Join Rebecca, Alison and Liz for a journey through the history and principles behind the U.S. exempting churches from taxation! We discuss the practice of tax exemption for charitable organizations, including churches, the major cases about the constitutionality of these ideas, and abuses of the Johnson Amendment.
Background
Churchtrac – The State of Church Giving: Trends and Statistics (2024)
Other podcasts that talk about church taxation
Cases
Rebecca Markert:
Welcome to We Dissent, the podcast with secular women attorneys discussing religious liberty issues in our federal and state courts and our work to keep religion and government separate. I'm Rebecca Markert with the Freedom From Religion Foundation.
Liz Cavell:
And I'm Liz Cavell, also with the Freedom From Religion Foundation.
Alison Gill:
And I'm Alison Gill with American Atheists.
Rebecca Markert:
In today's episode, we are going to address the taxation of churches. This is an issue that we continually hear about at our organizations.
Alison Gill:
Absolutely.
Rebecca Markert:
People ask all the time, why aren't the churches taxed? Should they be, what's the principle behind this? Plus they also engage in politics and lobbying and are still tax exempt. So we are going to do a deep dive into the principles behind the law in not taxing churches, discuss what the reasoning was and is and what the courts have said about it, and also, of course, discuss whether we think that should change.
Alison Gill:
Just a quick aside, I'll mention there was this program during the pandemic, Paycheck Protection Program. I mean funding basically to employers and we pushed back against it because the government shouldn't be funding ministers to do ministering and other types of religious work. But the complaints we heard out there in the field, everybody misunderstood and sort of thought this was about churches, like how dare you give churches money and they're not taxed, right? So it's amazing how everything is sort of filtered through that lens, even though that wasn't our pushback on it. Pushback was, well, you shouldn't give money for people to do religious activities, government funding, which is kind of a separate issue.
Liz Cavell:
Yeah, I think it gets confused a lot because when we're talking about funding, as we so often are in the Establishment Clause context, we're just talking about the general constitutional principle that public funding should not in our secular democracy go to religious activities. We shouldn't fund churches, we shouldn't pay for ministers to do ministering. We shouldn't pay for religious education, and that even though it also involves money and funds flowing between church and state, it's not the same thing. It's a separate question from who's paying taxes and why and why not. And of course, it is an American historical reality that we do not tax our churches on the same terms as other entities in a whole bunch of contexts. Rebecca mentioned property taxes as one of the biggest ones because of course there's a lot of church real estate in our country, but also all kinds of other taxes, business taxes and taxes on things that people sell and taxes on income and things like that. It is a separate question from government funding going directly to religious activities, which is a constitutional issue that we fight against all the time outside the tax context.
Alison Gill:
Absolutely.
Rebecca Markert:
Great point. Well, let's talk about the status of churches under our tax law. Now I have to say this is incredibly interesting because I, admittedly, was not very familiar with the history of the tax status of churches in our country. I did not take tax law when I was in law school. I decided while I was studying for the bar exam, I was going to ignore tax because there were 17 issues you needed to study. And so I really didn't know a lot about why churches have the status that they do and what the rationale was behind it even after working for FFRF for so long. So this also was shockingly very interesting to me. I did not think that I would be so excited to read about tax law and tax law history, but I was. Also, I think we are doing a very great public service because I also, in my research for this episode, did a deeper dive into podcasts who have talked about this issue before. I could only find two
Liz Cavell:
Look at us breaking ground. Wow,
Alison Gill:
Impressive.
Rebecca Markert:
There were only two podcasts that I also listened to about this. One was called Tax Chat and the other one was called Evangelicalish, and both of them talked about this issue and explained the rationale behind it and their thoughts on whether they should be taxed as well. So only two other episodes out there. So churches are exempt from federal income tax. They are also exempt from paying property taxes in all 50 states and in the District of Columbia, they are treated like other charitable organizations under our tax law. That means that any donations to churches are tax deductible. So Liz, Alison, what does the Constitution say about taxing or not taxing churches? Can you guess?
Liz Cavell:
Trick question.
Alison Gill:
Nothing. Well, nothing explicit.
Rebecca Markert:
Nothing. You are correct. The Constitution and the First Amendment specifically are silent on this issue, so it is not mandated one way or the other. There's also no case law that specifically requires taxation or for that matter tax exemption. So that's the status of churches under our tax law. In our history, we have always exempted churches in one way or another from taxation. This is a very early history of our government that actually goes back to English, common law and statutory law. So there is a statute in England called the English Statute of Charitable Uses that was passed in 1601 and that statute formed the basis for the American model of tax exemption. For churches and other charities at the time of the American Revolution, I found this also interesting, nine of the thirteen colonies had given churches some form of tax relief. Now, the rationale behind giving tax relief to churches is that churches and other charitable organizations are relieving the government from certain burdens that they need to provide for their citizens. They believed that this sort of relief was necessary because churches, like other charitable organizations, enhanced and supplement the services that the government provided for things like feeding the hungry and housing those in need of shelter and things like that.
Alison Gill:
So that means that four colonies did allow taxing churches or did tax churches. I find that interesting.
Liz Cavell:
That caught my attention too. Nine out of thirteen is a critical mass, but if four colonies didn't provide tax exemption for churches, that's really noteworthy because as you mentioned in the open, there is no place in the US now that subjects churches to any kind of taxation.
Rebecca Markert:
Right, and I think it's also significant when we're looking at the new Supreme Court test, history and traditions, is the tests that we're seeing in so many different areas, including our own, and this is showing really sort of an unbroken history and practice of taxing churches in our country. What I also found really interesting was that by the 19th century, there were actually criticisms of the tax exempt status of churches including from three US presidents, and those presidents were James Madison, James Garfield, and Ulysses S. Grant. In fact, Grant submitted a 900 foot long petition containing 35,000 signatures to Congress in 1875, demanding that "churches and other ecclesiastical property shall no longer be exempt from taxation." Grant told Congress that in 1850 the church properties in the US, which paid no taxes, municipal or state, amounted to about $83 million, and in 1860, that amount had doubled. In 1875, it was about $1 billion, and by 1900 without check, it is safe to say that this property will reach a sum exceeding $3 billion. So that's what he was telling Congress. The amount of money was just going to be astronomical.
Liz Cavell:
And this is a US president making this argument with his, what I'm picturing as a giant scroll.
But think about that. As far back as the 1800s or late 1800s, turn of the century, and for some of the same reasons that we today are still debating, does this make sense? Is this in the public interest of our nation? Because I'm thinking 1900, $3 billion projected in the value of property was astronomical at the time. It's just an ungodly, if you will, amount of value that is being completely untaxed. And these are still places that get police and fire protection. They get water and sewer, public roads and all the things, but of course, don't bear any of the public burdens because they're tax free from every angle.
Alison Gill:
If I could just do a shameless plug here, if people would like to see more information about the tax laws and how they affect churches across the country, we do track that information in our State of the Secular States report for every state. So that's at atheist.org/states. And so we look at a few different measures of taxation in that report for every state plus DC and Puerto Rico.
Rebecca Markert:
Interesting.
Liz Cavell:
That's great.
Rebecca Markert:
Well, President Grant also talked about a lot of the criticisms that we'll talk about a little bit later in not taxing churches. He said to Congress "so vast to some receiving all the protection and benefits of government without bearing its portion of the burdens and expenses of the same will not be looked upon acquiescently by those who have to pay the taxes." I also found it interesting that actually the federal income tax exemption was not officially granted until 1984.
Alison Gill:
Were they taxed before that or it just was unofficial? Do you know?
Rebecca Markert:
It was an unofficial exemption. So they were not taxed before then. I mean, this is, like I said before, this was a practice and tradition that dated back to England in the 17th century that the American colonies for the most part took over. They just continued that tradition and until the tax code was revised in the 1980s, it wasn't an official statute or an official exemption under our law, but there was a court case back in 1924 Trinidad v. Sagrada Orden in which the Supreme Court interpreted the reason behind tax exemptions. And in that case, the court wrote, "Evidently the exemption is made in recognition of the benefit which the public derives from churches' corporate activities." So that being, they are supplementing these services that the government is not providing, like feeding the hungry and housing the poor. Next, we want to talk a little bit about what the Supreme Court has said more recently than 1924 about the tax status of churches.
Liz Cavell:
So let me jump in here and talk about a case that is a pretty big one in the canon of Establishment Clause cases in 1970, and that was called Walz v. Tax Commission of the City of New York. This was a case that challenged property tax exemption of churches on the grounds that it violates the Establishment Clause. So Walz, who is the plaintiff, is, or was, a real property owner in New York City himself, and he sued the tax commission, the New York City Tax Commission because that's the entity that was collecting taxes. So the New York Constitution allows the legislature to exempt religious, educational, or charitable purposes for most taxation. That was in the New York State constitution. And by statute, those same organizations were exempt from real estate property taxes. So Walz claimed in this case that exempting churches requires other taxpayers to support a church that they may or may not attend or believe in.
Other real property owners are paying property taxes and because of that, they're subsidizing those that don't pay taxes like churches on their real estate. So he filed suit in New York State Court to enjoin the state from enforcing this tax exemption for churches. And his claim was that this violates the federal Establishment Clause. He lost in the New York Court of Appeals, the highest court in New York and the Supreme Court because it involved a federal question, it involved the federal Establishment Clause, granted certiorari to review the decision. So it ended up being a big Supreme Court case that came down in 1970 and it was a seven to one decision. So this is back in the Chief Justice Burger court and Burger wrote the majority opinion with six justices joining him. This was before the Lemon case, which means it was before the formal Lemon Test, but it was analyzed under the same analytical framework that would eventually come to be known as the Lemon Test in the next couple years. So the court did discuss the secular purposes of tax exemptions, the effects and whether or not it fostered excessive entanglement between religion and government. And the court also discussed history during the founding and the fact that Virginia, Washington DC, and New York, all disestablished churches and then had tax exemptions for them.
Alison Gill:
It's interesting, I mean obviously this is before the Lemon Test and nowadays we're talking about the history and tradition test and no one knows what that means, but apparently it looked at history in this case as well and it came out saying that this is allowable under the Establishment Clause basically. So I feel like regardless of what happened to the Lemon Test, it feels like that would probably come out similarly today.
Liz Cavell:
I think that's for sure. I think the court in Walz, at least back in 1970, was looking to history to answer those questions of "what is the legislative purpose behind exempting churches from property taxes?" Is it the advancement or the inhibition of religion? And I think the court decided in Walz, no, the purpose of these exemptions is not to sponsor religion or to be hostile towards any other religion or non-religion, but that there's this sort of civil harmonious relationship to the community that the church is providing. And so the state is providing this exemption in recognition of the fact that churches and other charitable organizations do charitable work and therefore should have the benefit of tax exemption.
Alison Gill:
Yeah, it looks like they compare it to things like libraries, hospitals, playgrounds, et cetera. You know what I mean? So that's pretty reasonable. I mean that's exactly what's what we'll be talking about in a minute with what the federal government eventually did after, what'd you say 1980?
Rebecca Markert:
1984. Yeah. I'll just pull one of the quotes from the opinion, which kind of talks about the rationale behind it, but also points out that this isn't something that's mandated or required and is something that could be lost. The court writes, "The State has an affirmative policy that considers these groups as beneficial and stabilizing influences in community life and finds this classification useful, desirable, and in the public interest. Qualification for tax exemption is not perpetual or immutable; some tax exempt groups lose that status when their activities take them outside the classification and new entities can come into being and qualify for exemption." So we're going to talk about some of those ways that you could lose your tax exempt status, even churches, a little bit later.
Liz Cavell:
And I think that's a really important piece of the rationale or the analysis of tax exemption is that it's only true that it's not favoring religion unfairly if it's being offered on the grounds that a group is functioning in a certain way. You have to be a charitable group and churches aren't the only possible groups that can meet that definition. And conversely, they're not inevitably included in that category. There are things that they can do that can take them outside that classification. And I think that's a really important point that the court was recognizing way back in Walz in 1970 as something that needs to be part of the tax exemption scheme in order for it to be compliant with the Establishment Clause. So we said this was a seven to one decision, which means there was one dissenting justice and that was Justice Douglas.
And Justice Douglas framed the question this way, and this is a quote, "The question in the case therefore is whether believers — organized in church groups — can be made exempt from real estate taxes merely because they are believers, while nonbelievers, whether organized or not, must pay the real estate taxes." And that's the end of the quote. In other words, Justice Douglas thought that the Establishment Clause question was pretty simple and stark, which is that churches are actually exempt from taxes just on the basis of the fact that they are religious or believers. While non-believers like Walz, this real estate owner who has to pay taxes, whether he was organized into a group or a fellowship or not, could not get the same exemption. And so in his mind, Justice Douglas, there was an Establishment Clause problem with tax exemption just for churches. Just recognizing that tax exemption is a subsidy, which is an important point that is brought up often when judges have argued that tax exemption for churches is more similar in character to funding a church, giving government funding to a church. It needs to be analyzed in that way.
Rebecca Markert:
And he explicitly says that in his dissenting opinion, he writes, one of the best ways to establish one or more religion is to subsidize them, which a tax exemption does. So like Liz said, he explicitly says this tax exemption is a subsidy for religion, which to his mind would be a violation of the Establishment Clause.
Alison Gill:
Yeah, I had a thought while reading this case, this was a challenge to these rules for churches under the Establishment Clause, and I was just thinking about how difficult this would be to bring today, even if let's say that they were favorable and they were not treated like other organizations. So we'd have a real Establishment Clause concern, and you can't bring this sort of taxpayer standing claims like Walz brought in today's courts that would not be allowable. So even if the churches got preferential treatment, it would be really hard to bring this case today based on the way the Supreme Court has sort of closed off these avenues for relief.
Liz Cavell:
I think that's so true. He brought this case in state court in New York and maybe taxpayer standing requirements might still be less prohibitive in a state court, but if you're raising a federal question, the Establishment Clause as a claim, you can bet that you're not going to have standing on appeal in a federal court because, of course, his standing rests on his status as a taxpayer in Walz. He's challenging the fact that he as a taxpayer is being made to subsidize a church and he's being treated unfairly as a property tax payer, but his standing to raise this quote un quote "Establishment Clause claim" rests on his status as a taxpayer, and we know the Supreme Court has completely closed off that avenue for establishing standing to challenge something under the Establishment Clause on that basis. So you're right, you would never see a merits decision like this coming out of the Supreme Court because you wouldn't get in the courthouse doors as a taxpayer challenging something on these grounds.
Alison Gill:
And we were going to talk about the rules are sort of unfair and stacked towards churches at the moment under federal law, but even if that's the case, bringing these types of suits is challenging, and I think you folks at FFRF have some experience with that as well, spending a lot of time trying to bring a tax-related case, if I'm not mistaken.
Liz Cavell:
That's right. It's true that FFRF has tried to challenge some of the unfairness in the tax code and the courts have bent over backwards not to rule on the merits of those tax cases because, I think, because the public is with us on the tax cases, the unfairness of churches being treated differently than other tax exempt educational organizations or 501(c)(3)s is obvious. They don't have to play by the same rules, but they get all the same privileges and the court doesn't want to really rule on the merits of those cases. They just want to say you haven't jumped through enough of the administrative law tax hoops to even bring this challenge as a tax paying organization. So we're not going to reach the merits of those cases. So you're right, and that's nothing new. The court continues to manipulate jurisdictional rules to reach the merits of cases it wants to rule on and avoid the merits of cases it doesn't want to rule on. I think most of the radical theocrats on the court would love to make some ruling that churches actually constitutionally have to not pay taxes ever. But I think it's a little more dicey because the unfairness of some of the way that tax rules are applied to churches even versus other 501(c)(3)s is so patently unfair.
Rebecca Markert:
Well, I will just interject to say that it was mostly appellate courts that disagreed that we even had standing to get to the merits. The district court judge, at least in the parsonage case, agreed with us that the parsonage allowance under the tax code was a violation of the Establishment Clause, but the appellate courts I think are pretty uniformly not on our side on this issue.
Liz Cavell:
But we're not eager to make an appellate ruling on those merits.
Rebecca Markert:
Right, exactly.
Liz Cavell:
When they could have done that, they could have overturned the district judge and said, no, actually this doesn't violate the Establishment Clause, but instead what the appellate courts were eager to do was dismiss our case on the grounds that we didn't have standing to even bring that challenge. So just let's just forget about the whole thing, and I think that says a lot because courts can dispose of these cases however they want.
Rebecca Markert:
But you're a hundred percent correct that if the situation were reversed and a state were to remove these tax relief statutes for churches and churches sued, they most certainly would have standing, and the court would most certainly find under the Constitution a right for churches to be exempt from taxation because they will find it a free exercise right and not a violation of the Establishment Clause and all of the things that we've seen the Supreme Court do in other cases involving churches asserting any sort of claim in federal courts.
Alison Gill:
There's a little bit of that in this next case. Maybe we should go into it in Texas Monthly.
Rebecca Markert:
Yes. So that's the second case that the Supreme Court has taken on the issue of taxation of churches.
Liz Cavell:
Yes. So back to our little tour through tax history, Texas Monthly versus Bullock is this big case that came down in 1989 that involved this time sales tax and it involved basically magazines, right? Texas Monthly, if you don't know, is a magazine and a journalistic outlet, and they specialize in cover news in the state of Texas. Bullock, the defendant, is just the comptroller of public accounts for the state of Texas. So basically this is Texas Monthly magazine suing the state of Texas, and the reason they sued is because Texas had this scheme of exempting from its sales tax, all magazines or periodicals that had subscriptions for half a year or longer and were considered second class mail. That was before 1984. Then in 1984, Texas revoked that exemption for all magazines except religious ones and those who pushed sacred writings. So then all of a sudden the sales tax exemption was only for religious periodicals.
Then in 1987, they reversed that and made it so all periodicals were tax exempt once more. But in those three years between 1984 and 1987, there was a period of time where Texas Monthly paid $150,000 in sales taxes while religious magazines exactly like them, but religious in their content, were exempt and paid zero in sales tax. So they argued that they were treated unfairly and periodicals that were religious were treated favorably, and it cost them to the tune of $150,000 in sales tax. They argued again, that violated the Establishment Clause. Texas was citing Walz, the case we just talked about, in defense of their practice saying, listen, Walz establishes that we as the state of Texas are allowed to have this sort of tax exemption for just religious periodicals and magazines, and the decision ended up being a plurality decision. So the decision actually ended up in favor of Texas Monthly and agreed that Texas' decision to exempt only religious groups from sales tax on magazines did violate the Establishment Clause and it distinguished Walz and the property exemption in Walz as different because the breadth of the regulation in Walz is what made it compatible with the Establishment Clause. In other words, it wasn't just religious properties or groups that got the exemption in Walz. It was a more broad regulation that applied to other charitable organizations.
Alison Gill:
That makes sense. I think Justice White said there were some free speech issues here as well. This is a content-based regulation, and so it seems like there's several different reasons why this was problematic. This one seems to have come out in a way that's favorable to us that we haven't seen in the Supreme Court in several years. So it's nice to read something like this for a change.
Liz Cavell:
So this decision was in 1989, and so Justice Scalia is on the court at this time, and he actually dissented from the decision. He called the plurality and concurring opinions, "a judicial demolition project" just being his usual dramatic self, and he argued that taxation is hostility and so taxing religious periodicals in general showed hostility to religion, which was a violation of the Establishment Clause. So he just went full other direction, and of course that previewed so much of the messaging that we would hear for the decades to come that somehow neutral treatment of religious entities is hostility towards religion and violates the First Amendment. So what Scalia was saying at the time in dissent, which I would say his view has won out on the Supreme Court, is that tax exemptions for religious periodicals are not just permitted by the First Amendment, but they are mandated by the First Amendment. Texas shouldn't just be allowed to exempt religious entities from taxes, they have to do it.
Alison Gill:
So obviously I think Scalia went way too far here. I mean, where he talks about being hostile, I think that's too much, but isn't there a principle that makes sense here? I think it was a very old case called McCulloch v. Maryland that said "the power tax is the power to destroy." Maybe I'm stepping out of line as a church state advocate a little bit, but if they suppose attacks like, I don't know, 50% of donations are taxed by the government, I think there'd be a real argument that violates the Free Exercise Clause. Right. So I guess I see the idea that the Constitution provides some protection. You can't just tax churches willy nilly. It provides some level of protection for churches so that they can exist. At least that's what I think. What do you think?
Liz Cavell:
Yeah, I mean, I also think not just on free exercise grounds, but there has been one important part of analysis under the Establishment Clause has to do with excessive entanglement between government and churches, and there is this sort of angst in the idea that taxing religious entities involves the state being involved in church finances in ways that might present problems or just excessive entanglement between government and church. And so I don't think you're wrong to raise those concerns when it comes to like, okay, what is the right way to think about taxing churches while still navigating and balancing the mandates of both the Establishment Clause and our desire to really separate church and state and keep them unentangled and the Free Exercise Clause, which does mean something – doesn't mean as much as Justice Scalia wants it to mean – but it does mean something, and we do want to make sure that governments not inhibiting religious exercise.
So what are the lines? So I do think part of what at least these earlier courts were grappling with was, okay, are these tax laws or tax exemptions, are they religiously neutral in some way or is there some way for government to sort of enact and enforce tax exemptions in a way that doesn't require them to probe into religious questions and things like that? There's a breadth of the law like in Walz, that makes it so that it's not under inclusive, it's not targeted at churches. It doesn't require government to probe into churches, but it does include churches, and I think that also overlaps with what just general lay people can see as kind of fair. If you are a 501(c)(3), for example, like our organizations and churches and the statute says you do this, this, and this, you don't operate for profit, you operate for these purposes. You keep your 501(c)(3) status by doing X, Y, and Z, and by not doing A, B and C, then you get to be exempt from taxes. And I think that makes sense because churches can be included in that and they're not inevitably included in that. I feel like that to me is the right balance, but I think a lot of, especially federal judges would disagree.
Alison Gill:
So we talked about how the previous one, the Walz case, would probably come out the same way under the history and tradition test. I'm curious, how do you think this one would come out under the history and tradition test?
Liz Cavell:
That's a great question. I wish I had Scalia's full dissent in front of me because I bet it's got some history and tradition nuggets in there. I think a Texas monthly opinion, if you just gave it to the Roberts Court of today and said, rewrite this would be like this freaking tour de force of law office history. It would just be some law office history that would justify the government never taxing religious writings, or it would lean into maybe the speech concerns that were raised by the plurality in the Texas monthly decision. Alison mentioned Justice White concurred in the Texas Monthly case pointing out that actually the Free Press Clause was implicated in this because it involved magazines and periodicals. I think it would not even engage with Establishment Clause concerns. It would go full on free speech, free exercise and how doubly protected it is, and that there'd be a whole bunch of law office history supporting that.
Rebecca Markert:
That's exactly my thoughts as well, that this would be, religious speech is more protected than other forms of speech because of this duality of the Free Exercise Clause and the free speech Clause, and so obviously the sales tax exemption would be okay and not even touch on the Establishment Clause at all.
Alison Gill:
I agree with you both. Yeah, I think that's definitely the way it would go. Unfortunately. I know I think this is pretty core because this is really about fairness here saying, okay, well, if you're going to provide special privileges for religion, you can't just take them away from other groups and justify it to religious people, and I think that's pretty core to what we consider fair in our society, even if we're talking about this idea of neutrality, it's not neutral to sort of remove all the restrictions on religious groups and keep them from everybody else. So it's kind of disappointing, but I think you're exactly right.
Liz Cavell:
I know, and it's sad because Texas Monthly was such a stark factual example of a benefit to exclusively religious entities that's just absent for the exact same situated entity, but secular Texas Monthly is doing the same thing as these religious periodicals, a magazine that's religious, that people subscribe to, whatever those things are, right? It's just people trying to sell magazine subscriptions, and so there's no reason to justify the difference in treatment other than religious favoritism, and that is what's really unfair. But the fact that none of us could see the current court ever coming down anywhere close to this decision today is really sad.
Alison Gill:
I don't even know if the liberals outside of Sotomayor would go that far.
Liz Cavell:
I know. You're right,
Rebecca Markert:
Right.
Liz Cavell:
We've strayed so far from balancing these First Amendment religion clauses principles and the play in the joints, and the both principles are meaningful, and how do we analyze state power and religion, we've just strayed so far from this from only 1989. In Taylor Swift's lifetime.
Rebecca Markert:
We have mentioned this many times on the podcast before that when a church has tax exempt status, they do have to play by particular rules. One of the rules and regulations that they do have to abide by is what's known as the Johnson Amendment. This is a law under the tax code that then Senator Lyndon Johnson created, which prohibits 501(c)(3)s, which are charitable organizations and churches from engaging in political activity and endorsing candidates. If they engage in those types of political activities, they do risk their tax exempt status.
Alison Gill:
So that's been the rule for a while. The Johnson Amendment is what it's called. However, the ADF Alliance Defending Freedom, friends of the pod, and others have been encouraging churches to break these rules for quite a long time. There was an organized day, I'm not sure if that still goes on officially, but there's been organized days.
Liz Cavell:
Pulpit Freedom Sunday.
Alison Gill:
Oh, Pulpit Freedom Sunday where people speak purposely breaking the rule from the pulpit, just daring the IRS to come down on them because they know they won't and why won't they, because they lose in court.
Liz Cavell:
And that goes way back even before the current iteration of our Supreme Court. I mean 10, 15 years back, these groups just trying to get persecuted so that they could cry persecution and encouraging pastors to violate this tax code rule so that they could get punished and then they could basically fundraise off of it. I just want to back up just to say we talk about this all the time, but it's a little wonky because this is a rule under the IRS regulations. It's just a rule that applies to 501(c)(3)s, like FFRF and American Atheists and churches also fall under the 501(c)(3) status, and basically the reason behind it is under 501(c)(3) we're exempt from certain taxes, and importantly, people that donate to our organizations or tithe to churches that can write those donations off as tax exempt, they're tax deductible.
That means tax dollars are supporting 501(c)(3)s and churches, because we've decided as a society that it's in the public interest to have a robust field of charitable and educational organizations doing things and supporting things and educating the public and fighting for civil rights and the environment and all of the things that nonprofit groups do. And so it's not very complicated why it exists, and the reason why we don't want and why Senator Lyndon Johnson and the Congress of the day didn't want nonprofit groups to be able to engage in electoral activities is because it allows people to donate tax deductible dollars to organizations that are then going to go act like PACs, right? They're just going to go endorse and help candidates get elected. It's a pretty narrow rule. The only thing we can't do is that we as 501(c)(3)s can't endorse or oppose candidates that are running for political office, public office, so it's not that hard is all I'm saying.
Rebecca Markert:
Well, and if they do want to engage in that activity, they have other means to do that. They can create organizations known as 501(c)(4) organizations, social welfare organizations, that are allowed to do up to 60% of lobbying activity, and then also 40% of electoral activities. They're also allowed to organize a PAC. They also don't have to be tax exempt. They could forego it all together and–
Liz Cavell:
Do whatever the hell they want, right?
Rebecca Markert:
There are lots of alternative ways to engage in these types of activities that they want to do without being classified as (c)(3) organizations.
Liz Cavell:
Right? What's so important is recognizing that tax exemption, which means that everyone else that pays taxes, corporations and individuals and small businesses are supporting with their taxes. These organizations that are tax exempt, including a lot of churches, and it's a privilege. It's not a right, right? It's a privilege that you are classified in a way that makes you exempt from taxes and makes donations to you exempt from taxes, and so just in order to have that privilege, there's just a few rules. If you don't want to do those rules, if it's so constricting, you don't have to be tax exempt, right? It's not like you're being censored. It's just if you want this privilege, here are the rules so that all of our nonprofit organizations don't just become black hole PACs.
Alison Gill:
Speaking of rules, it's kind of amazing that they are already stacked in the favor of churches, which makes the situation even worse. For example, churches don't have to file, unlike every other nonprofit, with the IRS to be considered a 501(c)(3), so they're not required to file. They're not required to file annual 990 forms, which is what we all file every year. If you're above a certain size of a nonprofit, if you're below a certain size, you just file a really, really simple form, but if you're above a certain size and it's not very large, you have to file a form every year disclosing your income and what you're spending it on and all sorts of things like that to show that you're legitimate. Churches don't have to do that either, so not only they already are getting a break on the rules, and if as you were saying, Liz, we're worried about nonprofits becoming black boxes, but churches would even more so become black boxes because they don't have to follow any of the rules of other entities when they're just engaging in this sort of activity. A church can just spring up and all, and that could be a 501(c)(3). Other nonprofits can't do that very easily. It requires a whole verification process. I think that's a really big deal.
Liz Cavell:
It is a really big deal, and it's something that you never hear from churches or pastors or ADF or any of these groups that are crying persecution because they have to not endorse candidates for public office. The fact that they already are given such favorable treatment when it comes to the financial accountability provisions of the 501(c)(3) tax code, they don't file what's basically like an extremely onerous tax return form where you have to show that you're not operating for profit. What are you doing with all your money? How much money do you have in reserves? How much do people get paid? How much is going towards the mission of your organization and all the programs? It's onerous as it should be. It's how nonprofits are accountable to the government and show that they are still worthy of their tax exempt status because they're doing things in accordance with the statute. Churches don't do any of that. They don't file any of those forms. They're on their own honor system that they're operating for nonprofit charitable purposes.
Alison Gill:
I always wondered what it might look like if the members of a church who are concerned about not having the sort of oversight, and we should mention also, there's limitations on audits of churches as well. They have more ability to not be audited compared to the nonprofits, but what if the members of a church were like, well, this sort of treatment is actually disadvantageous to us as religious people because the government is looking at other nonprofits and they're saying, well, they seem to be spending their money correctly, but no one's looking out for us and they're giving these tax breaks, and so we should sue as maybe this is unfair to us as religious people, and I guess I'm just curious. Just a thought I've been thinking about for a while, would there be some claims there that because you're treating us separately, our organization doesn't report back to us, we're unable to get the information that we need, unlike all the other nonprofits.
Rebecca Markert:
It would be really interesting. I just don't ever see a congregant getting a mass of people to do something like that.
Liz Cavell:
Just breaking down the reality of what you're saying, Alison, there's not like a GuideStar you can go to see if the church that you're tithing to 10% of your income every year for 10 years, that they're actually financially responsible, that they're solvent, that they're spending their money on programs. If you think you're supporting charities and food pantries and soup kitchens, and really all your money just goes into the pastor's pocket or something, there's no way to know that as a congregant or as a taxpayer member of the public who's subsidizing these nonprofits, so it's just not really fair to anybody.
Rebecca Markert:
No, and you're right, and just particular to the Johnson Amendment too. I mean, if there is a particular parishioner who believes that their money is going into these electoral activities and the church is supporting with the use of their donations, a candidate that they don't agree with at FFRF, we hear from many, many congregants who get very upset that their churches are endorsing candidates and doing things like that, so I could see that they would want some financial accountability and disclosure requirements just to make sure that that money is going to these religious charitable purposes and not election activity because the Johnson Amendment, we should also mention, is incredibly popular with the American people. I think over 80% of Americans believe that it is a good regulation to have for churches.
Liz Cavell:
I think it's just something that also strikes people as just kind of unseemly. You have pastors using the pulpit to basically campaign or using their power to tell congregants how to vote for specific candidates or against specific candidates. You're seeing right now, if you're kind of paying attention to the political news, we're in an election year. We're in the cycle of things where violations of the Johnson Amendment are going to be everywhere. There was just a big national news example of this in California, this megachurch mega pastor Jack Hibbs, who literally from the pulpit just openly flouted the IRS rules and said, you need to vote in this upcoming California Senate primary for Steve Garvey, who is the conservative candidate in the California jungle primary, and he literally says in the middle, there's video of this, of course, because a megachurch in the middle of saying it like, oh, I am not supposed to be doing this. I'm violating the law by telling you this from the pulpit, and he kind of steps away from behind the pulpit and then says it again, which is not the spirit or the letter of the law, but okay.
Rebecca Markert:
So clever. So clever.
Liz Cavell:
Yeah, so clever, so clever. And of course, we report churches to the IRS all the time that do this. This is literally a pastor of a mega church that's doing this completely out in the open from the literal pulpit on video. This is not something that people are doing on the down low. It's openly flouting the rules when these election years come around.
Alison Gill:
And yet they're not going to take action. No, they won't because ADF has been trying to bring the Johnson Amendment into the courts for years. They think it can get struck down, and so they're definitely not going to do anything about this, unfortunately. We hear a lot from folks, we should push on them to enforce the Johnson Amendment, enforce the Johnson Amendment. I just don't think that's realistic.
Liz Cavell:
No, it's not realistic, and I think you're right, Alison. What so many of these theocratic Christian Dominionist groups want more than anything is a showdown in the courts, which they have now completely rigged for their side. They want to showdown in the courts over the Johnson Amendment so that they can get it officially struck down as a violation of the free exercise and the free speech, the doubly protected Holy Grail of American constitutional rights. And so I think you're right that the IRS is not going to enforce the Johnson Amendment. They're not going to take away the tax exempt status of a church over one of these violations like Pastor Hibbs or something like that. The ADF and these megachurches would love nothing more than to have their tax exempt status removed or threatened by the IRS.
Alison Gill:
You raised another point, and I know we're almost out of time, but another thing we didn't really get a chance to talk about is the dispute around what actually counts as a church for the IRS, right? There's so much of that. Scientology fought for years with the IRS to get this benefit, and more recently groups like ADF are now claiming actually, we're not just a legal group, we're secretly a church.
Liz Cavell:
Right, we're a ministry.
Alison Gill:
And that's becoming more and more prevalent because they can get all these amazing benefits as well. So this is definitely being more and more abused because they know, just as we were talking about how unenforceable the rules have become because of fear of enforcement and fear of the courts.
Liz Cavell:
And how little accountability there is, there's a lot to gain and not a lot to lose. If you want to suddenly start holding yourself out as a ministry like ADF, who could not be less of a church in terms of what it's doing with its money and how much money it's making, but if they can say they're a ministry and that they're going to stop filing Form 990s, that's a huge boon to them because now all of a sudden they are relieved of all of the burdens, but still get to keep all the benefits of being tax exempt.
Rebecca Markert:
Obviously, there's a lot of issues surrounding this taxation of church's idea from the just basic idea of their tax exempt status to property taxes, to sales taxes. We could probably talk about this forever. Unfortunately, today we're out of time, so maybe there will be at some point a part two to this discussion.
That's it for today's episode. I'm Rebecca Markert.
Alison Gill:
I'm Alison Gill.
Liz Cavell:
And I'm Liz Cavell. If you haven't already, please follow us on our socials, Facebook, Instagram, and X, and please also remember to let us know how you're liking the show by leaving us a review. You can also find us we-dissent.org. Thanks for listening.
Rebecca Markert:
We Dissent is a joint production of the Freedom From Religion Foundation and American Atheists. It is hosted by attorneys Liz Cavell, Alison Gill, and me, Rebecca Markert. Production support comes from Greta Martens and FFRF legal fellow Hirsh Joshi. Audio Engineering is provided by Audio for the Arts based in Madison, Wisconsin. Thanks for listening.
