US houses of worship respond to new tax law

02.07.19

By Micah McIntyre

Churches, non-profit organizations and other religious centers throughout the United States are preparing to pay their dues to the government for the first time this tax season because of a newly enacted law.

The Tax Cuts and Jobs Act of 2017 was drafted by Congress to increase federal revenue by cutting rates for individual taxpayers while increasing that of corporations, many of whom have never had to fill out these tax forms before. In the past, exempt organizations (EOs) have been taxed on any business-related income. This act created a new category for taxable income, mainly for churches and religious centers.

Included in this draft is a provision that adds a 21 percent tax on “unrelated business income.” This includes transportation, parking and other “fringe benefits” for employees, such as on-site facilities (gyms, pools, etc.) and entertainment and meal reimbursements. All of these services are now classified as new forms of income and can be taxed as any other business-related income would be.

Proponents of the tax cuts argue that it is in the best interest of the American people as a whole. The bill has lowered taxes for Americans of every economic level and made significant cuts for small-business owners. Additionally, the corporate sector will see its largest single tax reduction in US history, which Republicans and other supporters hope will add a tremendous boost to the economy in the coming years.

Sarah Huckabee Sanders defended the tax bill in a press conference, stating that they would “look into” changing the law in an effort to help churches keep their tax-exempt status, but maintained they must keep the population’s best interest in mind.

“I’m not going to make a blanket generalization about every church in America,” Sanders said to the Washington Times. “But certainly the goal of the tax cuts and reforms package was to provide the greatest amount of relief to the greatest number of Americans, and we feel that it’s done that.”

Of the benefits being taxed, parking is the most common one among churches around the country, but not every church is feeling the effects of this new law.  

In the Wheaton area, no churches or religious centers have encountered any issues regarding the new tax. Some of these churches and organizations include Church of the Resurrection, Wellspring Alliance, Gary United Methodist Church, St. Michael’s Catholic Church and the Islamic Center of Wheaton. These organizations reported that they had either not heard of the new law or did not have parking that would warrant taxation. However, churches in urban neighborhoods are more likely to be taxed due to limited parking and their need for designated parking spaces.

While the Willow Creek Community Church campuses in the Wheaton area do not meet the requirements for taxation, one of their sites in downtown Chicago is having to take action. The office of Willow Chicago told the Record that they are currently analyzing their parking situation to determine whether they will have to pay the new tax. The process is not complete, however, their parking is limited due to their location and they may have certain undesignated spaces that could be taxed as a result.

Wheaton College’s Department Chair of Politics and International Relations, Dr. Bryan McGraw, believes that churches and religious leaders have the power to fight the provisions in this bill and can create unity amongst themselves in such a divided culture.

“I do think churches can and should push back — and we should take this opportunity to partner with other religious groups, as we have a common interest here,” he said. “We don’t have to be apocalyptic about it — there isn’t an army of anticlerical, would-be revolutionaries about to use the power of the state against us (as in, say, China) — but this can really matter, and we should say so.”

Religious leaders of all faiths are working together with supporters in Congress to get this act repealed completely by March. Members of Congress on both sides of the aisle are drafting a bill that would eliminate this provision entirely, while others are trying to at least delay the implementation of the tax.

The Evangelical Council for Financial Accountability has created a petition that has been signed by over 2,800 organizations across the country. Additionally, 33 religious leaders from every major faith have drafted a unified statement calling for Congress to repeal this tax and to refrain from treating their institutions as “untapped sources of tax revenue” and will continue to fight this tax until it has been repealed.

“The whole idea of tax exemption for nonprofit organizations that are doing charitable, religious and educational work is for them not to be on the same playing field as for-profit businesses when it comes to taxes, in order to incentivize the good work they do to make our society better,” said Mike Batts, chairman of the board of the Evangelical Council for Financial Accountability to Politico.

He and other church leaders argue that the new tax will hinder the missions of charities and churches who are already overwhelmed with work and underpaid for their services.

Brian Walsh, the executive director of the Faith and Giving Coalition told the Columbus Dispatch that “to pay the substantial costs of this new tax on employee benefits, [churches] will have to make painful financial cuts while continuing to care for the enormous spiritual, relational and physical needs of their diverse communities.”

The debate between the separation of church and state rages on in the face of these legal changes. While the new tax will not necessarily affect every church and EO equally throughout the country, many are saying that this act is indicative of what may come in the future.

Russell Moore, president of the Ethics and Religious Liberty Convention calls the taxation of houses of worship “deeply un-American” and believes it compromises the separation of church and state.

“As the Founders understood, the power to tax is the power to destroy. Tax laws don’t exist to give special privileges for religious organizations. They are meant to recognize that, unlike in other places and at other times, the state here doesn’t regulate, or subsidize, the worship of God,” he said.

McGraw believes that this is the result of “religion’s diminished social and political influence” and could be the beginning of more legal changes that will negatively affect churches and other religious organizations.

“More broadly, though, it does signal that political authorities are (a) scrambling for new sources of revenue and (b) more willing to touch churches as a way of doing so,” said McGraw. “I wouldn’t be surprised to see further efforts to diminish special income tax privileges for pastors or efforts to treat churches as any other non-profit institution.”