THOMAS LARSON

(The Truth Seeker May, 2016)

Scripturally Based Hostility

One day in 1991, the head of the Church of Scientology, David Miscavige, along with his top lieutenant, Marty Rathbun, were having lunch in Washington DC, not far from the headquarters of the Internal Revenue Service. Five years earlier, when Miscavige had seized hold of the church’s leadership following the death of their potentate, L. Ron Hubbard, he inherited the organization and its colossal debt to the IRS—at the time, estimates were as high as $1 billion; Scientology’s reserves were just 12% of that—as well as a war of denunciation both sides waged on the other that was years in the making.

Scientology was founded by Hubbard in 1954. Three years later, the IRS granted the church a tax-exempt status as a charitable organization. But in 1967, the agency revoked its status. Ten years of secret investigation and eventual court proceedings led the IRS to declare that Hubbard and crew were takers, not givers. The church existed “to benefit its founder” as well as those few executives with whom he shared (some of) the bounty. In several decisions, courts called Scientology “a commercial enterprise.” Meaning its sales, services, land and buildings, should be taxed because the group showed no evidence of charitable activity despite making unconscionable profits on Hubbard’s conversion method, called Dianetics, on psychological auditing, and on estate gifts from its joiners.

After 1967, Hubbard, whose tax bill was impossible to pay, left the country. He lived offshore on yachts, shining the IRS on. He did more than run and evade. He fought back in the courts himself. For decades, according to Lawrence Wright’s Going Clear: Scientology, Hollywood, and the Prison of Belief, Hubbard and the church filed some 2500 lawsuits against the IRS. They staffed a troop of Lee Atwaters (the hatchet man who did the dirty work for George H. W. Bush in 1988) who fabricated scandals and phony news stories about IRS agents. They especially went after the IRS’s “criminal” division—enough, as Hubbard egged his henchmen on, “to harass and discourage rather than win.”

Miscavige told Rathbun, let’s go—right now!—and end the standoff. We’ll tell them the war between us is over. We’ll negotiate a one-time payment. We’ll secure our nonprofit status for Scientology—we are a church!—once and for all. The pair trooped into foyer, got the commissioner on the phone, and demanded a hearing. Unimaginably bold moves happen every so often, and Miscavige’s pivot would become legendary. Despite a 1992 United States Claims Court ruling, upholding the 1967 revocation, which reiterated that Scientology had a “commercial character,” “incomprehensible financial procedures,” and a “scripturally based hostility to taxation,” the IRS cut a deal with Miscavige—not that day but two years later. It is, many tax-exemption scholars cite, perhaps the most detailed we-won’t-ever-touch-you-again agreement in IRS-church tax history.

Just as boldly as Miscavige, the commissioner ended their mutual harassment. Scientology paid a cash settlement of $12 million, roughly 1% of the church’s liability. In addition, Miscavige insisted and got the IRS to confess—and to apologize—that they’d been a biased and overzealous antagonist of the church its entire history. Though the arrangement was attacked by secularists and ex-Scientologists as too lenient and overly clandestine, the church convened a rally for 10,000 adepts, unaware of what was coming, at the Los Angeles Sports Arena. Miscavige bellowed from the podium: “The IRS has recognized the church and all its organizations as fully tax-exempt. The war is over!” The crowd roared with shouts and applause for six minutes and forty-three seconds.

Where Does the Tax-Exempt Status Come From?

In his readable, capacious history of Scientology, Lawrence Wright epilogues the book with this sadly true summation: “There is no point in questioning Scientology’s standing as a religion; in the United States, the only opinion that really counts is that of the IRS.” Tough to swallow, I know. But question I must. Why does the IRS have such a say? Where does declaring value for “religious” charities come from? Does the financial benefit Congress and the courts have bestowed on religion also entail equal treatment for their religious liberty? What has the wall of separation brought?

Believe it or not, there’s a long tradition in English and American law that exempts churches and religious organizations from paying taxes. Miranda Fleischer, a Professor of Law at the University of San Diego, whose research and teaching focus on tax-exempt entities and nonprofit law, tells me that religions throughout human history, where they are under the aegis of a state taxman, are rarely passed the collection plate. “There is the idea,” she says, “that churches somehow couldn’t be taxed, that they were of a different sphere; they belonged to God’s dominion—it wasn’t for humans to tax them.”

In America, the pecuniary needs of churches have always faced governmental oversight. The colonies mandated that people attend church and that congregations—not the state—fund the salaries of pastors and the cost of running parishes. On their own and free from the taxman, their autonomy should insure they thrive. Americans got on board, building houses of worship and enculturating a kind of soldierly religious duty. Such social organization led to churches and parishes owning property, also untaxed. (Opposition to this and other policies that favored Christians was organized in 1872 when the National Liberal League published its “Nine Demands of Liberalism.” Number one read, “We demand churches and other ecclesiastical property shall no longer be exempt from taxation.”)

Increasingly, Christians ministered to the needs of the soul and the stomach, personal worship and social welfare. The result was, government categorized the church—that is, its activities—as charitable. The value of charity, Fleischer says, grew whether it was husbanded by a congregation, a philanthropist, or a circle of quilt-makers. “In our society, we believe that the charitable sector is supposed to be a place for pluralism,” where we “allow different organizations to flourish, to provide alternative viewpoints in the arts, literature, culture, and public policy, and to serve as a counterweight to government.”

In the twentieth century, two things solidified the social currency of the charity. First, after the Federal Reserve Bank and the personal income tax were established in 1913, the federal government burgeoned into a ravenous tax-collecting machine. Public coffers were earmarked for federal projects, for the military, and for the common good—in that order. Citizens could deduct donations to charities, including to the church, from their taxable earnings. 

Second, secularists also wanted to do charitable work and gain the privileged exemption religion enjoyed. As early as 1894, the government passed special tax-exempt regulations for many charities. However, only in the early 1950s was the 501c3 bracket set up as an umbrella for all “charitable organizations.” The code still covers those “charitable, religious, educational, scientific, [and] literary” groups plus those involved in “testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals.”

Lumping all these entities together is, Fleischer says, how the government empowered charity in a pluralistic society. With the 501c3, nonreligious charities received what churches had always had in America: a tax exemption to finance their independence from the government. Separation of church and state as well as charity and state are both good things. Which brings us back to Lawrence Wright’s maxim: if the IRS says you’re a religion or a charity, you are. Enough said. 

Still, Fleischer notes, the psychology of tax-exemption is not so simple. “There’s the idea that a charity should provide for the public good or benefit. But it’s very hard to say what that is, so most of the rules basically work backwards. They assume that if there’s an organization and the people running it aren’t profiting from the organization, and if what it’s doing is not too commercial in nature, then it must therefore be doing something good for society to deserve a tax exemption.”

She goes further. “What the government treats as a charity and what the man on the street considers a charity are different. The legal definition [of a charitable organization] is much broader.” And, I would argue, so broad as to be unfair and in need of regulation. 

Charity Navigator is a clearinghouse website where you can evaluate charities to whom you give money or property. The lowest-rated religious organization (lowest means the least generous) is Shiloh International Ministries. Its goal is to improve “the quality of life of America’s disabled and needy children by providing medical necessities and moral support.” To this end, the group spends 97.4% of its income on “operating expenses,” that is, fundraising and administration, and only 2.6% on those “medical necessities.” There is no charity. (Lest you think little old Shiloh is an exception, see the citation, published in Free Inquiry in 2012, that the Mormon Church, according to its own research, is even lower, giving only 1% of its total annual income to charity.)

By contrast, the highest-rated religious group is International Messengers. Its mission statement reads, in part, “we are committed to making disciples of all nations through partnering with local churches to renew, train and mobilize believers for active involvement in reaching the world for Christ.” International expends 88.2% of its lucre on programs, that is, charity itself (broadly speaking), and splits the other 17.8% evenly between fundraising and administration.

The financial disparity of these groups and their “programs” makes no sense, tax or otherwise. One spends nothing on the “disabled and the needy” while the other spends robustly on mobilizing believers, whatever that is. The funded former sounds necessary, the unfunded latter like woo-woo. Yet both are IRS-regulated. And both seem to be doing little to actually help anyone except themselves. The question is begged: How can these groups be equally tax exempt when their programs have no standard of accountability?

Tax Exemptions for the Sincere

The answer is, there is no standard of moral improvement or regulated expenditures for charities by law. The IRS avoids the whole standard-bearing business. There are no rules for defining who is doing good, only that you claim you’re doing good. You’d think that by peering into the outreach gap between Shiloh and International, we might enact a “graduated” deduction: for instance, a group must pay taxes on the money it spends on operating expenses: 97.4% for Shiloh, 17.8% for International. In short, Shiloh would receive no write-off: no charity, no deduction.

Such a change is unlikely and, were it law, probably unenforceable. As a result, Fleischer says, the government applies no litmus test for the kinds or the degrees of beliefs and principles an organization must have to qualify. Anyone can claim they exist to help the needy. (With what? Bibles? Thoughts and prayers? Advertised good intentions?) “The government,” she says, “only requires that your beliefs are sincerely held.”

Sincerity. For religions, the word is a candle in the wind. As an example, take the Unification Church and its members who are derided as Moonies. In the 1970s, the South Korean-spawned faith was a political force in the United States. The group advocated a doctrine aimed at destroying communism; they supported Richard Nixon’s redbaiting zealotry even after Watergate. Such ardor was championed by their leader, Sun Myung Moon. Moon, who was convicted of income tax fraud and after a stint in prison emerged to lead the group again, declared himself the Messiah, Christ returned, in 1992.

The case of the Moonies, Fleischer says, exemplifies a core tax principle. “It’s not for the IRS to assert that activities [of a church] are secular and political instead of religious. If the organization asserts that their activities are religious, and they [the church] are sincere in their assertion, and their activities match what the organization publicly demonstrates its theology and beliefs to be, then the IRS has to take them at their word that they are a religious organization.”

The IRS cannot question the sincerity of the religious. (Who can will be one of the great jurisprudential questions the post-Antonin Scalia court takes up.) What the IRS can probe is malfeasance. Such misconduct is termed “inurement,” the financial enrichment of an individual in lieu of the organization—as committed by L. Ron Hubbard and Sun Myung Moon. 

A church, when it applies for a tax exemption, must fill out Form 1023. “Application for Recognition of Exemption” contains fourteen criteria by which a church qualifies for an exemption. Among them are the following: a church—by extension, a religion—has ordained ministers, a creed and form of worship, doctrine, governance, a history, places of worship, regular services, congregations, instruction for the young, and “a literature of its own.”

(Two curiosities. One, there is no criterion about the sincerity of believing a doctrine or “ministering” to those who do or don’t believe in that doctrine. Two, there is a long list of groups who are exempt—yes, exempt!—from filing the annual Form 1023, including church associations, religious conventions, interchurch groups, auxiliary organizations, faith-based fund management systems, foreign mission societies, and religious orders.)

Churches need to file income reports each year unless their income is below $50,000 and their assets below $250,000. Filing accrues benefits. Churches need not pay employment taxes or Medicare and Social Security for their workers. Ministers pay no Social Security, get deals on retirement plans, and are often exempted from state laws about solicitation and income reporting. Members of the cloth receive free housing and living expenses, the “parsonage” exemption, as televangelist Joyce Meyer, according to www.avvo.com, enjoys: Joyce Meyer Ministries has “spent $4 million on 5 homes for Meyer and her children. [One] is a 10,000 square foot home with an 8-car garage, a large fountain, a gazebo, a private putting green, a pool, and pool house with a new $10,000 bathroom.” In addition, churches, whose wealth is deep, can choose to invest (make so-called “passive” income) instead of spending on charity. They may even lobby Congress, Fleischer tells me in an email, “as long as lobbying is not a ‘substantial’ part of their activities.”

I’ll take up the question of tax exemption and religious liberty shortly. But, tracking a new church as it establishes itself for IRS consideration, we observe how the fourteen criteria can get a bit squishy. Consider the Church of Body Modification. This is a newly established 501c3, a religion of/for tattooers and their “faith” in tattooing. Part of the church’s mission statement reads, “We believe it is our right to explore our world, both physical and supernatural, through spiritual body modification.” The church’s “worship services” are done via online confabs and its “ministers” whose anointed ground is “one’s home, a studio, or even a park. [M]embers may create sacred space, individually or in groups, anywhere they wish to practice.”

If you’re wondering how body modification links one to spiritual or supernatural powers, I can’t help you. But this church’s registering its belief is a fine illustration of the kind of stewpot the IRS refuses to stir. The IRS may investigate this group if someone complains its Grand Poohbah is driving a Rolls Royce. But if a tattoo apostate says that body art has produced, in her or him, no religious experience, the IRS could care less.

The problem is, anything can be considered a legitimate expression of religious faith. Is Satanism worthy of a tax exemption? There are (a few) devotees who believe in Lucifer, court his texts, practice his creeds, and slit goats’ throats. (For the record, the Church of Satan has never sought such an exemption because it believes all churches should be taxed as the most sensible way to destroy them.) How about the Mormon belief that Native Americans are descendants of the ancient Israelites—a claim for which there is no archaeological proof? Forget it. The Virgin Birth? The Resurrection? Creation in seven days? Proof, we know, never enters into faith. (Credo quia absurdum, says Paul.) And, besides, the government isn’t interested in proof. Only what you believe is so.

The Church’s Property Tax Exemption

As to the property tax exemption, churches welcomed a monumental ruling in the 1970 Walz decision. Frederick Walz, a recluse and animal-rights lawyer, bought a vacant, weed-infested lot on Staten Island for $100, received a property-tax bill for $5.24, and promptly sued the state of New York Tax Commission. Incredibly, the Supreme Court agreed to hear the case. His lawyers contended that because the government gave land and building tax breaks to churches, Walz’s property tax was indirectly supporting, that is, “subsidizing” religious organizations. He was paying a tax on his property that a church across the street wasn’t paying on its land. This violated his “right of religious freedom”—that is, the right to be free from the government establishing any religious or nonreligious preference.

A subsidy means a payout, for examples, farmers receiving money to fallow fields. Owners of untaxed property are also subsidized. They receive government-supplied services like police and firefighting for free. To fund the public welfare of the religious, the state must subsidize, that is, use money from other collection plates. Indeed, not taxing religions becomes a form of social welfare. The church could contribute something for the services it receives. Why not just pay property tax?

The court disagreed with this logic, 7 to 1. Chief Justice Warren Burger underscored the state’s preferential tax treatment for religions:

The exemptions for religious organizations created only a minimal and remote involvement between church and state, and far less of an involvement than would be created by taxation of churches, and the effect of the exemptions was thus not an excessive government entanglement with religion. The grant of a tax exemption was not sponsorship of the organizations because the government did not transfer part of its revenue to churches but simply abstained from demanding that the churches support the state. The exemption created a more minimal and remote involvement between church and state than did taxation because it restricted the fiscal relationship between church and state and reinforced the desired separation insulating one from the other.

Memorably, Burger, a Nixon nominee, also opined that the insularity of “one from the other” is necessary because “the power to tax involves the power to destroy.” (This is what the right-wing calls “legislating from the bench.”) Burger was fearful that taxing the churches would bankrupt them and have the adverse effect—make them vie for members in the theological marketplace and put the least solvent out of business. He like most Supreme Court judges has overseen religion’s financial autonomy—socialism for the faith class.

By the court’s reasoning we could say that taxing Americans for the American military—easily the largest funded single institution in the federal government—has the power to destroy. Consider our constant wars in the Middle East and the fallout from bombing Japan and testing nuclear weapons. The Pentagon is the single largest consumer of energy in the world while the federal government burns 80 percent of our oil and gas. The U.S. military and, indirectly, its contractors, confirm the opposite of Burger’s claim: the power to tax is the power to enable entities far beyond what the competitive private sector would allow.

In addition, the Walz decision granted the state even greater power to limit government intrusion into so-called religious rights as well as to declare that the church needs special and ongoing protective status—one given by the state to keep the state in check. Again, this opposes Burger’s contention: siding with church landowners, the government does not wash its hands of religion. Churches, televangelist networks, the clergy, church-employed workers, and investors in religion-owned property all take advantage of this phony, court-crafted “remote involvement.” Nowhere does that advantage face redress.

It’s estimated that some one-quarter of all property in American cities are owned by churches and other religious organizations who enjoy property-tax exclusions. A study by the Secular Policy Institute found that when the government subsidizes church buildings and land, money the state does not receive, Washington loses $26.2 billion per year. This is more than a third of the $71 billion per year the government loses from subsidizing religion. (That number 71 has some mojo attached: Financing American Religion, published in 1998, revealed that of 271 American congregations, 71 percent of all expenditures went to yearly “operating expenses,” the majority for pastor salaries and homes.) What has been the accrued loss to the treasury over two-plus centuries of these policies—a trillion dollars?

Tax-Free Religious Liberty

Two years ago, former Arkansas governor, Baptist preacher, and perennial Republican presidential candidate Mike Huckabee, who won the GOP Iowa Caucus in 2008, tweeted, “It’s time for churches to reject tax exempt status completely; freedom is more important than government financial favors.” Admitting Christian liberty had been bought off, he noted that paying taxes on the church’s “charitable contributions” in exchange for not politicking from the pulpit wasn’t worth it. For Christians, the libertines of America were winning too many of the social issues church brethren cared about.

A few questions. Is Huckabee saying that if churches gave up their tax-free standing, then, via Supreme Court decree or Congressional statute, could they bar homosexuals from a church community? Could faith groups cut off government-funded birth control? Could congregations use the Bible to choose which vaccines or blood transfusions to allow? Could the clergy require women to wear dresses or welcome political candidates to preach on Sundays? Would the same privileges be extended to Muslims and portions of Sharia Law?

What’s driving this pro-tax initiative is a quid pro quo on behalf of “religious liberty,” a phrase, like “sincerely held religious belief,” our society is socially litigating these days. Religious people feel—whether they are or are not is another story—persecuted, the target of secular weaponry. (The War on Christmas, compulsory contraception, and a market in baby parts.) They want redress, their day, if not decade, in court. The activist Huckabee believes that even if tax-deductible donations by individuals to churches were lost, those donations would continue to roll in, supporting candidates and legislation and allowing key Old Testament decrees court-tested standing in religiously bonded communities.

In theory, the IRS expressly forbids politicking—churches can neither participate nor intervene in a political campaign, which includes no by-name pulpit endorsement—but the truth is, most churches violate this prohibition with voter guides and electioneering. Equally true, the IRS seldom snoops about unless a church goes bananas for a born-again politician. The track record confirms, IRS investigations of pulpit politicking embarrass the agency, never the pew-dwellers. The IRS is accused of a liberal or a conservative bias based on whomever they target. Typically, a warning and a promise by the faith offender not to do it again satisfies Big Brother.

Political scrutiny is a ruse just as tax-exemption is. Indeed, no taxes in exchange for token politicking allows the primal church game to go on and on, namely, making the untaxed membership feel they are richer than they are and, thus, will part, when the cause is convincing, with their bills. Consider Creflo Dollar Ministries. Named after the Georgia evangelist (yes, that’s his Christian name), the ministry has trademarked an “honor giving” mission to collect tax-exempt donations and spread—more like take on tour—the prosperity gospel of Christianity. In its statement of purpose, the group’s board of directors claims “to insure that all ministry policies, expenditures and activities are in full compliance with the Word of God, standard accounting practices and all applicable laws and regulations.”

The problem for me is not so much understanding what “full compliance with the Word of God” means—it’s meaningless—but mixing God’s Word and “standard accounting practices.” Last I checked the tax system does not comply with Biblical law, though it leans Judeo-Christian. Now we have an accounting practice, I mean, fundraiser, that Creflo Dollar says is necessary for him to “safely and swiftly share the Good News of the Gospel worldwide”: a $65 million private jet. If the IRS refuses to indict Creflo Dollar for this scam—apparently, the money’s been raised and the plane is forthcoming, though there’s a backlog of orders on Gulfstream planes—then the ministry is giving the IRS its middle-finger salute. Dollar’s video justifying the jet has been exposed with lurid ribaldry throughout the press. (His most audacious line is, “If you think a $65 million dollar is too much—when they discover there’s life on Mars, I’m going to need a $1 billion space shuttle to preach the Gospel on Mars.”) For the IRS not to investigate, let alone revoke, the ministry’s 501c3 status, proves that anyone who claims their accounting, charitably defined, complies with the Word of God, can flimflam the IRS.

In all these Byzantine misapplications of tax and no-tax policy, there seems to be an obvious solution, though I realize it’s politically untenable with a Congress and a Supreme Court whose membership is 92% Christian and 5% Jewish. The fairest and simplest regulation would exempt churches from taxes only for actual charitable giving, when the money or the service, even bingo to raise funds for the soup kitchen, is freely and wholly spent on helping others. We can also say that church land and buildings might get a tax break when they serve a charitable end. But money, whether profits or donations, spent on salaries, one or more parsonages, private jets, wardrobes, jewelry, lobbying, dumping Bibles on the heads of Muslims, and any commercial enterprise of the church, must be taxed—and here I have to be as artless as I can be—because these things are not charities.