Freedom Or Tax Exemption?

Mike HuckabeeFormer Arkansas Governor, Presidential candidate, and current Fox News host, Mike Huckabee has raised this question to Southern Baptists (HT: Billy Hallowell). It’s a fair question. I’m not sure I agree with him and I don’t claim to know the answer to the question whether we should seek tax exempt status but we should think about it. I’m not a lawyer and don’t play one on the web. The tax code is far more complex than it was at the American founding, far more complex than it was a century ago. Earlier generations didn’t have to worry about whether the government approved of their prayers and sermons but, increasingly, we do.

As we’ve seen in recent weeks (more on this below), in order to get tax-exempt status, congregations must be approved by the IRS as a non-profit organization. Most congregations also seek status as a non-profit corporation in their state. This gives state and federal governments a degree of control over what churches can say and do. We must prove to authorities that we’re a genuine church. Someone, who may or may not know anything about Christianity, has to decide whether a congregation qualifies as such.

When the apostolic church began meeting on the first day of the week, they did so without official sanction from the Roman state. They never filed papers asking for tax-exempt status. They didn’t submit copies of their liturgy. They didn’t have to detail the nature of their prayers. Early on they were regarded as a Jewish sect and thus a legal religion. Over the next several years, however, Jewish officials worked diligently to convince the Romans that the Christians were not a subset of Judaism, that it was a cult devoted to a criminal, a rebel whom the Roman judicial system had justly put to death. The only thing that the church asked from the civil authorities was freedom to worship according to the Word of God and to live quietly. They affirmed that they agreed with the Pharisees on the bodily resurrection and that Jesus, the Messiah, was resurrected but his kingdom is present in the earth but it is not a civil kingdom and not, in a direct way, a threat to the kingdoms of this earth. The apostles exhorted Christians to live peacefully, lawfully, and quietly in this life, to fulfill their vocations in this world to the glory of God and to the well being of their neighbors. They were taught to live as good citizens in this life and as those whose “citizenship is in heaven.”

When the post-apostolic church began to suffer persecution, as early as 112 AD, their repeated request was to be left alone to do their jobs (fulfill their vocations) and to worship in peace. In contrast to much modern practice, they tended to be somewhat secretive about their worship practices. When Pliny the Younger (c. 112) wanted to discover what Christians did he had to torture a deaconess or two. As it turns out it wasn’t very exciting. There were prayers, songs, sermons, and sacraments. That’s it. Nevertheless, it was not unusual for the early church to send non-communicants out of the service and to conduct the Lord’s Supper in private.

The early Christians insisted repeatedly that they were no threat to the existing order. They only asked not to be punished or put to the death for refusing to sacrifice to the Caesar or to conform to the Roman civil cult. The thing that irritated the pagan Romans about the Christians more than anything else was their refusal to go along. They regarded that refusal to go along with the status quo as a kind of inhumanity.

We may well be coming back to a time like that. The Enlightenment was not so much really an Enlightenment as it was a repudiation of Christian theism and an elevation of rebellion against God. It took time for the effect of that rebellion to work out its principle but it has happened. We’re there. We don’t live in Israel. We live in Babylon.

Presently it is becoming increasingly difficult for Christians to build places of worship or even to meet for Bible studies in their homes. If news reports are to be believed, there seems to be a sudden and unexpected turning against Christianity within segments of the US Military. Perhaps we have come to a time when we can no longer assume that most of our neighbors agree with us or even vaguely sympathize with the Christian faith. It may well be that the last people they knew who attended church regularly or regarded the Bible with any reverence were their grandparents. Christianity may seem to them like a strange obsession with a crucified man. Where some version of Christianity does flourish, increasingly it is not the message of the cross that draws thousands. It a message health, wealth, and self-esteem that draws thousands, even in the South, the last bastion of the Old World in the New.

The question is what we should ask from our neo-pagan neighbors? If we follow the apostolic and pre-Constantinian pattern, we should ask to be left alone. “But,” one objects, “We are American citizens and we have rights. The Apostle Paul asserted his right as a Roman citizen to appear before Caesar.” Fair enough. Do churches have a “right” to ask for a tax-exemption? Well, it’s in the tax code so it’s perfectly legal and proper but as we’ve seen in recent weeks, those requests come at a cost. The government increasingly seems to view all income as theirs and that they are doing us a favor when they do not take it. Listen to this dialogue between ostensibly between an IRS agent and someone applying for tax-exempt status.

Anyone who has filled out state and federal paperwork for this sort of thing, to gain non-profit status, to become a corporation, to gain tax-exempt status can testify to how invasive it is. Yet, this is not a question to be decidedly lightly. It would likely have severe consequences for congregations and ministers.

I remember talking about this question with a non-Christian neighbor more than 20 years ago. He was an electrician and he did some work for the church. He was a good guy, a good electrician, who charged a fair rate for his services. It irritated him, however, that as a non-profit we didn’t pay taxes the way he did. I defended the status quo but I often wondered if that defense was an obstacle to the gospel, whether he thought I was more interested in his wallet than his soul. I suppose I’ll never know.

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  1. Churches are tax exempt before applying for 501(c)3 and I have never understood why churches go through the process of becoming 501(c)3 organizations. If there is a tax attorney perhaps tehy can shed some light on 508(c)(1)(a) as that seems to automatically exempt churches from taxation without many of the binding that 501(c)3 does.

    • The IRS states in their material that churches are automatically considered to be tax-exempt if they have secured non-profit status with their state. “Recognition of Tax-Exempt Status
      Automatic Exemption for Churches
      Churches that meet the requirements of IRC section
      501(c)(3) are automatically considered tax exempt and
      are not required to apply for and obtain recognition of
      tax-exempt status from the IRS .
      Although there is no requirement to do so, many
      churches seek recognition of tax-exempt status from the
      IRS because such recognition assures church leaders,
      members, and contributors that the church is recognized as exempt and qualifies for related tax benefits .
      For example, contributors to a church that has been
      recognized as tax exempt would know that their contributions generally are tax-deductible ” (p.3 IRS publication “Tax Guide for Churches,…etc. )

  2. When Pliny the Younger (c. 112) wanted to discover what Christians did he had to torture a deaconess or two.

    Why? If Christians were so open, why was torture necessary? And what’s a ‘deaconess’?

    • Rube,

      They were open about their doctrine, about the law and the gospel, but they weren’t, shall we say, “seeker sensitive” or “seeker friendly” regarding their worship services. There were many misunderstandings about Christian worship in the 2nd century. It is interesting, isn’t it that members had to be tortured to divulge information about the worship service?

      “Deaconess” is the word that Pliny used. I wouldn’t read too much into it. He was a pagan who re-interpreted what he heard into more familiar pagan categories. E.g., he interpreted the songs sung by Christians (have you read RRC yet?) as the equivalent to Roman military hymns. In this case it could mean “servant girl” or it could mean whatever Phoebe in Romans 16 is. I don’t know.

    • Yes, I bought and read RRC, but it was a few years ago now. I don’t remember anything about Pliny. If I had a kindle version instead of a paperback, I could easily search, but if you wanna toss me a page number I can check it out again.

    • Followed the link, got to the paperback; I think you mean this. I wasn’t complaining, just expressing a sentiment in favor of softcopy books. There are plenty of people nowadays who heap praise on dead trees and complain about screen reading — I happen to have no problem with screen reading, and am endlessly frustrated whenever I remember that a book said this or that, and try to find it again. Usually I can even remember something like “It was about 2/3 down a left-hand page”, so that helps. But electronic searching is so much more efficient! Sometimes I can get by with Amazon’s “Look Inside This Book”. I like the preview model where you can get a reasonably small number of searches into the entire text for free. It has helped me re-find quotes for blog posting more than once.

  3. RSC,
    I plan to swipe about 3 paras from above for another bulletin insert. Fair use, and all that.

    It’s ridiculous how often you’re tuned-in to the same wavelength as I am.

  4. Incorporating a church limits liability to the individual members of the congregation. In other words, should a lawsuit or claim be filed it goes against the non-profit corporation rather than the members of the church.

    If a church chooses to incorporate they must be careful not to include ecclesiastical details in those by-laws. A good attorney will help make this a reality.

    • Thanks Dave.

      Liability is an issue, especially since we live in such a litigious society.

      When I first read the objections to incorporating (20+ years ago) they were from theonomic types and that didn’t engender confidence. Now, however, it doesn’t seem so odd. Their main objection was that incorporating makes the church technically a creature of the state. I’ve seen alternatives to incorporation that don’t put a congregation in the same status but I don’t recall what they are.

  5. I believe that when you become a tax-exempt organization you become subject to the State, and are limited in what you can say from the pulpit. The Council , all it`s members, are liable.

    What exactly are all of the benefits received from becoming tax-exempt? Members can write-off their donations?

    • A reader pointed us to:

      p. 3 says in part:

      Churches that meet the requirements of IRC section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS. Although there is no requirement to do so, many churches seek recognition of tax-exempt status from the IRS because such recognition assures church leaders, members, and contributors that the church is recognized as exempt and qualifies for related tax benefits. For example, contributors to a church that has been recognized as tax exempt would know that their contributions generally are tax-deductible.

      This is also interesting:

      Unlike churches, religious organizations that wish to be tax exempt generally must apply to the IRS for
      tax-exempt status unless their gross receipts do not normally exceed $5,000 annually

      I wonder what qualifies as a “religious organization”?

  6. Dr. Clark,
    I have read Pliny’s letter to Trajan. I had assumed that he resorted to torture because the witness was a woman/slave, and accordingly he could not accept testimony otherwise. It had not occurred to me that this measure was because of reserve on the part of Christians to give information about their practice. I am surprised by the assertion that believers were secretive. Are you extrapolating here or can you cite other evidence? This is because I teach Latin at a Christian school.


    Ben Inman

    • Hi Ben,

      I’ve read that he couldn’t accept their testimony otherwise. It’s interesting. Is there a reference to Roman law that supports that?

      It’s fairly widely known among patrologists that the early church was fairly secretive about their services. Christianity was not a legal religion. It may have been because of their reserve about their worship services that various slanders arose and/or because of misunderstanding or both.

    • Well, I’m not a patrologist. It is frequently asserted in discussions of Roman slavery that their testimony was only acceptable under torture. Yes, I have come across the common assertion that the early church was secretive, but they have seemed a little overreaching. Fencing the table by absenting non-members from celebration of the sacraments seems parallel with other cultus– perhaps thoughtless imitation, or a matter of generally assumed propriety? I have thought, again while reading Pliny, that the “house church” existence of the church– lacking what amounted to the marks of a legitimate institution in their context, made them less conspicuous rather than secretive. I would like to see evidence of direction, instruction, exhortation to such secrecy before I concur with this common assertion. Or there may be some other way of demonstration rather than a present day explanation of ancient evidence. It may be anachronism.



  7. A couple of comments:

    1) As others have pointed out, churches are automatically tax-exempt as long as they meet the definition of “church;” among other things, the IRS uses a 14-point operational test (avoiding the matter of actual beliefs) that is more or less tilted in the direction of U.S. church denominations as we know them.

    2) The main reason NOT to file a form 1023 and receive tax-exempt status is that you then must file the IRS Form 990 annually, which is very detailed and intrusive and time-consuming.

    3) “Religious organizations” are things like RubeRad points out – organizations that have a religious (as opposed to charitable) reason for their exempt status but don’t qualify as a church. A big one in this category is religious publishers; in fact, a 1984 tax case is Presbyterian and Reformed Publishing Co. vs. Commissioner; the issue is whether P&R was actually a commercial rather than religious venture, thus violating its exempt status. Interesting reading (seriously!)

    4) It’s not clear in his post where Huckabee is coming from, but a number of pastors on the Christian right seem to believe their first amendment rights are abridged because IRS rules disallow churches from engaging endorsing political candidates. See a couple of posts about “Pulpit Freedom Sunday” on on this topic.

    5) Huckabee is right that we ought to be willing to give up the tax-deductibility of our donations to our churches if that is the price to be paid for the free proclamation of the Gospel, etc. But, at least so far in the U.S. at least, it’s overt political speech that gets churches into trouble with the IRS, not religious. From an Old School/confessional point of view, that’s not necessarily a bad thing. If there are cases where churches have gotten into trouble for their Biblical teaching and preaching I’d be interested in hearing about that.

    • Thanks Jim, this is helpful.

      I suspect that Gov. Huckabee wants socially conservative churches to have the same liberties as socially liberal churches have enjoyed for decades, the freedom to speak to social-political issues from the pulpit. I don’t know how many times I’ve seen left/liberal politicians in liberal pulpits making partisan political points. It happens on the right too, I understand. I believe that some conservative churches have had their tax-exempt status threatened but not for preaching the gospel but for delving into social-political topics, particularly partisan political topics.

      I’m with you. I believe the spirituality of the church but the line between application of the biblical text and “social” preaching can be fuzzy. In our culture/climate, applying the 6th commandment to abortion, for example, will be regarded by some as a “social” comment. People now believe they have a right not to be challenged and they’re greatly offended if someone disagrees with them.

      If I may quote from an earlier post, I tried to speak to pulpit freedom, to following the text of Scripture where ever it leads, here:

      Finally, there is a temptation among those who distinguish between the spheres in which God administers his sovereign rule, perhaps in reaction to the second error, to restrict unduly the ways in which God’s Word is applied to every sphere of life. To be sure, there are proper and improper applications of God’s Word. Sometimes one gets the impression that some think that because God is sovereign, and because I think God’s Word applies to a certain situation this way, anyone who disagrees with my application of Scripture is denying God’s sovereignty. Obviously that is a non sequitur. God is sovereign but your application of Scripture is not. There is a difference. There are limits on the sort so of things to which ministers should speak. Ministers are not ordinarily physicians or physicists. We are not called, in our office as ministers, to give medical advice or to speak authoritatively on the latest developments in physics. The law and the gospel were true under the pre-modern physics, under Newtonian physics, and under post-Newtonian physics. However many scientific revolutions have happened since the Councils of Nicea and Constantinople (I), the Nicene-Constantinoplitan Creed has not changed. Medicine has changed dramatically but the law and the gospel have not.

      Rather, we should think and say that everything to which his Word intends to speak is a proper object of the ministry (proclamation and application) of the Word. We are called to preach the “whole counsel of God” (Acts 20:21). We are called to speak to cultural developments as God’s people are called to live out their faith in their daily lives. Faithful living will bring engagement with the broader, unbelieving culture. That intersection should raise questions. “The prevailing non-Christian culture says x, but the Scriptures and the faith say y. How should we respond? ” The application of God’s Word requires wisdom, patience, and care but we cannot shrink back from our vocation.

      This is not a call for a Jihad (nor to turn the pulpit into a partisan political organ) against unbelievers or for an undue focus on their behavior—that’s like shooting ducks on the water—but where a passage speaks or necessarily implies (by good and necessary inference) a contrast between the biblical view and a pagan view of a matter, we shouldn’t hesitate to follow God’s Word where ever it leads. Consider, for example, the practice of abortion. I doubt the wisdom of a pro-life Sunday just as I doubt the observance of Mothers Day on the Sabbath. It is the Lord’s Day and it shouldn’t be co-opted by this or that interest. Nevertheless, a consistently Christian interpretation of reality (worldview) will yield a view of the inherent value of humans as image bearers. The prevailing pagan ideology and practice of abortion denies the humanity and image-bearing status of infant humans and thus sees no reason to protect them. There is a Christian view of humanity and there are pagan views of humanity. Those different views lead to different ethical systems and thence to different practices. When we come to a biblical text that speaks to the Christian view of humanity or to the inherent value of human life, we should speak to this issue. Now, we should do so carefully, recognizing that there may be those in the congregation who may have made serious mistakes (even sins) in their past. We trust that such are penitent but we should be as gracious with the grieving as we are firm with the impenitent. Nevertheless, ministers are called to serve the Word. We must go where the Word leads. We should refrain from carefully applying the Word because some might not like it.

      This is God’s world. Christ has established his kingdom. He sustains everything by his providence and has established a mission representing his kingdom in the world. As kingdom citizens we are his emissaries to the world. As king he has spoken and interpreted all things. Christ is returning and he will bring his reign to consummation in glory. Until that moment, however, we are left to die to sin, live to Christ, and by his Spirit, read the Word with the church and to acknowledge his Lordship by serving him in every aspect of our lives, in each sphere, to his glory. We are not polishing brass on a sinking ship because the world is not a sinking ship. It is the theatre of his glory. We are serving Christ the King as his people, in the station to which he has called us. He is accomplishing his purposes. He will be glorified.

      How did the P&R case come out?

  8. Scott,

    Thanks for the further comments on preaching. Yes, liberal churches have gotten away with a lot of political speech and activity, and it is a scandal. But despite the recent IRS shenanigans I get the impression that the IRS is reticent to take on the matter, with either liberal or conservative churches.

    In 1982 P&R had its exempt status revoked, the tax court finding that it had strayed from it’s original exempt purpose and had become a commercial enterprise. However, in 1984 they won an appeal and they remain exempt to this day. The whole mess turns out to be the fault of Jay Adams. A quote from the appeal: “The sudden popularity of an erstwhile obscure writer, such as Jay Adams, cannot, by itself, be the basis for stating that P & R has departed from its professed purpose any more than an increase in congregations would call into question the OPC’s continued designation as a church. Such a standard would lead to an inequitable disparity in treatment for publishers affiliated with mainstream churches as opposed to small offshoots.” Were that the OPC had P&R’s problem!

    The case is interesting reading for the history it contains – the OPC, WTS-Philadelphia, various P&R authors, etc.

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