Scott Greenberg | Tax Foundation
“Praise be to the IRS, that most permissive of government agencies,” is a phrase that presumably had never been uttered by anyone – until last Sunday night, when television comedian John Oliver delivered a twenty minute monologue about the tax status of churches in the United States.
Sunday’s episode of Last Week Tonight focused on how easy it is for groups in the United States to qualify as tax-exempt religious organizations. Several times, Oliver quoted from IRS regulations for tax-exempt religious organizations, and claimed that many of the guidelines are purposely vague and hard to enforce. To demonstrate his point, Oliver announced that he had founded his own church, Our Lady of Perpetual Exemption, showing how “disturbingly easy” it was to obtain tax-exempt status for a sham religious organization (the main mission of Our Lady of Perpetual Exemption is to collect donations).
While Oliver’s new “church” is sure to gain a great deal of attention, the tax-exempt status of religious organizations has long been an important topic in federal tax policy. Because of concerns about the separation of church and state, the IRS does not define the term “church.” Instead, it considers fourteen different criteria to determine whether an organization is a church, including whether it has an “established place of worship” and a “formal code of doctrine and discipline.”
Because of the difficulty of determining what counts as a religion, there have been dozens of court cases about which groups qualify as tax exempt religious organizations. For instance, in 1980, the First Libertarian Church was denied tax-exempt status after a court ruled that its regular supper club and “doctrine of ethical egoism” did not qualify as religious activities. More notably, the Church of Scientology gained tax-exempt status in 1993 after a twenty-five year legal battle with the IRS.
While the IRS does not grant tax-exempt status to organizations whose earnings mainly benefit private individuals, Oliver claimed that several religious organizations do not follow this regulation, citing pastors that receive large salaries and benefits from the churches they lead. In the segment, Oliver also noted that only three churches were audited by the IRS in 2013 and 2014, limiting the agency’s ability to enforce the requirements for tax-exempt organizations.
Churches and other religious organizations have been unofficially tax-exempt in most of the United States since the American Revolution. The Internal Revenue Act of 1913, which established the modern income tax, also contained a specific exemption for religious organizations.
Oliver’s latest episode comes in the wake of a heated public debate about the tax-exempt status of churches and other religious organizations. In late June, journalist Mark Oppenheimer published an essay in Time Magazine arguing that the federal government should consider eliminating the tax-exempt status of churches, given the difficulty of determining what counts as a religion. The piece evoked a strong reaction across the internet, with writers such as Professor Denny Burk claiming that, without tax-exempt status, it would be difficult for many churches to survive.
Source: TAX FOUNDATION