donations to those charities. Here is the abstract:
Muslims around the world are observing the holy month of Ramadan, a time set aside by observant Muslims for fasting and prayer. Another important obligation tied to Ramadan is Zakat, the practice of offering of money to the needy. Imam Hassan Qazwini and attorney Arsalan Iftikhar discuss government scrutiny of charitable giving in a post-Sept. 11 world and the affect on donations.
September 22, 2008
Western Conference on Tax Exempt Organizations to Convene November 20
Wall Street Implosion Means Dire Straits for Charities
If charities catch a cold when Wall Street sneezes, what should they expect in the coming weeks? Wall Street has a very bad case of pneumonia and is essentially on life support as we speak. According to a WSJ article in today's paper, Charities are in for some seriously tough times:
The failure of Lehman Brothers Holdings Inc. and pain at other big firms threaten to cut into the corporate and individual donations that more than a million nonprofit organizations rely on for basic operations and charitable programs. Officials at charities are trying to devise creative ways to stand out. They are making urgent appeals through direct-mail and email campaigns and taking to the airwaves. Charities also are gearing up to tap their wealthy board members and other well-off supporters for extra cash. If they fail, charities may have to cut staff or seek loans. At Covenant House New York, the nation's largest adolescent-care agency, which serves homeless, runaway and at-risk youths, board members convened Thursday and discussed a possible "doomsday" scenario in case they lose upwards of 40% of their income, said Georgia Boothe, the nonprofit's associate executive director. The charity needs to raise about $3 million through direct mail in December, she said, adding, "We're worried." Direct-mail giving in July was off 15%, she said.
"There will be fewer dollars coming in the doors," he said. "There needs to be thought given to strategic alliances, partnerships, back office consolidation, mergers and acquisitions. In many ways, it's a variation on what's going on Wall Street." The collapse of corporate balance sheets, along with strained household budgets, could start cutting into the more-than-$300 billion national charitable-giving pie. U.S. charitable donations only grew by 1% adjusted for inflation in 2007, according to the Giving USA Foundation. That was before the worst of the housing correction and the current Wall Street crisis.
Brennen, Moran and Havard to Speak at Congressional Black Caucus Foundation Issues Forum on "Living in the Black: Barriers to Wealth Creation in the African American Community"
Congressman John Lewis has invited law professors David A. Brennen (AALS and University of Georgia), Beverly I. Moran (Vanderbilt University), and Cassandra Jones Havard (University of Baltimore) and university professor Jessica Gordon Nembhard (Howard University) to hold an issues forum this Friday, on September 26, 2008, on the topic "Living in the Black: Barriers to Wealth Creation in the African American Community." The forum will be a part of the annual legislative conference of the CBC Foundation.
Professor Brennen will address the topic of racial inequality in the tax exemption context. Professor Moran will discuss the topic of tax policy and its impact on wealth inequality among racial populations. Professor Havard will talk about the impact on effective wealth transfer mechanisms of the failure to properly regulate U.S. financial markets. And, finally, Professor Nembhard will discuss the topic "Alternative Asset Building in African American Communities: Wealth Accumulation through Cooperative Ownership."
For other CBC Foundation legislative conference events, go to http://www.alc2008.org/ and view the complete schedule of issues forums and brain trusts.
Do Tax Exempt Churches Cause Regressive Taxation in Poor Communities?
An interesting article in yesterday's New York Times discusses the effect of "too many" churches per square mile, particularly in poor communities whose revitalization efforts depend on attracting a tax paying business core community:
RESIDENTS here have long wished for a thriving downtown where they could shop and work — a business district that would also help shoulder their heavy school taxes. Instead, there are exactly one supermarket and one bank, zero drugstores and nary a 7-Eleven or Starbucks in sight. What Roosevelt has in abundance, however, is churches. By one unofficial count, 68 houses of worship have taken root in this small community, which is a bit over a mile in width and in length and has a population of about 16,000.
I've often wondered and, in fact, bemoaned the fact that the poorest communities suffer the same irony. Too many churches competing with too many liquor stores or cigarette billboards. I'm not a property or constitutional scholar guy but sometimes I wonder whether residents of poor and dying communities ought not to picket or protest whenever either new establishment adds to the great redundancy of such outlets in poor communities. I have even discussed with my own pastor why, in some instances there are four, five or six churches all within 300 yards of each other and all sorrouned by abject poverty. He was loathe, to say the least, to suggest agreement with the idea that there can ever be "too many churches." After all, the Bible says "where any two are gathered . . . Still, in nearly every poor community there are plenty of places to worship -- too many of which are so oblivous to the plight of the people right outside their doors that they have become unfortunately irrelevant to the community in which they sit. What is needed are places of production and other tax and job generating outlets, perhaps staffed by people who attend the fewer (but still sufficient number) of churches. But this, of course, is a taboo subject easily capable of distortion, as noted by the city leaders described in the article:
The issue is not religion but the effect of tax-exempt churches displacing property tax-paying businesses, thus shifting more of the property tax burden onto homeowners. Countywide, the percentage of tax-exempt property is 28 percent. For Roosevelt, the figure is 34 percent.
I would be remiss by ending this editorial without first pointing out that it is the proliferation of tax exempt properties in poor communities (where land is cheap, and getting cheaper as the result of that very proliferation) not necessarily the proliferation of tax exempt churches. But as the article points out, at least implicitly, the phenomenon seems especially inappropriate when it involves churches.