Originally published on Forbes.com.
John Oliver’s send up of televangelists particularly those who make claims about your donations to them helping you, rather than them, become prosperous or as an alternative to medical treatment is drawing attention to the IRS, since the televangelists enjoy favorable tax status.
Being a church is the most enviable of all tax statuses. Not only is the organization not taxed on its profits, it is not even subject to the sometimes embarrassing transparency that other not for profits like the National Football League must bear.
Unlike Tea Party groups, they don’t have to deal with Lois Lerner’s gang that couldn’t sort straight since a church is entitled to 501(c)(3) status without applying for it. The IRS has to jump through extra hoops before it can even look at a church and for a few years there one of the hoops was broken.
The icing on the cake is the parsonage exclusion which allows “ministers of the gospel” to exclude cash housing allowance from taxable income. There is no dollar limit on the housing allowance and although it is usually a modest benefit for modest pastors, it can run into hundreds of thousands of dollars for televangelists and mega-church pastors.
Some Church People Recognize The Problem
Some people actually think that the favorable tax status of churches is bad for religion. Reverend Frank Benson Jones in Stop The Prosperity Preachers wrote
Because of the failure of the government to require full financial disclosure from churches and because of the parsonage allowance tax loophole for ministers, many people have entered into the ministry for the sole purpose of making a financial profit.
The Laodicean prosperity preachers are using and abusing the parsonage allowance to a degree that was never intended. They are using enormous parsonage allowances to purchase palatial estates, and thereby, greatly reduce their taxable income.
Reverend William Thornton, who blogs on Southern Baptist issues, has also criticized the unseemliness of unlimited tax-free housing allowance.
No reasonable, thinking Southern Baptist minister can avoid one conclusion in all this: the manner in which our housing allowance has been used borders on clergy malpractice. A growing subset of ministers who are very highly paid and who live in multi-million dollar mansions are able to exclude hundreds of thousands of dollars from income taxation. While this is perfectly legal, I would expect that most of us would think it to be bad policy for both government tax law and for maintaining clergy goodwill in the community. Do we really think it fair to shift taxes from wealthy clergy living in mansions to the less highly compensated? Surely not. Add to that the practice of churches ordaining ministry associates in administrative or peripheral church jobs solely so that they can be qualified for the housing allowance.
Some of the worst abuses would be avoided if religious organizations followed the principles laid down by the Evangelical Council for Financial Accountability.
Mostly It Is Not Tax Issues
John Oliver focused on abusive fund-raising by televangelists who convince the weak, vulnerable and gullible that by sending money to the televangelists they will either be healed of their diseases or will receive financial rewards. The implicit assumption seems to be that the televangelist don’t actually believe this mishegas. Unless you could figure out a way to prove that though, there is really nothing for the IRS to concern itself with when it comes to those claims. Call in the FDA on the health claims or the SEC on the financial claims, but it really is not a matter for the IRS.
Fundamentally the IRS cannot base its enforcement actions on the content of an organization’s beliefs. That is what is at the heart of the Lois Lerner Teapartygate never-ending scandal. Since some of the Tea Party groups were engaging in political activity, groups with similar names were subject to special scrutiny.
Professor Adam Chodrow of Arizona State University explains the problem like this.
Also, the IRS can’t really be in a position to assert that religious beliefs are bogus. Set aside the fringe and look at mainstream Christianity. The claim is that God sent his son to Earth and let him be sacrificed to save mankind. Moreover, one should tithe or otherwise donate to churches to support the institutions, spread the word, and also help the less fortunate. Other than helping the downtrodden, it sounds absolutely nuts to a non-believer, much like Greek mythology sounds to us today. The IRS has to tread very lightly when dealing with faith and claims that religious leaders are ripping off their flock. As a constitutional matter, we really don’t want the government intruding in religion and telling people what to believe or that their beliefs are bogus.
Scientology
This reminds me a good bit of the debate that raged through the pages of my blog some time ago about Scientology. The IRS has about 90,000 people tasked with collecting over $2 trillion dollars. Just over 20,000 of them are actually involved in enforcement- revenue agents and revenue officers. Their entry-level education requirement is a bachelor’s degree with 30 hours in accounting. Most of the bad things that Scientology is accused of doing are things that cannot be addressed by accountants even the much smaller number who are armed and have arrest powers. The same goes for the televangelists.