WHAT DOES “RELIGIOUS TAX EXEMPTION” MEAN IN AMERICA?
Thanks to free speech, any group in America can call itself a religion. However, only the IRS is allowed to make a determination on behalf of the US Government that a particular group is organized for religious purposes, operates for the public benefit, and therefore qualifies for religious tax exempt status. Under the IRS code, qualifying religious and charitable groups receive 501(c)(3) status.
Not all religious groups in America have tax exemption — and not all religious groups want tax exemption. Some religious groups want nothing whatsoever to do with the US Government and so refuse to file the required application for 501(c)(3) status. The application is called a Form 1023.
Some Evangelical groups argue that any religious group in America is automatically tax exempt and does not need to file a 1023 with the government. This view was basically correct until US tax law changes in 1954. Most religious groups in America, however, voluntarily file a 1023 as part of their formal incorporation process. Formal standing as a 501(c)(3) can also help a religious group avoid unwanted IRS attention that may arise from not having such standing.
Charitable groups with 501(c)(3) status must to file annual 990 forms with the IRS. However, religious groups are exempt from filing annual 990’s. This allows religious groups to be extremely secretive about their financial activities.
Nevertheless, if a religious group has unrelated business income in a given tax year it must file 990-T. These forms were private until a change in US law in 2006 which required 990’s and 990-T’s be made publicly available. This change in tax law allowed me to find $1.5 billion in Church of Scientology book value filed in its 2012 990-T’s. Click here to see $846,314,618.00 in Scientology book value.
Heal Our Land Ministries is one of many American religious groups with a highly critical and anti-government view of 501(c)(3) tax exemption. For example, groups with 501(c)(3) status are legally prohibited from either endorsing or opposing candidates in American political elections. This anti-electioneering prohibition is controversial to say the least.
How did this happen? Why are tax exempt religious groups in America forbidden from engaging in political activities? The answer is twofold:
1. The Revenue Act of 1954 created 501(c)3 status.
2. The Johnson Amendment to the Revenue Act of 1954 prohibits tax exempt organizations from using tax exempt monies to either endorse or oppose candidates in political elections. Many religious groups maintain Senator Johnson of Texas, who in 1954 was the Senate minority leader, put his amendment into the Revenue Act to prevent Christian voters in Texas from using church monies to fight his reelection efforts and vast political ambitions. Johnson went on to become Vice President under President Kennedy. Johnson then became the 36th President of the United States when President Kennedy was assassinated on November 22, 1963.
As a fairly new addition to the US tax code, section 501(c)(3) has been, and continues to be, the subject of intense litigation. For example, after the recent Hobby Lobby victory at the US Supreme Court, American Evangelicals are now sharpening their knives in search of a test case to overturn the Johnson Amendment. Many Christian churches in America have taken to openly and flagrantly violating the 501(c)(3) political prohibition each year on Pulpit Freedom Sunday.
The key argument for religious groups is this: Does the 501(c)(3) prohibition on political activities violate First Amendment protections?
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”
In response to the willful and deliberate violations of the 501(c)(3) rules such as Pulpit Freedom Sunday, the atheist group Freedom From Religion successfully sued to compel the IRS to enforce the anti-electioneering Johnson Amendment. Moreover, the group American Atheists is suing the IRS for what it alleges is the preferential treatment granted religious 501(c)(3) groups as opposed to secular 501(c)(3) groups, e.g. religious groups are exempt from filing 990’s whereas non-religious 501(c)(3) groups are not. Does this unequal treatment violate the Equal Protection Clause of the 14th Amendment?
In the context of American political life, then, IRS Code 501(c)(3) is inherently controversial.
The controversial nature of IRS Code 501(c)(3) has engendered a great deal of litigation and disputation in America. This is the key point I wish to emphasize when discussing 501(c)(3) and the Church of Scientology.
THE THREE DIFFERENT TYPES OF AMERICAN RELIGION
Relative to IRS Code 501(c)(3) , one can say that there are three different types of religious groups in America:
1. Those that have tax exemption.
2. Those that do not have tax exemption.
3. Businesses pretending to be religions that have obtained 501(c)(3) religious tax exemption by making false representations to the IRS. These business are typically quasi-religious, or pseudo-religious, and consider they are entitled to tax exemption and other religious protections.
One example of a business pretending to be a religious group was the Music Square Church (MSC), formerly known as the Alamo Christian Foundation. From Wikipedia:
“The IRS Commissioner found that “MSC was so closely operated and controlled by and for the benefit of Tony Alamo that it enjoyed no substantive independent existence; that MSC was formed and operated by Tony Alamo for the principal purpose of willfully attempting to defeat or evade federal income tax; and that MSC was inseparable from Tony Alamo, and failed to operate for exclusively charitable purposes.”. MSC sued and lost in the US Court of Claims. They lost on appeal to The United States Court of Appeals in 1999.”
“In June 2013, the federal government filed forfeiture and collection actions in federal court on 27 properties owned by members of Tony Alamo Christian Ministries in an attempt to pay $2.5 million in restitution that Alamo was ordered to pay his victims. The U.S. Attorney’s Office argued that the properties remained in Alamo’s control and that the owners were “owners in name only”.”
In America, the penalties are very harsh for any business pretending to be a religion. And this is exactly what happened to the Church of Scientology of California (CSC), the “Mother Church” of Scientology from 1954-1981.
The short and tortured history of the Church of Scientology of California ended in both the IRS and US courts finding that CSC was organized solely for the benefit of L. Ron Hubbard and his family.
In other words, CSC was a business pretending to be a religion.
This is the truth of the matter.
We examine the Church of Scientology of California, a business pretending to be a religion, in Part 3 of this series.
Categories: The Scientology Money Project