This blog post delves into the complex issue of how the US government can address the abuse of tax-exempt status by non-church organizations claiming to be churches. It examines the IRS’ outdated test for church status and proposes reforms to enhance transparency and accountability in the nonprofit sector.
Exploiting the Tax Code
Finally, it raises concerns that some organizations are billing themselves as churches or associations of churches when this is simply not the case — in hopes to avoid the oversight that comes with being a charitable organization.
Today, churches and church associations receive a wide variety of privileges under tax law including exempt status and the ability to forego filing an annual 990 form where they disclose their financial information as well as staff and board members. They are also held to a higher standard and the IRS must have a ‘reasonable belief’ of wrongdoing before an investigation can proceed.
Such limited interconnectedness has sparked worries that some entities are gaming the tax code, to the detriment of the integrity of the nonprofit sector. This is something the IRS and Congress need to address, the article suggests, in order to make sure that these so-called charitable solicitations are just that — soliciting for a tax-exempt cause.
Reimagining Church 21st Century Style
The story also raises the question of whether the IRS’ 14-factor test to differentiate churches and religious nonprofits is even valid anymore, in light of a growing diversity among faith communities in America.
The authors suggest that the IRS should use a broad meaning of ‘associational test’ applied to whether congregations meet in person and have traditional worship settings, rather than apply features considered typical of Protestant Christian churches.
This update would more accurately reflect the way many Americans worship today, even by live stream or teleconference. This would also be more relevant to things like houses of worship and faiths that do not value the items in the current IRS test (say, requiring a formal code of doctrine or requirement viewers not to belong to other faiths).
Conclusion
In sum, the article underscores the importance for both the IRS and Congress to confront tax-exempt status abuses in non-church organizations and reform what exactly is meant by a ‟church” in light of these changes in religious community formation. This will serve to increase the transparency and accountability of nonprofit operations without intruding upon the unique role real churches fulfill in our society.
