The Same-Sex ‘Marriage’ Defeat and the Looming Tax Threat
Now that the Supreme Court has made same-sex ‘marriage’ the law of the land, everyone is wondering how it will affect religious institutions and businesses that have conscientious objections. Currently, churches, religious schools and charities enjoy nonprofit status, and donations are tax-deductible. Additional local laws exempt them from property taxes and state income taxes. There are fears the government will eliminate these tax benefits for those who don’t fall into line, and possibly even institute penalties for not complying.
There is precedent a court could easily rely on to do this. In the 1983 Bob Jones University case, the Supreme Court held that a school could lose its tax-exempt status if its policies violated “fundamental national public policy.” There, the university had a policy that prohibited interracial dating. IRS regulations promulgated in 1970 prohibited racial discrimination by tax-exempt private schools and universities. The decision against Bob Jones University could be broadened to extend to same-sex marriage policies.
The clamor is getting louder, with many asserting that taxpayers are subsidizing churches, and opponents point to beautiful church buildings and a handful of wealthy televangelists as evidence of extravagance. At Time magazine, Mark Oppenheimer writes, “You and I are subsidizing Mormon temples, Muslims mosques, Methodist churches.” Less popular churches that have been granted tax exemptions, such as the Church of Scientology and the dubious Church of Cannabis are being highlighted as examples of why the policy needs to change. Eliminate the tax breaks, Oppenheimer writes, and “government revenue would go up, and that money could be used to, say, house the homeless and feed the hungry.”
What he doesn’t mention is that an estimated 85 percent of churches barely break even or operate at a loss. And much of their efforts are geared toward helping the needy. Churches have been exempt from taxes since 1917, and the arrangement works. A 2010 Indiana University survey found that over two-thirds of high-net-worth donors said they would decrease their giving if they did not receive a deduction for donations. The U.S. has the most generous tax incentives for charitable giving, and the highest level of giving as a percentage of GDP, 1.67 percent. Americans give over half of their charitable donations to religious organizations.
If the tax-exemption starts getting used as cudgel, other areas besides churches to be affected include ministries, parochial schools, Christian colleges, religious news sources, military chaplains, Christian adoption agencies and hospitals. Brigham Young University’s honor code bans “homosexual behavior.” Will the ban go or the tax exemption? There may come a moment when the BYU board has to decide.
The route the opposition will likely take is to target a small Protestant church first, since it won’t have massive resources to fight back. Once the first church loses its tax-exempt status, it will be much easier to strip the tax-exempt status of other uncooperative churches. Another way it might be accomplished is Obama issuing an executive order. (He’s fond of those.)
Countermoves
One solution being proposed is to eliminate the corporate income tax and convert nonprofits to corporations. The corporate income tax has been around for roughly 100 years, and ranges from 15 to 35 percent. The U.S. has the highest corporate income tax of developed countries, bringing in about nine percent of all federal revenues. However, it would be an uphill battle to eliminate it. Even if successful, there would still remain the problem of which religious entities were tax-deductible gift destinations and which weren’t.
Perhaps a better solution would be for nonprofits to form two separate entities. One side, the nonprofit, would consist of very little except the ability to accept tax-exempt donations, perhaps serving an educational purpose. It could then provide grants to the other side, which could be a corporation or 501(c)(4), an entity that is allowed more leeway in engaging in politics. This model is already in use by many groups that engage in political activism, such as pro-life organizations.
Some are considering the “Benedict Option,”withdrawing from the public sphere and meeting to worship privately in homes as is done in communist China. Richard Land, president of the Southern Evangelical Seminary, says that is not a realistic solution, “What makes you think the progressive left will leave you alone in your monastic communities? They’ll come after you there.”
Sen. Mike Lee (R-Utah) and Rep. Raul Labrador (R-Idaho) introduced the First Amendment Defense Act a couple of weeks ago, which would prevent any agency from denying a federal tax exemption, grant, contract, accreditation, license or certification to an individual or institution for acting on their religious belief that marriage is a union between one man and one woman. However, it is uncertain that it will make it into law and if it did, it might get shot down by the courts, which have shot down similar state bills.
The trick is fashioning a sound remedy that also has a political constituency of winners behind it that can push it through. One thing is for certain, churches must stand their ground and pool their resources to unite and stop this from happening. Standing around and watching the hyenas pick off the smaller, more vulnerable prey isn’t a strategy for long-term success.
Churches and religious liberty will suffer if we don’t stand together. So, too, will the poor. Government has never been good at providing for the needy and, indeed, their interventions often make matters worse. As Ronald Reagan once said on the matter, “Government is the problem, not the solution.”
