End Religious Privileging by the IRS and Government Institutions

In 2007, Senator Charles Grassley (R-Iowa), ranking member of the Senate Finance Committee, initiated an investigation of six televangelists asking them to disclose their organization’s compensation plans, spending practices, assets and business arrangements. The investigation was prompted by complaints that these ministers live lavish lifestyles with multi-million dollar homes and private jets.

In January 2011, Grassley issued a final staff report on the ministries, concluding that he could find no wrongdoing because most of the ministries refused to voluntarily turn over documentation or appear before Congress. Grassley refused to issue subpeonas. Grassley asked the Evangelical Council for Financial Accountability (ECFA) to spearhead an independent national effort to review and provide input on major accountability and policy issues affecting religious organizations. On April 13, 2011, the ECFA announced the creation of the Commission on Accountability and Policy for Religious Organizations. See SCA's press release for more information.

If these organizations were nonreligious nonprofits, Grassley could simply review their annual IRS 990 Reports and obtain this information; however, religious organizations are treated differently than other nonprofits in the following ways:

  • Religious organizations (such as churches, mosques, synagogues, etc.), do not have to prove they are doing charitable work and automatically receive tax exempt status from the IRS, whereas secular nonprofits performing charitable work must prove that they are worthy of tax exempt status.
  • Religious organizations do not have to inform the public what assets the organization has, what their annual income and expenses are, etc. through an annual 990 report that all secular nonprofits must fill out each year.
  • The IRS, based on Church Audit Procedures Act of 1984, has special rules that make initiating an audit of churches, mosques, synagogues and other religious entities more difficult than with other secular nonprofits. These rules even apply to inquiries regarding “excess benefit transactions” (gifts, grants or other compensation) that has occurred between a church and an individual who has not rendered reasonable service to merit this benefit.
  • K-12 schools run by religious organizations, funds or retirement programs run by religious organizations, and religious organizations organized for overseas missionary work also do not have to file IRS returns.

Housing Allowance

Clergy employed by religious organizations are also exempt from claiming any income tax on the property that they rent or live in if the property is church-owned. A tax-exempt housing allowance is not available to the leaders of any other type of nonprofit organization.

Discrimination in Employment

The Civil Rights Act provides an exemption for churches, and other religious groups, in that they can discriminate in hiring based on religion. The courts have ruled that this exemption applies to all positions, not just clergy. This hiring exemption is one (of many) reasons we oppose the faith-based programs supported by your tax dollars.

The Secular Coalition for America contends that religious organizations should be treated no differently than other nonprofits. The current privileging of religious organizations over nonreligious organizations violates the intent of the Establishment Clause to provide for the separation of church and state.

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