Originally published on Forbes.com.
Some Background
L Ron Hubbard is reputed to have remarked to fellow author Theodore Sturgeon “ Y’know, we’re all wasting our time writing this hack science fiction, You wanta make real money, you gotta start a religion “. It would get even better. The thirty year war that his religion, Scientology, waged with the IRS ended in 1993 with Scientology organizations being recognized as churches.
Many years after Hubbard’s casual remark, not-for-profits in the United States were subjected to fairly strict financial transparency rules enforced by the IRS through a requirement of filing Form 990, which includes, among other things, disclosure of the salaries of the highest paid employees. 990s are easily accessed on guidestar.org. Don’t expect to find, the salary of Scientology leader David Miscavige on guidestar.org , though. Churches are exempt from filing Form 990.
The Freedom From Religion Foundation litigates about many of the ways in which the law privileges churches. Officers of FFRF may well find the 990 exemption particularly irksome, since FFRF has to file the form itself. Regardless, they went to court about it. Last week they got the bad news from Judge Barbara Crabb. Following the Seventh Circuit’s reasoning in FFRF’s case against the parsonage exclusion, which allows the mega pastors of mega churches to exclude mega housing allowances from taxable income, Judge Crabb ruled that FFRF does not have standing to bring the suit.
Churches And Transparency
FFRF is an atheist organization and you could view this lawsuit as just one more attack on religion in the public square like the suit about prayers at the school board meeting in Chino Valley, Calif or the one about a ten commandments monument in front of Valley High School in Pennsylvania. I think that view is mistaken. Lack of transparency in churches is a concern among people who are deeply religious.
The standards of the Evangelical Council on Financial Accountability require that member organizations provide audited financial statements on request. ECFA is concerned about the effect that financial shenanigans have on non-believers citing Paul’s letter to the Corinthians which states “For we are taking pains go do what is right, not only in the eyes of the Lord but also in the eyes of men.”
The strongest voice I have noted for church financial transparency is that of Reverend Frank Benson Jones. In his book Stop The Prosperity Preachers he argues that lack of transparency is one of the things that draws the wrong type of people into ministry. He believes that if the profits were removed, only prophets would remain.
I have heard of some churches that require the members of the staff to sign non-disclosure agreements, and that is a sure sign the church is doing something wrong. Requiring churches and religious organizations to file an IRS form 990 would in no way impede the constitutionally guaranteed freedom of religion, but it would help to expose those greedy preachers who are using the constitution to conceal their improper accumulation of wealth at the expense of American citizens.
Reverend Jones finds prosperity preachers forming something of a mutual admiration society to keep their con going.
Any evangelist who preached to a congregation that the pastor should obey 2 Corinthians 8:20-21 by giving full financial disclosure to the congregation would not be invited back to that church and would probably be put on the undesirable list by other prosperity preachers who heard of the evangelist’s message. Any evangelist who is known for failing to support a pastor’s right to maintain the confidentiality of a church’s finances would be committing economic suicide and would eventually not be welcomed by the prosperity preachers who could afford to give such an evangelist the largest offerings.
I find it strange and appalling that the salary of the president of the United States is made public; the salaries of the members of the Senate and the House of Representatives are made public; the salaries of every state governor are made public; but the salaries of pastors and church employees are kept confidential and top secret.
Many, probably most, churches are financially transparent, but the lack of transparency affects some of the largest mega-churches.
The Ruling
FFRF argued that it should not have had to subject itself to possible sanctions in order to be in a position to challenge the exemption for churches. The argument did not go anywhere. Judge Crabb noted that the IRS has Form 8940, which provides for a request for rulings on, among other things, exemption from filing Form 990. If FFRF had used that form, they would not having been following the instructions, so I don’t know if that would have worked.
In this case, plaintiffs have disavowed any interest in seeking an exemption. (“The plaintiffs have been annually filing the information return, Form 990, required by § 501(c)(3), and they will continue to do so in the future.”). Even after defendant pointed out this issue in his motion to dismiss, plaintiffs did not seek to amend their complaint to allege that they would attempt to take advantage of the exemption if it were not for their fear of sanctions. Rather, their sole interest has been in eliminating the exemption for religious organizations. Because plaintiffs have not expressed an interest in engaging in conduct that could be sanctioned, the threat of sanctions cannot qualify as an injury for standing purposes.
Comments On The Decision
I reached out to my Establishment Clause “brain trust” for some comments on the ruling. So far I have heard from Professor Samuel Brunson of Loyola University School of Law who wrote me:
I think Judge Crabb’s decision is spot-on; again, the FFRF chose not to pursue an exemption from the filing requirement. Not only that, it disavowed any desire to do so. But standing, with very few exceptions, requires personalized harm, and those exceptions don’t appear to have been here.
And again, “standing” may not mean much to the average person; I understand that we want to see justice done, but the procedural protections do, in fact, promote fairness and justice, while making sure that their administration is systematized.
Professor Edward Zelinksy of Yeshiva University writes:
Judge Crabb has, in a thoughtful and well-reasoned manner, done exactly what a district judge is supposed to do: follow the precedent established by the Court of Appeals. The Court of Appeals for the Seventh Circuit has now stated that, to have standing, FFRF or anyone else similarly situation, must asked for and be denied the exemption they are challenging. Since this is the controlling decision, Judge Crabb was right to follow it.
This confirms my view that increasingly First Amendment litigation of this sort will be shifting to the state courts where standing rules are more favorable to the challengers.
People In The Pews
Most charities are subject to some level of transparency, but not churches. That leaves it up to the members to demand transparency. If you meet resistance from the leadership, maybe you might consider that rather than a sheep who is being fed, you are one that is being shorn.