October 24, 2019

Why Are Churches 501c3 not 501c4?

Background

Currently churches, mosques, and other religious organizations benefit from 501c3 status.  However, the Rotary and Lion’s Clubs enjoy 501c4 status.  So what, you may be asking, why are we discussing the tax code?  Well, these sections make a huge difference in the rights, privileges, responsibilities, and limitations afforded to these two types of organizations.

The 501c3 status is given to organizations that exist for a charitable purpose: religious, charity, scientific, education, etc.  The organization doesn’t pay taxes and all donations to these entities are tax deductible to the giver.  However, these organizations are absolutely prohibited from participating in a political candidate’s election campaign.

501c4 is a similar status.  Like the 501c3, the organization itself doesn’t pay taxes, but unlike the 501c3, the people donating DO NOT get a tax write off.  However, the institution is allowed to do substantially more lobbying and can do some level of endorsing of candidates, so long as it’s not the primary purpose of their existence.

Throughout my life, I’ve heard the fact that religious organizations can’t participate in political campaigns loudly bemoaned by pastors and other religious leaders, as if this was a form of persecution, a glitch in the tax code, or some dark conspiracy to silence them.  In fact it’s none of the above, the tax code explicitly calls out religious institutions for 501c3 status because it was ASSUMED that they would be non-partisan, would be focused on spiritual goals, and would not endorse specific candidates.  The legislators assumed the religious organizations would have their eyes focused on heavenly things, not politics.  However, as we saw during the last election, it’s now clear that this assumption is patently false and pastors do want to be able to support electoral candidates.

What’s the Difference Between a Religious Organization and the Lion’s Club?

So, the question now becomes, why should donations to a religious organization be subsidized by tax payers (by being tax deductible), but donations to the Lion’s Club shouldn’t be, especially if both want to participate in politics?  This leads to the question of, from the perspective of a secular government, what’s the difference between the Lion’s Club and a local church?  Note that I said from the perspective of the government.  Obviously a religious institution has numerous benefits from a religious perspective, particularly if you agree with the religion.

From a governmental perspective, both serve as a gathering place for citizens, both improve community, both provide for “social welfare” (part of the definition of 501c4), and both provide for a place to share values.  Often times, both do things in their community that are charitable.  However, for the Lion’s Club (and other similar entities), they have a 501c4 arm that serves the members and a 501c3 arm that does charitable activities.  So, again I’d ask, why should donations that turn on the lights at a church be tax free to the giver but those that turn on the lights at the Lion’s Club not be?  In both cases, those lights primarily provide for the “social welfare” of the members.

What Now?

Churches have made it clear that they wish to engage in politics.  I’d argue that this is a bad idea from a religious perspective because the divisiveness undermines the mission and goal of the church.  However, leaving that question aside, the solution is simple, let’s change religious organizations from 501c3 status to 501c4.  If they want to do charitable activities in the community or the world, then wonderful, create a charitable 501c3 for that purpose just like most 501c4 organizations do.  However, let’s turn the lights on with 501c4 dollars.  This will allow the pastor to proclaim his allegiance to a specific political party or candidate without fear of loosing his tax status, and will allow the rest of us to stop using our tax dollars to subsidize political parties we don’t like.  As an aside, it will also allow us to stop using our tax dollars to subsidize religions we don’t agree with.

Why Not?

The most common complaint I hear to this idea is that churches will loose funds.  I have two responses to this:

  1. The Bible says to support the local church and devout Christians did this for centuries without a tax benefit.  If they’d stop doing it now because they lost a tax benefit, that is a horrendous commentary on the quality of our teachings and beliefs about money.
  2. If we suddenly found that people were donating more to the 501c3 charitable arm of the church and not enough to the 501c4 arm, maybe that would be a good indication that the priorities of the institutions are out of alignment with their members?  Maybe we’re spending too much of the church budget on lights, salaries, buildings, and other things that primarily benefit the members, and not enough on the things that help the rest of the world.  If that were the case, would it be such a bad thing theologically if churches were forced to run a tighter budget for their internal purposes because people were more interested in giving to charitable causes?

Conclusion

While we’re all used to the benefits of religious organizations having 501c3 status, the fact that we’ve always done something one way is a terrible reason to continue doing it if it’s not working.  Religious leaders are upset that they don’t have the freedom to campaign for election candidates.  Everyone else doesn’t want to use their tax dollars to subsidize religions or political parties they don’t agree with.  Finally, if making this change caused fewer dollars to go to church buildings and religious salaries and more dollars to go to charitable causes that benefit the poor and needy, wouldn’t this align nicely with Jesus’ commandments to help the least of these?

 

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