Churches often defend their tax-exempt status by claiming that they are providing helpful services to the local poor. But is their tax-exempt status harmful?
Churches have become deeply political spaces. Prior to the Christian Right’s integration into Republican politics in the 1980s, churches didn’t play a major role in campaigning. Evangelicals have reshaped that narrative, with movements such as the Moral Majority pushing the Christian Right into mainstream political battles. As the decades have worn on, the Christian Right has increasingly taken sides on a wide range of contentious political issues. Although abortion is the most prominent, it is far from alone. Churches have increasingly become places where congregational leadership endorses candidates and their political agenda.
Churches have increasingly turned to political campaigning over the years. This practice has only spread during the age of Trump. There have been widespread reports of churches across the country preaching pro-Trump messages to their congregations and even spreading misinformation on the former President’s behalf. Roughly 70% of white Americans who attend religious services at least once a month supported the former President in the 2020 election. Part of the mechanism behind those numbers might be that white Americans are more likely to have a pro-Trump preacher in their church’s leadership, effectively campaigning on his behalf at church events.
The IRS rules state that “the law prohibits political campaign activity by charities and churches by defining a 501(c)(3) organization as one ‘which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.’”
Under the current rules, the IRS automatically categorizes most churches as 501(c) (3) charitable organizations. Churches do not have to take any additional action or seek any formal recognition from the IRS, unlike other types of organizations seeking tax-exempt status. The only stipulation on this arrangement is that churches are not supposed to campaign for political candidates or engage in electioneering.
In addition to the categorization as a charitable organization, churches have an additional protection from the IRS. Religious organizations generally do not have any obligation to report to tax authorities at all, so in most cases, the IRS doesn’t have much financial information on churches around the country. And it isn’t just the federal level where churches are tax-empty. They don’t have to pay taxes at the state or local levels either. This is an incredibly advantageous position for churches, because church giving is big business. Church giving brings in an estimated $50 billion a year, and churches are largely allowed to spend that money as they see fit. That is billions of untaxed dollars that would otherwise be routed to public infrastructure, schools, and administrative projects in the communities these churches reside in.
If churches were categorized as corporations, they would be obligated to pay taxes at the local, state, and federal level. Since most public schools are based on local tax systems, churches avoiding tax obligations has real-life ramifications for needy children across the country. Churches often defend their tax-exempt status by claiming that they are providing helpful services to the local poor. But in reality, their tax-exempt status is shielding billions of dollars in potential tax revenue from reaching the social safety net. Ironically, it is those with the least resources who are hurt the most by churches’ aversion to paying taxes.