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Tag: Church Tax Exemption

How Evangelical Preachers Legally Avoid Paying Taxes

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preacher asking for donations

Let me tell you a story . . .

“Bob” pastors Frozen Chosen Baptist Tabernacle in Newark, Ohio. The church runs a hundred or so in attendance. Bob pastors Frozen Chosen full-time. Bob is a winsome man who has a bad habit: he likes to tell anyone who will listen that he is “poor.” To prove his point, Bob tells people that he “only” makes $12,000 a year. Having made such a wage on several occasions in my life, I can say that this is indeed a poverty-level salary. Unfortunately, Bob lies about how much he makes. Yes, he “only” paid a $12,000 salary. However, the church also provides Bob a parsonage rent-free, with all utilities paid. The church also pays all the maintenance costs for the parsonage. [Cue Ron Popeil] But wait, there’s more! The church also provides Bob with a car to drive, gives him a gas allowance, pays his medical insurance, life insurance, and auto insurance premiums, pays his cellphone bill, and provides him a book allowance. As you can see, the good pastor actually makes $46,000 a year. And when Bob files his income tax return, his taxable income is only $12,000, not the $46,000 he actually made. All of this is 100% legal.

Pastors are dual-status employees. They are considered employees for income tax purposes and self-employed for social security purposes. Typically, pastors receive a 1099 from their churches, not a W-2. Churches are not required to withhold taxes, so many pastors are required to make quarterly income tax payments.

Pastors can have their churches designate part of their salary as housing allowance. A housing allowance can include rent, mortgage, fair market value of the parsonage, utilities, insurance, and maintenance costs, to name a few. The housing allowance is not subject to income tax. It is, however, subject to Medicare and Social Security tax, though I will explain in a moment how pastors can avoid paying these taxes too.

Churches can provide all sorts of allowances to their pastors that are also tax exempt. A church can buy a new car for its pastor, provide him a gas allowance, and pay all the insurance, repair, and maintenance costs. As long as the car is used *wink, wink* only for church business, the pastor pays no income tax for its use. I drove church-provided cars for years. We also owned a second car. The church-provided car was used only for church business, but truth be told, it was used for personal business too. Of course, our second car was often used for church business, so the “use” balanced out.

Pastors are required to pay Medicare and Social Security taxes. Typically, pastors pay the self-employed rate. However, pastors can file for an exemption from these taxes if their churches are *wink, wink* morally opposed to government social insurance. Countless pastors file for exemption so they can pay into a private retirement account instead or boost their weekly pay. As a Baptist pastor, I filed for exemption at age twenty-three. For the next twenty years, I paid no Medicare or Social Security taxes on my ministerial income. I planned to use the money to fund a private retirement account. Of course, life got in the way and that never happened. In the early 2000s, I realized that I had made a horrible mistake. Getting older and having health problems will do that to you. I renounced my exemption and started paying Medicare and Social Security taxes again. Sadly, five years later, I was no longer able to work. Not paying into Social Security for so many years made me ineligible for disability. I retired three years ago and receive $800 a month. This payment is primarily based on my income and work quarters from secular work and self-employment income. If it had not been for me working outside of the church, I would have zero retirement income. Oh, the stupid decisions we make when we are young and healthy.

Some pastors and evangelists incorporate their ministries as non-profit businesses. Pastors who do this are employees of their corporations, not their churches. This provides pastors with additional tax benefits and can, in some circumstances, insulate pastors from legal liability.

Remember, the goal is to avoid paying taxes. Evangelicals, in particular, love putting the screws to the “evil” government. Through legal use of the tax code and having eight deductions, I didn’t pay income taxes on my ministerial income for almost two decades. Since I was also exempt from Medicare and Social Security taxes, most years I paid zero taxes. For many years, thanks to the Earned Income Credit (EIC), I actually got a substantial refund check. There were years when my housing allowance made up most of my ministerial income. Eligible pastors get larger EIC credits than non-clergy due to the fact that their housing allowance wasn’t counted as income. Fortunately, the IRS fixed this issue, and pastors are now required to claim their housing allowance as income for EIC purposes.

In closing, let me state that I am not a tax lawyer or an accountant. That said, I have dealt with several accountants over the years who knew very little about the issues mentioned in this post. I got into a heated argument with one accountant over the church I was pastoring at the time giving me a W-2 instead of a 1099. I tried to educate him on this issue, but he doubled down, playing the “authority” card. He later determined I was right and issued me a 1099. Of course, I knew I was right. I had actually taken classes on church and clergy taxation and benefits.

I am not in any way suggesting pastors are being dishonest — though some pastors most certainly are. Like all of us, pastors take what tax deductions and allowances the law allows. If you could take a deduction or allowance that reduced your income tax by 50-90%, you would do it. Few of us like paying taxes. The answer, of course, is to change the tax code. Personally, I would like to see the clergy housing allowance done away with. Pastors should pay the same taxes everyone else does. By allowing pastors to drastically reduce their taxable income through the housing allowance, all taxpayers are, in effect, subsiding churches. The same goes for permitting pastors to opt out of paying Medicare and Social Security taxes.

American taxpayers subsidize churches to the tune of billions of dollars a year by allowing churches and pastors a plethora of tax exemptions. I plan to write a post on this subject in the near future. Stay tuned.

Bruce Gerencser, 67, lives in rural Northwest Ohio with his wife of 46 years. He and his wife have six grown children and sixteen grandchildren. Bruce pastored Evangelical churches for twenty-five years in Ohio, Texas, and Michigan. Bruce left the ministry in 2005, and in 2008 he left Christianity. Bruce is now a humanist and an atheist.

Your comments are welcome and appreciated. All first-time comments are moderated. Please read the commenting rules before commenting.

You can email Bruce via the Contact Form.

Understanding 501c3 Status for Churches

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somerset baptist church 1989

I listen to a lot of atheist podcasts and watch a lot of videos. I have noticed a disturbing trend among these content creators: when it comes to church taxation, tax exemption, non-profit status, and 501c3 status, many of them don’t know what the hell they are talking about. I used to politely and privately correct these content creators. Unfortunately, not one person responded to me, thanking me for correcting their mistake, so I stopped doing so. If we are going to critique Christianity, particularly Evangelicalism and the Independent Fundamentalist Baptist (IFB) church movement, then we have a duty to so honestly and factually.

ALL churches, by default, are granted 501(c)(3) status but the Internal Revenue Service (IRS). Churches don’t have to apply for this status, nor do they have to be non-profit. If a group of people gather together in a home somewhere, have a pastor/teacher/elder, and worship their God on a regular basis, the IRS, by default considers them a church. In the mind of the IRS, if it looks like a church, it is a church. The IRS goes out of its way to NOT define what a church is. Yes, the IRS publishes criteria for what constitutes a church, but they do NOT use this list in any meaningful way when determining 501(c)(3) status. Freedom of religion is all that matters to the IRS, so if a church says it’s a church, that’s good enough for them.

501(c)(3) status allows a church exemption from federal taxation. Its donations are tax-exempt, and donors can claim their donations on their tax returns. This does not mean the church’s pastor and/or staff is exempt from federal taxation. He still has to pay federal income tax, Medicare tax, and Social Security tax. Pastors are generally considered self-employed, though the law is complex on their status. Pastors should receive a 1099 from their churches, not a W-2 (generally speaking). I will show in another post how pastors can use special provisions in the law — exemptions and deductions only available to them — to drastically reduce their taxable income. (It’s a great gig if you can get it. Just start a church and all these perks can be yours!)

In many states, churches are exempt from sales tax and real estate tax. I lived in one area where the Catholic church owned thousands of acres and numerous houses — all exempt from real estate taxes. I bought several new cars through one church I pastored, saving hundreds of dollars in sales tax. When I went to file the title for one car, the person in charge refused to do it. She told me I had to pay taxes on the purchase. I told her I didn’t. The car was owned by the church and provided to me for my use. This went on for a couple of days. Finally, her boss in Columbus informed her that she had to title the car.

Churches are not necessarily non-profit. Here in Ohio, a church must apply for non-profit status. The churches I pastored were non-profit corporations (though none of them actually followed Ohio corporate law). Incorporating allows churches to shield their officers from personal liability for malfeasance. When churches are sued, it’s the corporation that is sued, and not its officers (pastors, deacons, board members). It might be surprising for readers to learn that, in incorporated churches, it’s their constitution and bylaws that determine how a church is governed and how claims are adjudicated, not the Bible. Churches learn this the hard way when they have conflict or when they are trying to fire a pastor.

Once a church has non-profit status, it can then file for OFFICAL 501(c)(3) status. This is different from the generic 501(c)(3) status granted to all churches. Official 501(c)(3) status requires churches to file documents with the IRS, proving that they are a charity worthy of tax exemption. Once a church is approved, it receives an official letter that states it has 501(c)(3) status. Denominations apply for 501(c)(3) status, and once approved, all churches under their umbrella are, by default, granted official 501(c)(3) status. Once approved, churches have greater access to grants and programs, along with special mailing privileges with the U.S. Post Office.

Hopefully, readers will find this helpful. I am not a tax lawyer nor accountant. I do, however, have extensive experience starting new churches. It was important to me at the time to know exactly what the law said about churches. While I haven’t started a new church in a few years, I am unaware of any meaningful changes in the law that would alter what I have written here. If you have any questions, I am more than happy to answer them.

Bruce Gerencser, 67, lives in rural Northwest Ohio with his wife of 46 years. He and his wife have six grown children and sixteen grandchildren. Bruce pastored Evangelical churches for twenty-five years in Ohio, Texas, and Michigan. Bruce left the ministry in 2005, and in 2008 he left Christianity. Bruce is now a humanist and an atheist.

Your comments are welcome and appreciated. All first-time comments are moderated. Please read the commenting rules before commenting.

You can email Bruce via the Contact Form.

Twenty-One Things You Might Not Know About Evangelical Churches and Pastors

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did you know

Most Americans are quite ignorant about Evangelical churches and their pastors (I use the word “pastor” as a general term that encompasses pastors, elders, missionaries, evangelists, et al.). Here are twenty-one things you might not know:

  1.  Churches, by default, are tax-exempt. Churches do not have to apply for 501(c)(3) status in order to be exempt.
  2. In many states, churches are exempt from paying sales and real estate taxes.
  3. Anyone can start a church. (See How to Start an Independent Baptist Church.) A church is a church if it says it is.
  4. In many states, churches can operate Christian schools, daycares, teen group homes, and boarding schools without ANY government licensure or oversight.
  5. In many states, Christian schools are exempt from all laws governing schools. (See How to Start a Non-Charted Christian School in Ohio and The Anatomy of an Unaccredited Christian School.)
  6. In many states, churches can start colleges and grant degrees without ANY government licensure or oversight.
  7. Anyone can be a pastor. There are no educational or licensure requirements for becoming a pastor. A man is a pastor because he says he is.
  8. In many states, pastors can counsel people without having any training. In most states, pastors are not required to be licensed to counsel people. (Please see Beware of Christian Counselors, Questions: Should People Trust Christian Counselors with Degrees from Secular Schools?, Outrage Over Christian Counselor Post, Biblical Counseling, A Danger to Hurting Church Members,  and Why I Thought I was “Qualified” to Counsel Others.)
  9. Pastors are permitted to opt-out of paying social security tax. This means pastors don’t pay social security tax on their income and housing allowance.
  10. Pastors receive a housing allowance that is income tax-free.
  11. Pastors, in most instances, are treated as employees for income tax purposes and self-employed for social security purposes.
  12. Pastors can drive church-owned vehicles, thereby reducing their taxable income by thousands of dollars a year.
  13. The more expenditures churches pay on behalf of their pastors, the less income tax pastors have to pay.
  14. For many pastors, their effective tax rate is quite low. Many pastors pay NO income tax, especially if they have a number of children.
  15. Pastors can incorporate their ministries, shielding themselves from liability and lawsuits.
  16. Churches can also incorporate, shielding themselves from liability and lawsuits.
  17. Donations of money, personal goods, and property to churches are considered charitable, tax-deductible donations.
  18. Churches are exempt from filing non-profit tax returns.
  19. Churches are not required to do background checks on people who work with children and teenagers.
  20. There is no national database for pastors accused or found guilty of sexual abuse or other criminal behaviors.
  21. Many of the pastors who call themselves “Dr.” have honorary doctorates or doctorates from diploma mills. (See IFB Doctorates: Doctor, Doctor, Doctor, Everyone’s a Doctor)

Bruce Gerencser, 67, lives in rural Northwest Ohio with his wife of 46 years. He and his wife have six grown children and sixteen grandchildren. Bruce pastored Evangelical churches for twenty-five years in Ohio, Texas, and Michigan. Bruce left the ministry in 2005, and in 2008 he left Christianity. Bruce is now a humanist and an atheist.

Your comments are welcome and appreciated. All first-time comments are moderated. Please read the commenting rules before commenting.

You can email Bruce via the Contact Form.

Should Churches be Tax-Exempt?

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irs

If people give money, services, or property to a church, they can use the amount of their donation to reduce their federal income tax liability. Every year, billions of dollars of money, services, and property are given to churches. All churches, by default, are tax-exempt. Many people wrongly think that a church must be 501(c)(3)-approved to be tax-exempt. But that’s not the case. All a group needs to say to be tax-exempt is this: we are a church. That’s it. By 9:00 a.m. next Sunday, I could start a church that would be completely tax-exempt by IRS standards, even if only my family attended. (Please see How to Start an Independent Baptist Church.)

The IRS deliberately steers away from explicitly defining what a church is. In their view, if it looks and acts like a church, it is a church. Here are the main criteria the IRS uses to decide whether a church is tax-exempt:

  • a distinct legal existence and religious history,
  • a recognized creed and form of worship,
  • established places of worship
  • a regular congregation and regular religious services, and
  • an organization of ordained ministers

As you can see, it is very easy for a group to be considered a church by the IRS.

Churches are also, in many states, exempt from paying sales and real estate taxes. Ohio is one such state. Churches can even operate for-profit businesses that are tax-exempt. In the 1970s, churches were encouraged to start daycare centers as a way to maximize building use and generate income – uh, I mean, minister to the poor. Just because a church tacks the word “ministry” on the end of a business name doesn’t make it one.

The question I ask is this: Should church donations be tax-deductible? Should churches be tax-exempt?

Christians will quickly state that their church is a charity and does good in the community, so their church should be tax-exempt and members should get a tax deduction for their donations. Relative to the amount of money they take in, do churches really do a great amount of good in the community? If the average church closed its doors tomorrow, would anyone outside of the membership care? Take a look at a church’s budget. Where does MOST of the money go? Salaries, benefits, insurance, utilities, buildings, and programs that only benefit the congregation. If a “real” charity spent their money in this manner, the IRS would pull their tax exemption and donations to said charity would no longer be tax-deductible. Yet, the IRS and federal and state governments give churches a blind-eye pass.

I have written on churches and their finances many times over the years. If you are getting ready to object, here’s my challenge. Send me your church’s budget. Let me take a close look at it. I have eagle-like eyes for seeing through the budget secrecy and bullshit many churches practice. Let’s take a close look at the numbers. Not the annual generic summary, but the actual income and expenses, I have made this challenge many times over the years, and not one church, pastor, or Christian has taken me up on it. They whimper, whine, and complain, but they never produce their financial documents. Why? They know the emperor has no clothes. They know if they shared their financials that the truth would be revealed.

If a church wants to be considered a tax-exempt charity, then they should be required to apply for charity status. They should then be required to spend the bulk of their money on charitable services that benefit the community. No church should be tax-exempt just because they say we are a church.

Most churches are social clubs and the price of membership is what people give in donations. The club rightly spends the bulk of its money on things that directly benefit the membership. As a club — a for-profit business — a church should be required to pay taxes and fill out all the tax forms that other businesses do. Isn’t it about time churches start paying their own way, just as every other business does? Why should First Baptist Church or St Peter’s Catholic Church be tax-exempt and receive free fire and police service and free infrastructure improvements? Why shouldn’t Betty’s Coffee Shop or Bob’s Bar and Grill get the same tax treatment as a church?

I support the elimination of all church tax exemptions (sales, real estate, income, social security), church donation tax deduction, and the clergy housing tax allowance/deduction. A practical side effect of eliminating these exemptions is that churches would then be free to endorse political candidates. No more Christian whining about their “free” speech being stifled. Churches would be FREE to do what they want AND pay taxes just like everyone else.

Bruce Gerencser, 67, lives in rural Northwest Ohio with his wife of 46 years. He and his wife have six grown children and sixteen grandchildren. Bruce pastored Evangelical churches for twenty-five years in Ohio, Texas, and Michigan. Bruce left the ministry in 2005, and in 2008 he left Christianity. Bruce is now a humanist and an atheist.

Your comments are welcome and appreciated. All first-time comments are moderated. Please read the commenting rules before commenting.

You can email Bruce via the Contact Form.

Understanding Evangelical Christianity: It’s All About the Benjamins

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free-money-for-pastor-walt

Warning! Snark and pointed commentary ahead. Easily offended Evangelicals should avoid reading this post lest it “trigger” them.

Every time I write about Evangelicalism and money, I get emails and comments from angry “Spirit-filled” Evangelicals who object to my characterizations of their churches, pastors, and beliefs. Evangelicals have convinced themselves that their churches serve some higher moral purpose and that their ensconcement in their local communities is essential to the welfare of locals, Christian or not; that their churches are bastions of morality and ethics, and without it, their communities would slide into immorality, unrighteousness, and decay. In their minds, they are the bulwark holding back Satanic, atheistic, socialistic Mongols intent on destroying Western civilization. That none of these things is true matters not. Perception is reality, and when it comes to Evangelical churches, they delusionally have a bigger-than-life view of their place not only in their local communities, but in society as a whole. The fact remains, however, that if every Evangelical church closed its doors tomorrow, most communities wouldn’t even notice. Sure, members of those churches would be adversely affected, but since Evangelical churches do very little meaningful charitable work, it is doubtful that people outside of the closed churches would notice their closures. I know, I know, ouch, but, as I will show, Evangelical churches, compared to the amount of money they take in, do very little, dollar-for-dollar, to “minister” to people who aren’t members of their clubs.

Evangelicals love to tout the notion that they give more money to charitable causes than secular people do. Take that, Bruce! Well, here’s the problem with this “fact: Evangelical charitable contributions include the money they donate to their churches and other religious organizations. If, as I assert, Evangelical churches are fundamentally clubs, and that congregations pay their membership fees weekly by giving money to their respective churches, then most of the “dues” stay inside the church. Take a look at the average church’s financials. Not the annual generic bullshit summary they put out, but the actual income/expense statements. What you will find is the most church income goes towards buildings, utilities, insurance, salaries, benefits, equipment, and programs that typically only benefit club members. It is not uncommon to find that a church spends less than ten percent of its income on actual ministry outside of the four walls of their sanctuary. The bigger the church, the less percentage-wise that is spent on doing meaningful work in the community. A megachurch might talk up the fact that they spent $1 million helping the “least of these” — laudable, to be sure — but $1 million out of a $25 million budget is what? Four percent of the church’s budget. In other words, ninety-six percent of the church’s income is spent in-house. Which is their right to do. Clubs have a right to spend their monies as they see fit. After all, clubs exist to benefit members, not people outside of their memberships. The issue I have is the unwarranted trumpeting of all the “good” Evangelical churches purportedly do in their communities. (If you are inclined to fire off an angry email to me that says your church and pastor are “different,” please send me copies of your church’s income/expense statements — full statements, not a summary. So far, not one Evangelical has done so, but, hey, maybe you’ll be the first.)

If Evangelical churches are clubs — and they are — then success is measured thusly: the more asses in the pews/chairs, the more money in the collection. Asses=money. No asses, no money. What are the two statistics that every congregant and prospective member wants to know? Attendance and church income. Take a look at the average church bulletin or attendance board. What two numbers do you find, regardless of the denomination? Attendance and offering. Churches in the United States — particularly Evangelical congregations — operate much as businesses do. What are businesses most concerned about? Customer counts and revenues. Granted, businesses are also concerned about profit and loss, but churches are given billions of dollars’ worth of tax exemptions and are wrongly considered by the IRS and state tax authorities as tax-exempt non-profits. And even here, churches get to play by special rules that don’t apply to “worldly” charitable organizations. Those organizations are required to file quarterly/annual tax returns, but churches are not. Why should churches and clergy receive these tax benefits? Evangelicals scream about federal tax money supporting Planned Parenthood, yet the taxes paid by non-Christians directly support the operations of Evangelical churches and their ministers. Why should atheists, agnostics, humanists, and other secularists be forced to support Evangelical (and other Christian) congregations? Perhaps, it is time to pull the tax teat away from Evangelicals. Just because a church says it is a charity doesn’t make it one. And why should non-Evangelicals pay for clergy housing and living expenses? Man, all this talk of tax exemptions makes me want to go out and plant a new church: The First Church of the Latter-Day Dude — Ney Branch. (Please see How American Taxpayers Subsidize Churches and Ministers and Should Church Donations be Tax Deductible? and The Johnson Amendment: I Agree With Donald Trump and 21 Things You Might Not Know About Evangelical Churches and Pastors)

dudeism

I have participated in countless church business meetings and board meetings over the years. What’s the number one thing talked about at these meetings? Money. How to generate more income and on what to spend it on. Some churches take in far more money than they could possibly spend so they “invest” the money. It is not uncommon for older, established churches to be sitting on piles of cash. I pastored two such churches over the years. Both were sitting on large sums of money. Yet, when I suggested spending some of the money to renovate buildings, expand ministries, increase salaries/benefits, or fund new outreach ministries, why, you would have thought I had asked them for their first-born sons. Come on, that was God, not Pastor Bruce.

Regardless of whether Evangelical churches spend the money as fast as it comes in or squirrel it away in bank investment accounts, the fact remains that church life revolves around money. One the one hand, this shouldn’t be a surprise. Life, for all of us, revolves around money. The difference, however, for Evangelicals is that they purport to believe and practice the teachings of the Bible and set themselves up as some sort of moral authority. If you take the higher moral ground, then you should expect that people are going to hold you to a higher standard. And if you say your life is governed by the Bible, people are going to look at how you and the churches you attend handle money and ask, where is your treasure?

 Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also. The light of the body is the eye: if therefore thine eye be single, thy whole body shall be full of light. But if thine eye be evil, thy whole body shall be full of darkness. If therefore the light that is in thee be darkness, how great is that darkness! No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon. Therefore I say unto you, Take no thought for your life, what ye shall eat, or what ye shall drink; nor yet for your body, what ye shall put on. Is not the life more than meat, and the body than raiment? Behold the fowls of the air: for they sow not, neither do they reap, nor gather into barns; yet your heavenly Father feedeth them. Are ye not much better than they? Which of you by taking thought can add one cubit unto his stature? And why take ye thought for raiment? Consider the lilies of the field, how they grow; they toil not, neither do they spin: And yet I say unto you, That even Solomon in all his glory was not arrayed like one of these. Wherefore, if God so clothe the grass of the field, which to day is, and to morrow is cast into the oven, shall he not much more clothe you, O ye of little faith? Therefore take no thought, saying, What shall we eat? or, What shall we drink? or, Wherewithal shall we be clothed? (For after all these things do the Gentiles seek:) for your heavenly Father knoweth that ye have need of all these things. But seek ye first the kingdom of God, and his righteousness; and all these things shall be added unto you. Take therefore no thought for the morrow: for the morrow shall take thought for the things of itself. Sufficient unto the day is the evil thereof. (Matthew 6:19-34)

First century Christians likely met in homes. Two thousand years later, expensive Christian churches sit on countless street corners. First century preachers were likely bi-vocational. Two thousand years later, full-time pastors make good money, complete with benefits and vested retirement plans. First century Christians likely spent significant time ministering to the least of these. Two thousand years later, churches spend most of their money on making fat sheep fatter. It can be argued, then, that the Christianity of Jesus and the early church has long since died, and that whatever people call Christianity today bears little to no resemblance to the church that Jesus built.

Want to change my mind about Evangelicalism? Start spending those Benjamins you worship. Start meaningfully ministering to the poor, immigrants, orphans, and the other hurting people. Fire your pastors and staff and tell them to get real jobs. Remove the golden idol from the center of the church, and then you’ll see what people are made of. As it stands now, I don’t see a Christianity that matters. It is unlikely that I will ever darken the doors of a church again, but how about living in ways that would cause me to admire you and the work you do from afar.

About Bruce Gerencser

Bruce Gerencser, 62, lives in rural Northwest Ohio with his wife of 41 years. He and his wife have six grown children and twelve grandchildren. Bruce pastored Evangelical churches for twenty-five years in Ohio, Texas, and Michigan. Bruce left the ministry in 2005, and in 2008 he left Christianity. Bruce is now a humanist and an atheist. For more information about Bruce, please read the About page.

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How American Taxpayers Subsidize Churches and Ministers

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free-money-for-pastor-waltRight-wing Christian Republicans love to talk about the importance of religious freedom, and how liberals and atheists are hell-bent on destroying this freedom. Listen to Evangelical talking heads and you would think that the martyrdom of American Christians is just around the corner; that if atheists have their way, Christians will be rounded up and imprisoned in WWII-type internment camps. Of course, none of these things is true. Christians are free to worship Gods where they wish, in any manner they wish, without government intrusion. Christians are free to stand on street corners and preach their versions of the gospel. Christians are free to start new churches, proselytize, and do any of the things they have done for the past two hundred years. Similar to the cheesy bread in the Domino’s commercial, you’re FREE Christians, you’re FREE.

Video Link

What HAS changed is that Christianity is no longer given a seat at the head of the American culture table. Evangelicals, along with conservative Catholics, are butt-hurt over their loss of influence and power. In a last-ditch attempt to regain their glory days, many Christians have turned to politics. Now spiritually bankrupt, Evangelicals have abandoned Jesus and turned to their true God: Republican politics. Eighty-two percent of voting Evangelicals voted for pussy-grabber-in-chief Donald Trump. Without their vote, Hillary Clinton would be president. Worse yet, Evangelicals have spent the last two years defending and supporting a man who can only be described as a sociopathic, narcissistic liar. But, hey, he’s a “baby” Christian, right?

Secularism and religious indifference are on the rise in the United States, and young Americans are fleeing organized religion in droves. Evangelicals feel their power slipping away, and they don’t know what do. So, much as did Joseph McCarthy in the 1950s, Evangelicals see demons — and liberals, socialists, communists, and atheists — under every bed. What they, in fact, see are delusions cooked up in the minds of Evangelical preachers. The fall of American Christianity rests on Christians themselves, not secularists or atheists. Certainly, we are enjoying the bonfire, but it’s Evangelicals who gathered the wood and set it on fire. How about some hot dogs or marshmallows?

Secular legal groups have now set their sights on how government unconstitutionally subsidizes Christian churches, pastors, and educational institutions with taxpayer money. That’s right, atheists and Fundamentalist Christians alike help support Christian churches through their payment of taxes. I, for one, am tired of financially supporting religious institutions. It’s time for churches, parachurch groups, Christian colleges, and other religious institutions to pay their own freight.

Here are some of the ways ALL of us currently support Christian churches, pastors, and religious schools:

  • Churches are, by default, tax exempt. There are no forms to file or reports to be sent in to the IRS. Any group of people can gather together, call themselves a church, and the IRS will consider them tax exempt. Churches are, by default, EXEMPT from all filing requirements. A church is a church because it is a church. End of discussion. Or so says current tax law.
  • Churches in most states are exempt from paying real estate and sales taxes.
  • Monetary or in-kind donations to churches are tax exempt.
  • Pastors can claim what’s called a housing allowance. This allowance allows churches to designate their pastors’ rent/mortgage, utilities, home repairs, and other housing expenses as part of their housing allowances. Claiming a housing allowance allows pastors to drastically reduce their taxable income. Some pastors claim ALL their income as housing allowance, thus reducing their taxable income to ZERO.
  • Pastors can also opt out of Social Security. That’s right. Pastors can pay little or no income tax and no social security tax. Jesus F. Christ, what an awesome deal!
  • Pastors can buy cars through their churches, and have their churches pay all the expenses, further lowering their taxable income. Other expenses such as book and computer purchases can be made through the church, lowering a pastor’s taxable income. The goal is to give the evil government as little money as possible. Zero taxes paid and a big fat Earned Income Credit refund is the wet dream of countless Evangelical preachers.

I was a pastor for twenty-five years, and I can tell you this: any pastor who is paying income tax needs to get a better accountant. The U.S. Tax Code provided numerous ways for churches and clergy to avoid paying taxes.

It is time for us to end all tax subsidies for churches and clergymen. Churches should be forced to PROVE they are charitable organizations before receiving tax-exempt status. Good luck with that, churches. Churches should be required file the same tax forms and pay the same taxes as businesses. No more hiding the truth about the golden calf of American Christianity. And while we are at it, it is time for pastors to pay the same taxes as everyone else. Both churches and pastors should pay their fair share. The United States is a secular country, and as such, we should stop supporting Christian churches, pastors, and educational institutions with tax money.

Evangelicals clamor for religious freedom, and I am all for giving it to them. The government has no business subsidizing religious institutions and their leaders. It’s time to set the cheesy bread free!

About Bruce Gerencser

Bruce Gerencser, 61, lives in rural Northwest Ohio with his wife of 40 years. He and his wife have six grown children and twelve grandchildren. Bruce pastored Evangelical churches for twenty-five years in Ohio, Texas, and Michigan. Bruce left the ministry in 2005, and in 2008 he left Christianity. Bruce is now a humanist and an atheist. For more information about Bruce, please read the About page.

Bruce is a local photography business owner, operating Defiance County Photo out of his home. If you live in Northwest Ohio and would like to hire Bruce, please email him.

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The Johnson Amendment: I Agree With Donald Trump

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501c3

In the 1950s, thanks to men such as there’s-a-red-under-every-bed Catholic Congressman Joseph McCarthy, American Christianity’s God found a home in the Pledge of Allegiance and on the back of our paper money. Under God was added to the Pledge (1954) and In God we Trust was added to American paper currency (1957). In 1957, President Dwight Eisenhower signed a bill into law that stated the national motto was In God we Trust. These blatantly unconstitutional acts are still with us today. In 1954, then-Senator Lyndon B. Johnson proposed an amendment to U.S. tax code that would forbid churches and other non-profit, tax exempt institutions (501(c)(3)) from endorsing and campaigning for political candidates. This amendment is currently part of the tax code.

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity. Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain taxes.

Certain activities or expenditures may not be prohibited depending on the facts and circumstances. For example, certain voter education activities (including presenting public forums and publishing voter education guides) conducted in a non-partisan manner do not constitute prohibited political campaign activity. In addition, other activities intended to encourage people to participate in the electoral process, such as voter registration and get-out-the-vote drives, would not be prohibited political campaign activity if conducted in a non-partisan manner.

On the other hand, voter education or registration activities with evidence of bias that (a) would favor one candidate over another; (b) oppose a candidate in some manner; or (c) have the effect of favoring a candidate or group of candidates, will constitute prohibited participation or intervention.

The Internal Revenue Service provides resources to exempt organizations and the public to help them understand the prohibition. As part of its examination program, the IRS also monitors whether organizations are complying with the prohibition.

Churches and their pastors KNOW that U.S. law forbids directly endorsing or campaigning for political candidates. They also know that they are free to ignore the law because the IRS has shown that it has no appetite for going after churches and pastors who spend time and money whoring for political candidates. Evangelicals, sensing that the Obama Administration will not revoke their tax exemption, now want Congress to overturn the Johnson Amendment, giving churches and pastors the right to keep their blanket tax exemption AND endorse, work for, and financially support political candidates.

In recent days, Republican Presidential Candidate Donald Trump has said that, if elected, he would work to repeal the Johnson Amendment. I agree. I hope Congress will remove this amendment from the U.S. Tax Code. I also hope they will strip from the tax code the clergy housing allowance and any/all preferences churches and religious institutions currently receive. It is time for poor, helpless churches and their pastors to be cast out into the world to live by the same rules and laws that govern other businesses. Yes, other businesses, because churches are, above all else, profit-driven businesses. The charitable, public service parts of what churches do is minuscule. Churches exist, for the most part, to serve their customers — members and prospective members. If churches wish to remain tax-exempt, then the bulk of their income should be spent on charitable works. As it stands now, churches spend most of their money on buildings, salaries, benefits, and programs that only serve congregants.

If, as Donald Trump and many Evangelicals/Catholics want, the Johnson Amendment is overturned, churches and religious institutions should then be required to file business income tax returns and govern themselves according to current business law. This means churches and religious groups should also be required to pay sales tax, real estate tax, and every other tax businesses pay. Imagine the trillions of dollars that will make its way into local, state, and federal government coffers.

Churches and pastors should be careful about what they wish for. If churches are required to play by the same rules as businesses, I suspect that there would be a lot of church bankruptcies and mergers. Good news, to be sure, for those of us who are tired of churches receiving unconstitutional favoritism and financial support via tax exemptions, tuition payments, reduced postage charges, and other tax benefits that are only available to churches and religious institutions. But, bad news for those few churches and pastors who really do care about the social welfare of others.

Notes

Churches have always been permitted to support ballot initiatives and issues.

Pastors, outside of their official capacity, are free to endorse candidates. Unfortunately, this line has become blurred, and an increasing number of pastors and parachurch leaders now think they can endorse candidates without restriction. Realizing that they are breaking the law, these so-called men of God often add to their pronouncements, I say this as an individual, not in my official capacity as a pastor. And then they smile and wink.

Churches, by the way, do not have to file for 501(c)(3) tax status. They are, by default, considered tax exempt. Churches do not have to file any documents in order to be exempt.

What is a Church According to the IRS?

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irs

Anyone can start a church. In most cases, the new church will be considered tax exempt by federal, state, and local government.

The IRS lists the following generic (albeit very Christian sounding) characteristics of a church:

The term church is found, but not specifically defined, in the Internal Revenue Code. With the exception of the special rules for church audits, the use of the term church also includes conventions and associations of churches as well as integrated auxiliaries of a church.

Certain characteristics are generally attributed to churches.  These attributes of a church have been developed by the IRS and by court decisions.  They include:

  • Distinct legal existence
  • Recognized creed and form of worship
  • Definite and distinct ecclesiastical government
  • Formal code of doctrine and discipline
  • Distinct religious history
  • Membership not associated with any other church or denomination
  • Organization of ordained ministers
  • Ordained ministers selected after completing prescribed courses of study
  • Literature of its own
  • Established places of worship
  • Regular congregations
  • Regular religious services
  • Sunday schools for the religious instruction of the young
  • Schools for the preparation of its members

If a group of people generally exhibit these characteristics they are considered a Church by the IRS. State laws are different from federals laws and vary from state to state.

A Church is not required to file for 501c3 status to be tax exempt. 501c3 status does grant certain additional benefits to the church, BUT it is not required for tax exemption.

The IRS handbook for churches states:

Congress has enacted special tax laws applicable to churches, religious organizations, and ministers in recognition of their unique status in American society and of their rights guaranteed by the First Amendment of the Constitution of the United States. Churches and religious organizations are generally exempt from income tax and receive other favorable treatment under the tax law; however, certain income of a church or religious organization may be subject to tax, such as income from an unrelated business.

The IRS church handbook states:

Churches and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under IRC section 501(c)(3) and are generally eligible to receive tax-deductible contributions. To qualify for tax-exempt status, such an organization must meet the following requirements:

■ the organization must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes,
■ net earnings may not inure to the benefit of any private individual or shareholder,
■ no substantial part of its activity may be attempting to influence legislation,
■ the organization may not intervene in political campaigns, and
■ the organization’s purposes and activities may not be illegal or violate fundamental public policy.

Churches that meet the requirements of IRC section 501c3 are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS.

Now, get out there and start a church. You can do it!

If you need ordained, check out the Universal Life Church.

Bruce, surely it is more complicated than that? I assure you, it is not. I’ve thought about starting a new sect, The Church of Bruce Almighty®. Donations would be tax-deductible and my church could buy buildings, property, cars, and other essential ministry tools and not pay tax.

Only in America…