How Our Money Becomes God’s Money

In Monday’s newsletter, we delved into a new regime initiative to award at least $1 BILLION in taxpayer funding to RELIGIOUS ORGANIZATIONS to tackle homelessness. It’s linked below in case you missed it:

Religious organizations

Religious organizations are usually classified as tax-exempt charities under 501c3 and similar code sections. These groups can also be known as faith-based charities, religious non-profits, and similar. As such, they are required to file an annual Form 990 with the IRS and report income and expenses.

A 990 is required because non-profits must show that they are using contributed income according to the mission of the tax-exempt organization. If too much income goes to non-programming activities, it jeopardizes tax-exempt status.

Churches

Churches have a special carve-out. They are not required to file Form 990 with the IRS or report any financial information for federal tax purposes.

Furthermore, no federal law compels churches to provide financial information to anyone upon request. (Read more at Grain Ledger, a church accounting software system, HERE.)

Churches affiliated with large denominations usually have financial disclosure requirements because they must send a percentage of their collections to support the denomination’s work. Some states also require churches to submit financial information.

In general, a court won’t compel churches to disclose financial information because it has long been considered a violation of separation of church and state. However where state disclosure requirements exist, those records can be subject to Freedom of Information requests.

To qualify for a Church exemption, the IRS has set out 14 loose requirements:

Churches are not required to meet all 14 to qualify. Courts and the federal government have been historically lenient when enforcing these requirements, because again, government interfering with churches has been a bad look.

1. Does it have a distinct legal existence?

2. Does it have a recognized creed and form of worship?

3. Does it have a definite and distinct ecclesiastical government?

4. Does it have a formal code of doctrine and discipline?

5. Does it have a distinct religious history?

6. Does it have a membership not associated with any other church or denomination?

7. Does it have an organization of ordained ministers?

8. Are its ordained ministers selected after completing prescribed courses of study?

9. Does it have a literature of its own?

10. Does it have established places of worship?

11. Does it have regular congregations?

12. Does it hold regular religious services?

13. Does it offer religious instruction of the young, such as “Sunday school”?

14. Does it provide schools for the preparation of its members? (Source NGO Source HERE)

Recognizable religious non-profits have played this game. In 2017 (note the date - it’s important), Focus on the Family, James Dobson’s White Christian Nationalist juggernaut, converted to “church” status for tax purposes. Their Colorado Springs headquarters has its own zip code.

Other recognizable names that used this tactic? The Billy Graham Evangelistic Association. (Source for both: The Washington Post HERE.)

Other groups that use this tactic include City Elders, the Oklahoma-based WCN religious organization to which DHS Secretary Markwayne Mullin belongs. From Rev. Dr. Shannon Fleck’s excellent March piece on City Elders:

Let’s talk a bit more about Jesse Leon Rodgers. (Linked documents all provided by the amazing reporting done by Clifton Adcock with The Frontier in 2019, a must read.)

Rodgers didn’t just wake up one day and decide to wade into politics. He started out in Ada, Oklahoma, maneuvering his way to the top of a congregation so aggressively that his church elders filed a lawsuit just to slow his roll. The charge? Rigging the board, bypassing congregational input, and locking up total control of every penny and asset. (That hollow sound you hear is grace packing up and leaving for another address.)

After the church elders locked him out of the building for good, he didn’t dial it down. Not even close. He formed a new organization known as the Freedom Center of Ada, Inc. and clearly learned his lesson, as evidenced by the stringent by-laws giving him say and sway in all matters of leadership and functionality. He would not be stopped again. Power and control is paramount. They would eventually change their name to Gateway Church of Ada, Inc. right before folding.

Rodgers, however kept the church alive on paper, no congregation, no Sunday school, just the paperwork and, fun fact, the church’s name on the mortgage for two family homes. Come tax day, he waved the parsonage exemption around like a golden ticket. Thousands shaved off his property bills, all for “the pastor”—even though the only flock this church had was on paper. No services. No community. Just a legal echo chamber he could control.

City Elders uses this paperwork church exemption today.

• Congregations - and many governments - do not know how much money churches collect. Even if a religious non-profit posing as a church creates by-laws, they can be written to play-act transparency without teeth.

• No public accounting exists for how money is spent. Again, by-laws can require financial disclosures and audits, but disclosures without backup can mean anything. Or nothing. And as we learned with scandals like Enron, auditors can be incompetent and/or bought.

• Churches are another source of dark money. Focus on the Family cited the need to “protect their donors” as the reason for claiming to be a church. Churches do not have to disclose who gives them money OR how that money is spent. Meaning they could launder foreign money. They could funnel money into political campaigns and dark-money Super PACs. I’m not accusing any church of doing these things. In established denominations with independent control, I doubt this happens often. But in smaller, independent, non-denominational, personalist-congregations that revolve around a pastor/dictator? I’m merely saying they could.

• Pastors are not subject to mandatory tax withholdings and do not have to report their salaries to their congregations. Pastors are considered to be self-employed. They report their net earnings and pay taxes individually. Established denominations require reporting on pastor salaries and would hopefully investigate anomalies. All other groups? Not so much. (In case anyone wonders why non-denominational, non-affiliated church structures are so popular with folks like Joel Osteen.)

We don’t know how many religious non-profits are classified as churches. But we do know it has become very attractive for religious organizations to claim to be churches for income tax purposes, with very little pushback from the federal government.

As taxpayers, we don’t have any way to verify how at least $1 BILLION of our money would be used - or even IF it would be used - to combat homelessness.

I’m not saying churches and religious organizations don’t do good work. I’m not even saying they all need to be examined be any government. I’m saying this system incentivizes corruption. Transparency protects church leaders from assertions of impropriety, could increase confidence in churches, and could even promote greater church attendance. Of all people, religious leaders ought to be concerned about their own accountability, the appearance of conflicts, and their own good reputations. Instead, many see basic financial reporting requirements as “Christian persecution.”

Americans must focus on electing representatives who will put a stop to this corrupt system. We should demand that churches report their finances transparently - like the rest of us are compelled to do - and that should include paying taxes.