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?
Amendment I
“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:
“Music Square Church was granted 501c tax-exempt status in 1981,[6] but this was retroactively revoked by the IRS on April 5, 1996.”
“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.”.[6] MSC sued and lost in the US Court of Claims. They lost on appeal to The United States Court of Appeals in 1999.[6]”
“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”.[7]”
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
Jeffrey,
Great evaluation, we need to clearly see these distinctions.
People should really understand, that no US government agency and particularly the IRS give a hoot about anybody’s religious beliefs or infringe on their right to practice their religion, not matter how weird those might be.
The above include Satanism, as the O.T.O. http://en.wikipedia.org/wiki/Ordo_Templi_Orientis, and its Church http://oto-usa.org/oto/egc/, and the ceremonial use of a psychotropic like Peyote http://en.wikipedia.org/wiki/Native_American_Church.
As a mother of fact, in the US, there are thousands of mom and pops evangelical ministries, run by a preacher and his family, as a BUSINESS. They file 1040 form, Schedule C, Profit or Loss from Business as Self Employed. The IRS does not grant them 501(c) (3) status until, and if, they can actually prove the main portion of their income does not go into their pockets, but it is used for religious activities.
But NOBODY messes with their right to practice their religion or to make a living from preaching.
It is their status as a tax exempted, Religious Charity for the public benefit that is challenged.
As you reported there are a lot of things that you can hide under religious tax exemption.
It is easy to see what Hubbard and David Miscavige were after: hiding cash flows, inurement, massive wealth accumulation, and the ability to maintain a tax free, SLAVE labor force.
.
The US Supreme Court, The US Tax Court and the Ninth Circuit Court have all ruled that the Church of Scientology does not merit a 501C3 because of its financial program. In 1991, leaders of the COS met with IRS Commissioner Fred Goldberg , promising to cancel over 2000 law suits which the COS had filed against the IRS in exchange for a 501c3. In 1993 a new IRS Commissioner gave the COS a 501c3 totally ignoring the Supreme Court Ruling. That same year, the head of the COS held a rally in Los Angeles announcing the decision, claiming that COS members had just saved $1 billion in tax payments by deducting the costs of COS classes from their income tax. In 1997, the US Tax Court ruled against the COS having a 501c3 and in 2002 the Ninth Circuit Court of Appeals did the same and stated that the proper course of action was to file a law suit against the IRS forcing them to obey the Supreme Court Ruling. No lawyer had yet dared to file such a suit. Every time the IRS has been asked why it ignored a Supreme Court Ruling, the Exempt Organizations Division claims that the IRS can not release tax payer information. WE ARE NOT ASKING FOR TAX PAYER INFORMATION. WE ARE ASKING WHY THE IRS IS NOT FOLLOWING THE RULING OF EVERY COURT DECISION THAT THE DOES NOT MERIT A 501c3. Years ago, 8 members of the COS were convicted of infiltrating the IRS and stealing IRS materials relating to the IRS. A major division of the COS places members in government offices and other organization to be listening posts, reporting to the COS any negative information they might hear in those offices. In the early 1990’s, the retiring head of the FBI office in Los Angeles stated that the COS has a better information gathering ability than the FBI. Are those listeners in in the IRS?
Contact IRS Commissioner John Koskinen asking his to follow the rulings of every high court decision and revoke the COS 501c3. It could return billions owed the IRS.