Monday, March 15, 2010

Kansas to Repeal Tax Exemption for Churches?

Kansas House Bill 2549 would require churches and religious non-profit organizations such as Catholic Charities to pay the state’s 5.3 percent sales tax.  As you might guess, this has caused churches, particularly the Catholic Church, to go into hyperventiliation (see story here) with the Bishops of Kansas' four Catholic Dioceses warning that the provision will "seriously undermine the ability of religious groups to serve Kansas' most vulnerable citizens in these very difficult times."

So I have just a couple of observations.  First, this is a repeal of exemption for the sales tax, not for the state property tax.  We're not talking Armageddon, here.  Second, many states have no sales tax exemptions at all for charitable organizations; for example, California does not base its sales tax exemptions on the nature or character of the organization at all, but exempts only certain kinds of transactions. In other words, there is no blanket exemption for religious organizations.  I wonder if the Catholic Bishops of Kansas have talked to their brethren in California - or perhaps the California Catholic Church doesn't engage in poor relief because they don't have a sales tax exemption in that state? (I'm being facetious here, folks).  By the way, Georgia is considering repealing the sales tax exemption for nonprofit hospitals.  I guess they will whine about the impact on the poor, too.  Heaven forbid that they should cut administrators' salaries.

Second, I have serious doubts that religious organizations should be exempt from taxation at the entity level.  Churches are largely nothing more than clubs for believers, and the vast majority of the revenues taken in at the Sunday collections go to pay for expenses for upkeep of the church building and grounds, salaries for the church staff (and in many cases, the pastor) and so forth.  Yes, many churches do engage in poor relief.  So here's a thought (with a hat tip to Rich Schmalbeck of Duke, who is working on an article about this idea): repeal the tax exemption for churches in all its forms (income, property, sales) and give the churches a deduction for money spent on the poor.

I'm sure the Kansas bishops would be very pleased with this outcome, which will permit them to engage in their poor relief programs free of taxation.  Right?  Yeah, right.


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I actually agree on the sales tax. But the foundation for exempt status of charitable organizations is a bedrock principle that should not be violated. California makes a distinction in the non-profit code which might offer a justification why churches should be exempt. They divide non-profits into public benefit corporations, religious corporations and mutual benefit corporations. The latter are organizations formed to benefit members like homeowners associations. Even if you agree with the notion that churches are merely clubs (I don't) they certainly are not organized to make a profit.

Posted by: drtaxsacto | Mar 15, 2010 7:00:40 AM

This is a law prof blog, right? If one of your students submitted an essay peppered with bias-laden language ("hyperventilating", "whining"), how much would their grade be penalized?

Personally, I'm "on the fence" about whether religious organizations should be tax-exempt. However, I think a consideration of which organizations receive tax-favored treatment needs to go a lot deeper than a "clubs for believers" analysis. After all, are symphony orchestras anything more than clubs for people who enjoy classical music?

Posted by: SHEILA HARD | Mar 16, 2010 9:26:14 AM

I disagree with repealing tax exemption for churches. Your comments assume that the only good a church does for society is provide relief to the poor. I firmly disagree with your assumption. You are essentially equating a church with a soup kitchen. Frankly, the highest good a church can and should do is preach principles of morality, honesty, integrity, and virtue to mankind and to point their minds to God as the source and example of these higher principles. What would our society be like without such principles?! Indeed, these higher principles are already becoming an endangered species as it is! I do not disagree with reining in abuses in the payment of salaries, etc., but there are already mechanisms in place for dealing with such abuses through the excess benefit excise tax. If the problem with churches is lack of transparency because they do not file Form 990, I could probably be convinced to require them to file Form 990 to help keep churches on the straight and narrow. Such a step would be much less disruptive than an outright repeal of their exemption.

Posted by: John Valentine | Mar 23, 2010 7:12:07 AM

the churches claim they must remain tax exempt because they run charitable institutions ? these same charitable institutions were where maybe 100.000 s of children worldwide were abused ? they have lost there right to charitable tax exemption ?How many children died in these charities ? this is something that has not been revealed yet !

Posted by: spectre | Apr 9, 2010 12:16:15 PM

ssignats were paper money issued by the National Assembly in France during the French Revolution. The assignats were issued after the confiscation of church properties in 1790 because the government was bankrupt. The government thought that the financial problems could be solved by printing certificates representing the value of church properties. These church lands became known as biens nationaux. Assignats were used to successfully retire a significant portion of the national debt .here in greece all religions have lost there tax exemption all religions must now pay tax at %20 ,the press that is suppossed to be "free and impartial" has refused to publisice this development .The tremendous material wealth of the religious institutions will be expropriated by the political governments in their dire financial straits. watch this space .

Posted by: spectre | Apr 9, 2010 12:21:42 PM

i have another idea tax the churches and give the money to the victims whose lives were destroyed by these good christian people,the whole world will agree with this plan ,of course not the clergy who as we write will be scrambling to hide there monies out of reach of the judiciary ,which will only inflame honest hearted people,and make the situation far far worse ?

Posted by: spectre | Apr 9, 2010 12:46:30 PM

The crazy thing is that, the priests are generally good people, and the number that are bad make up only a small percentage.

However, there is a group where the percentage of drug abuse, physical abuse, and pedophiles is very high. Yet the media is virtually silent, and those who dares to speak out will be silenced too.

Posted by: Anon | Apr 18, 2010 3:19:10 AM

What kind of idiocy is this? I found this link by accident and discovered illiterates and frothing ideologues "debating" a serious legal point. Look folks, in the U.S.A., taxing church groups would violate the sacrosanct "wall of separation" by a de facto funding of the government by church revenues. If the government can't be compelled to fund churches, then the churches can't be compelled to fund the government. And I'm not even a lawyer, let alone a "law professor" like JDC!

Posted by: Chris | Sep 10, 2010 12:03:34 PM

I strongly believe that most christian based churches in America have become quasi Republican/Tea Party based political organizations. Visit some churches and I know that you will see that what I am saying is true. Religious organizations should not be allowed to operate as a political entity and remain to receive tax-exempt status.

Other non-religious charitable organizations and foundations need to be scrutinized as well as they seem to acquire federal grants for projects that enrich principals as well as their friends.

America is in need of collecting as many tax dollars as possible to eliminate the national debt and these tax-exempt organizations should be no exception and they need to pay their fair share.

Posted by: Lauren Stewart | Feb 20, 2011 9:39:14 PM

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