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Friday, November 25, 2005

Religious non-profits make deal with the devil

Report today from the Tax Foundation on the misuse of non-profit status by what ought to be regarded as for profit institutions. Insta-man notes how 501 (c)(3) status infringes on the political speech rights of religious organizations. Another perverse effect of non-profit status is how it keeps churches from using their vast resources of property and physical plant to make a contribution to the economy.

I learned this when I stopped in at a local church to see if I could use their large beautiful brand-spanking-new hardwood floored activity room to teach ballroom dance lessons. They said they could lose their non-profit status if they let the space be used for profit. I asked whether, if I did the necessary paperwork, I could qualify as a non-profit and take the fees as a “non-profit” salary. They said maybe, but that they wouldn’t be willing to put their own non-profit status at risk over such a venture.

A year later they converted their beautiful new activities room to office space. They really wanted to be able to host activities, but when they had an opportunity to do it, the law prohibited them. In my neighborhood there are numerous churches with vast physical resources--Sunday school classrooms, kitchens, dining halls, gyms, stages, pianos, dance floors--sitting 90% idle. Churches are supposed to participate in the community, but if they are barred from the normal instruments of exchange, they cannot. The non-profit laws shove them off to the side.

There would be nothing healthier for our churches than to get rid of this bargain they have struck with the devil where they get tax-free status in exchange for staying out of the political and economic life of the community.

UPDATE: TaxProf Blog highlights the regressive impact of charitable deduction provisions.

When a church incorporates it loses many of the benefits of being a church.

As a corporation it places itself under corporate law, rather than outside the law as separation doctrine would seem to dictate.
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