Religion and Tax–not an easy issue
by Linda Beale
Religion and Tax–not an easy issue
The Atlantic magazine has an article in the May 3 2016 issue asking “Should Courts Get to Define Religion?”
The article deals with a Catholic shrine in Attleboro Massachusetts, Shrine of Our Lady of LaSalette, that covers almost 200 acres of land and includes what are undoubtedly religious places of worship as well as a coffee shop, conference rooms, bookstore and grounds that are decorated during the Christmas holidays with lights and Santa Claus and all the other gimmickry that draws thousands of tourists to see the Christmas display.
The state has a colonial-era law that exempts religious houses of worship and the dwellings of their ministers from payment of property taxes if they are used for religious worship or instruction. The town of Attleboro has in the past allowed the entire shrine property to claim the exemption, but on closer examination it concluded that much of the property is used for secular, commercial purposes and should be subject to property tax. The city sent a bill. The shrine paid but is seeking redress through the courts by arguing that the entire 199 acre compound is used for religious purposes. Not surprisingly, religious leaders across faiths have supported a brief claiming that local governments can’t “presume to deem whether one use of a religious organization’s property or another falls within the definition of ‘religious worship’. That’s a claim, in other words, that a religion can proclaim that whatever it wants is to be respect as “religious use” and any government must accede to that religion’s view of itself, even if the activities are clearly commercial in nature and the same as what other enterprises do as part of their money-making ventures.
Here’s the problem. As long as we single out religious institutions and properties for tax breaks, we have needlessly entangled the state in determining “what counts” as a religious institution or religious activity. I do not think the First Amendment was meant to, or should, protect religious institutions or religious properties from paying their fair share of taxes. I think the First Amendment was meant to protect a person’s individual views from the particularized attention of the state, either positive or negative attention: that is, the State should not be able to target an individual for that person’s beliefs. That is the core idea behind the notion of generally applicable laws: if public accommodations are supposed to be open to all, then no one can deny someone service based on either the owner’s or the customer’s religious beliefs. Religion should not be disadvantaged relative to other institutional organizations, but neither should religious institutions be advantaged. Accordingly, tax exemptions such as the property tax exemptions that exist in many U.S. cities and states, are problematic: they provide a special advantage to people who work in churches (tax-free housing for parsonages, etc.) and a special advantage to commercial enterprises run by churches (property tax exemptions for bookstores, cafes, flea markets, tourist venues, performances, and all the other trappings of religious institutions, made even more clearly egregious when the religious institution claims to follow a “prosperity gospel” approach that treats commercial market success as part of its religious activities).
The problem is that these tax breaks for religious institutions are in reality burdens on the religious freedom of all taxpayers who do not support that particular religious institution. They are impositions on taxpayers who are atheists or even of different religions from that religious institution, since any taxpayer is essentially subsidizing the tax breaks for those religious institutions that enjoy them. That is particularly problematic if most of the religious institutions receiving the break represent one main religion (such as Christianity, in the United States), whereas the subsidy comes from all of the members of minority religions or atheist households.
The climate in the U.S. today makes it even worse, in that almost any person can claim to found a religious institution, take in money to ‘support’ the institution, and live on the grounds of the ‘institution’ and thus enjoy an almost tax-free entrepreneurial religion-invention enterprise.
The solution is to get rid of all tax exemptions that favor religious institutions. Providing those tax breaks is not a matter of religious freedom–it is a matter of burdening the religious freedom of every person who does not agree with the supported institution.
crossposted with “a href=”http://ataxingmatter.blogs.com/”>ataxingmatter
Not to mention the quite anti-worker exemptions that churches/religious organizations also get, for instance optional workers compensation insurance.
Oh and for our commenters that say “Hey, I don’t know that I could insert images!!! Cool!!”. Well you can’t. WordPress allows moderators to do all kinds of things by default.
And no life isn’t fair. Why do you ask?
I agree that religion is used as a ‘directive mechanism’. Similar to a very long *sacred* list — your federal mortgage interest deduction is one that ultimately pushes down to municipalities increasing the property tax load onto renters, never mind artificially increasing single house prices.
Other than high school and university summer jobs I’ve been self employed. My accountant had yearly conniptions since I never allowed him to use my very legitimate ‘entertainment expenses’ as a deduction. I fully understand its importance for ‘business’ but also understood its misuse so I made a very costly moral choice..
“[Your] federal mortgage interest deduction is one that ultimately pushes down to municipalities increasing the property tax load onto renters….”
I do not understand the mechanism. How does the mortgage interest deduction (which those who own rental property also get), increase the property tax load onto renters? Both home-owners and renters pay property tax — home-owners pay it directly, and renters pay indirectly through increased rent.
I believe that your basic premise is incorrect. According to the Houston Chronicle, “Organizations that qualify for federal tax-exempt status are, by law, exempt from paying property taxes in all 50 states.”
http://smallbusiness.chron.com/nonprofit-organizations-pay-property-taxes-61900.html
As such, there is no necessity for State and local governments to decide what is a religion and what is not. The only issue is whether the property is owned by a tax-exempt organization, religious or not.
Warren not true. There are too many variables and from my time working in a Tax Assessor’s office I know the decision making process isn’t that easy.
Can a bona fide religious institution buy a profit making property that is not connected to the religious purpose of that institution? Sure, your local Baptist Church can buy the 7/11 franchise out on Hwy 59 and sell beer and wine to all the sinners driving through. And own the hot bed motel next door that caters to hookers ‘servicing’ the truck drivers. But that doesn’t make those properties exempt from property tax.
It may be true (tho I think not) that State and local governments have no necessity to decide what is a religion or not. But it is NOT true that they have no necessity to determine if a given property is in whole or in part devoted to religious purposes.
You con’t get to buy a whorehouse in Nevada and call it either a ‘nunnery’ or a ‘religious retreat’. Or even the Hotel St. Francis on Union Square in SF and say ‘church owned’. (But it says ‘St. Francis’ right over the door!! And on all the bath towels!! And the coasters in the bars!!!!!”
Bruce is right. The notion that a Church could claim the Walmart on their property ought to be tax-exempt is clearly absurd.
The article said that local governments do not have the right to define what religion is. They’re right. But government most certainly has the power to define what a commercial enterprise is – and to tax it.
Tax breaks for religious institutions, though, are more a burden on taxpayers than on the religious freedom of all taxpayers who do not support that particular religious institution. The Exclusion Clause — the very first clause of the very First Amendment — is perfectly clear: the state doesn’t interfere with religion; religion doesn’t intrude on the state. Religionists have shown complete ignorance of this in their arguments about Christian County Clerks, or Christian bakers, having the right to refuse to service the public – gays. But no state authority has the power to insist that a Christian church must perform weddings of gays. Anti-religionists ought to accept this – indeed, they must accept this. Hopefully, now that Scalia walks among the heavenly hosts, the Supreme Court would see it this way.
So if a charity buys a 7/11 franchise and uses the proceeds to help the homeless, do you tax the property?
Warren,
Even if it’s a religious charity, the 7/11 is a commercial enterprise, and thus I don’t think would be exempt from taxation on religious grounds. It would in all likelihood receive tax breaks as a charity, but not an exemption as a religious institution.
I do agree that we need to tax churches-religion just as same as any other entity. As in Pay God what is God’s and pay Cesar what is Cesar’s. But the thing I really cannot get my brain around is why do we allow corporations to not pay their fair share of tax to the people-government? Why do we allow the oligarchs to game the system and not pay their fair share? Why do we not set up tax free economic enterprise zones in every state so corporations will not feel that they have to run off to Mexico, Ireland or China to stay competitive?
William Ryan,
The reason why “we” allow it is due entirely to the dynamics of politics, and specifically to the dynamics in place for financing campaigns. There are no real accidents when it comes to setting policy; all legislation is social engineering, in that laws are passed to accomplish specific goals. As it is, legislators spend 2/3 of their time raising money for their re-election. When the costs of those campaigns are so exorbitant, the donors get what they want or they don’t contribute. In addition, when half of Congresspersons are millionaires, it’s not hard to anticipate where their sympathies lie.
If, for example, we had public financing of campaigns, their constituents would be the ones represented. As it stands now, the oligarchs’ interests are represented first and foremost.
“It would in all likelihood receive tax breaks as a charity, but not an exemption as a religious institution.” -Ms 57
“I do agree that we need to tax churches-religion just as same as any other entity.” – William Ryan
According to the article I posted earlier, that is exactly what we do.
But the idea that a 7-11 is a “commercial enterprise”, and so should pay property taxes whether it is owned by a tax-exempt organization or not, contradicts the fact that we do not charge property tax on tax-exempt hospitals, but we do on for-profit hospitals.
“But the thing I really cannot get my brain around is why do we allow corporations to not pay their fair share of tax to the people-government? Why do we allow the oligarchs to game the system and not pay their fair share? Why do we not set up tax free economic enterprise zones in every state so corporations will not feel that they have to run off to Mexico, Ireland or China to stay competitive?”
Sounds contradictory. You want corporations to pay their “fair share” (Can you define FAIR, generally, and tell us how to apply that to corporate income taxes?), but then want them to NOT pay taxes so that they can stay competitive.
The way I see it, corporations are made up of people — owners, employees, and creditors. Just tax the people when they get the money — dividends and capital gains for owners, wages for employees, and interest for creditors — and do not directly tax the corporations at all. (Foreign owners simply pay whatever our top personal rate is.)
This would, of course, require that we treat all such income the same for tax purposes, without special rates for dividends and long-term capital gains.
Warren,
I think you are wandering away now from the piece above, which wasn’t about profit or non-profit hospitals or 7/11s but about taxation of religious institutions.
Perhaps, Ms 57, but I do not think so because, in general, religious institutions are treated no differently than any other tax-exempt organizations.
Warren, I can’t say for certain either. In terms of tax policy towards both religious institutions and tax-exempt organizations, they may be treated the same, but tax-exempt organizations don’t have the same constitutional protection as religious institutions, i.e., the right to practice religion free of state interference. The question would then be whether removal of the tax emption for religious institutions would constitute state interference. I don’t know the answer to that question. One thing I know for sure — religionists would raise holy hell if that happened. Cheers.
“[Tax-exempt] organizations don’t have the same constitutional protection as religious institutions, i.e., the right to practice religion free of state interference.”
Sure they do — they are just not doing so.
“The question would then be whether removal of the tax emption for religious institutions would constitute state interference.”
The question at hand is property taxes. If you treat one tax-exempt (by U.S. government standards) differently because it is a religious organization, then you will run afoul of the First Amendment.
Expensive private schools for the elite, like Harvard and MIT that own valuable property in Boston, are also exempt from property taxes. Should the hardworking laborers of Boston be subsidizing elite private universities?
Massachusetts exempts all non-profits from property and income taxes, religious or not. Since there are a lot of universities, museums and non-profit hospitals in the state, that puts pressure on the townships. They demand services, but are not obligated to pay for them. The compromise has been that many of them make payments to the surrounding township in lieu of property taxes. (They call these “lulus”.) The only place religion comes into this case is that religious organizations qualify more or less automatically for non-profit status. They don’t need to explicitly argue an educational, charitable or research mission.
A lot of these organizations have cafeterias and gift shops. Some even rent space to other commercial enterprises, like the hair salons and banks in the MIT Student Center. They also rent space for events. For example, I attended a couple of corporate parties at the Museum of Science. They don’t pay property taxes, and they don’t pay income taxes on the rents.
Even if we ignore the religious aspect, this shrine controls 200 acres of largely undeveloped land. That’s not all that unlike Habitat in Belmont which controls 90 acres. Habitat is a non-profit that runs a summer camp, maintains and preserves 90 acres of open space, teaches nature courses and rents the place out for events. They don’t pay property taxes or income taxes. In other words, the Shrine of Our Lady of LaSalette in Attleboro is a pretty ordinary non-profit and would be even if it were secular.
There is still the question of whether its money making operations are within the scope of its mission. WGBH, the Boston based non-profit educational television station, for example produces video for broadcast and sale, but that video is within the scope of its educational mission.
The standard counterexample was the Mueller Noodle Company which was owned by NYU and sold a variety of pasta products. NYU was and is a non-profit with an educational and research mission. I suppose they might have tried to exempt their alphabet pasta, but when tried in court, NYU lost and Mueller Noodle was ruled a commercial enterprise. Non-profits can own commercial enterprises in whole or in part as long as those enterprises pay their taxes. NYU eventually divested, but the case is still taught at NYU law school.
I’m not exactly sure what elements of the shrine’s enterprise Attleboro is arguing is inconsistent with its religious mission. Surely not the coffee shop, book shop or conference rooms. All sorts of non-profits run those. Is their lighting extravaganza around Christmas too commercial?
This gets us back to lulus. Most non-profits, especially those over a certain size make payments to the local town in lieu of property taxes. Clearly this shrine is not doing so or we wouldn’t be seeing this challenge. I think religion is a red herring in this case. The shrine is over a certain size and should have negotiated some form of in lieu of payment as is customary. My guess is that is what is going to happen, and that this case is just a pressure tactic.
Kalesberg
Thanks for the detailed explanation