Tuesday, December 31, 2019

Churches, Transparency, and $100 Billion

Yesterday, I wrote that this week I would be blogging about the Mormon church's $100 billion endowment.

It's worth noting here that estimating the value of the Mormon church has been something of a parlor game for the last couple decades, at least. When I was in college, Time published a story estimating the church's wealth at $30 billion. A decade and a half later, Reuters estimated that the church owned real estate worth $35 billion and received roughly $6 billion annually in donations from members in the U.S. and Canada. And now, apparently, the church receives $7 billion in contributions annually and has an investment portfolio worth $100 billion.

So why all of the estimates? Because churches in the U.S. aren't required to file the financial disclosures that other tax-exempt organizations must file. Church finances and assets, then, can be a black box. (They don't have to be a black box--nothing in the tax law prevents churches from disclosing financial data, and some churches have chosen to be transparent. More on that in a minute.)

Why are churches exempt from the tax-exempt filing requirements? Originally, no tax-exempt organization had to file a return. That changed in 1943, when Congress introduced the first tax-exempt filing requirements. It exempted religious organizations, though. The reasons for originally requiring returns and for exempting religious organization have been lost to the legislative history.

In 1969, however, Congress became concerned that tax-exempt organizations (including religious organizations) needed more oversight. The House passed a bill expanding the filing requirement to all tax-exempt organizations. 

That bill spurred churches into action. On behalf of the Mormon church, the president of BYU argued to the Senate that filing requirements would be costly and burdensome to religion. The U.S. Catholic Conference took a different approach, arguing that the separation of church and state required fiscal separation.

Ultimately, the religious lobbyists were successful, and churches kept their carveout. (I write about this in a little more detail here.)

But did that 50-year-old victory turn out to be Pyrrhic? The Mormon experience over the last couple decades suggests that it may have been. Stories estimating the church's wealth end up being big deals. And if the church put out annual disclosures? Professor Nate Oman points out that the "routine financial disclosures of large, conservatively managed institutions" rarely make the news.

It's clear that, under U.S. law, the Mormon church--like other churches--has no obligation to disclose its finances. But if it routinely disclosed its finances voluntarily, it would be a lot harder to make this kind of whistleblower report into big deal news.

Samuel D. Brunson


Church and State, Current Affairs | Permalink


I'm not sure what a "South Dakotan trust" is, but the following web page from the South Dakota Trust Company (alluded to in the article) does a little better job of explaining dynasty trusts, along with noting that about 30 U.S. states have some form of the vehicle: https://www.sdtrustco.com/why-south-dakota/

Posted by: Michael L. Wyland | Jan 1, 2020 4:02:45 AM

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