TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, November 25, 2018

Stop The Tax On Houses Of Worship

Wall Street Journal op-ed:  Stop the Tax on Houses of Worship, by Russell Moore  (Southern Baptist Convention):

A little-noticed provision in the Tax Cuts and Jobs Act of 2017 now looms over faith communities in America, raising serious questions about religious freedom and the First Amendment. While this provision is a relatively small piece of the overall package, the effect of the policy it created will be felt by the faithful around the country.

This change is a new policy to tax nonprofit organizations—including houses of worship, like the Southern Baptist churches I serve—for the cost of parking and transit benefits provided to employees. This effectively creates an income tax on churches. As Michael Martin of the Evangelical Council for Financial Accountability has noted, that has never happened in U.S. history.

The imposition of a tax burden on churches, religious schools and other charities is a shocking change in the federal government’s orientation toward these organizations of goodwill. The new tax requires institutions to file federal Form 990-T and possibly pay taxes every year—regardless of whether they engage in any unrelated business activity. In addition to the new federal requirements, many nonprofits will then face the requirement to file state returns and possibly pay state income tax.

Further, in the name of taxing parking lots, the new regulations created a new tax liability. In turn, this creates new operating costs for proper accounting and regulatory compliance at every nonprofit organization. For many nonprofits, these operations costs could exceed the amount of money actually collected by the Internal Revenue Service. ...

This summer Rep. Mark Walker introduced H.R. 6460, the LIFT for Charities Act, which would repeal Section 512(a)(7) from the code. James Lankford of Oklahoma introduced a Senate version of the bill in August. The two pieces of legislation move the conversation closer to a sensible change in course from the current detrimental path of taxing nonprofits. By striking this new section of the code, the LIFT Act would eliminate this new tax burden and operational impediment on churches and nonprofits.

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