Monday, August 20, 2012

Churches, Money and Tax Exemption

An article posted in today's Chicago Tribune digital edition (free subscription required), which appears to have originally come from the Economist, is a very interesting look at the finances and financial management of the Catholic Church in America.   Using data from bankruptcy filings by dioceses that faced large damage awards over sexual abuse, the article paints a picture of financial mismanagement, if not skulduggery.  One paragraph sort of sums it up:

The picture that emerges is not flattering. The church’s finances look poorly co-ordinated considering (or perhaps because of) their complexity. The management of money is often sloppy. And some parts of the church have indulged in ungainly financial contortions in some cases--it is alleged--both to divert funds away from uses intended by donors and to frustrate creditors with legitimate claims, including its own nuns and priests. The dioceses that have filed for bankruptcy may not be typical of the church as a whole. But given the overall lack of openness there is no way of knowing to what extent they are outliers. 

The last sentence is, I think, particularly important.  Churches do not have to file a Form 990 or an application for exemption on Form 1023.  We know virtually nothing about how they manage their money, yet we grant tax exemption virtually automatically to any entity calling itself a church.  

Others have questioned whether churches should receive tax exemption at all (I happen to be in the camp that says "no," provided they get an unlimited deduction for what I would classify as charitable expenditures, which would not include building expenses/maintenance/pastor and staff salaries, etc. - but I realize this is an issue on which reasonable people can and should disagree).   But I view this story as less about the merits of exemption than the merits of financial disclosure by exempt charities.   Churches need to file a 990 like everyone else.  We need disinfecting sunlight on their financial operations, particularly when folks starting hiding behind God as the rationale for their actions, many of which end up being very un-god-like.  And for those of you who might claim that subjecting churches to information filing on a 990 is a violation of the free exercise clause . . . well, I'd like to see that case litigated.


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