For the last several decades a debate has stirred regarding whether or not churches and other religious institutions should be required to pay taxes like businesses or corporations. In the U.S. and several other countries, religious institutions including churches, mosques, synagogues, etc. have been able to operate under tax-exempt status.
U.S. churches officially received federal income tax-exempt status in 1894, but they have been unofficially tax-exempt since the country was founded. And churches are exempt from having to pay property taxes in all 50 states.
However, the fact that religious institutions can operate (sometimes at a very large scale) without paying taxes has received pushback for the last century. People speaking against tax-exempt status for churches goes back many years including when author Mark Twain wrote about the subject in “Mark Twain’s Notebook,” published in 1935. “No church property is taxed and so the infidel and the atheist and the man without religion are taxed to make up the deficit in the public income thus caused,” Twain argued.
The debate was also brought to the public spotlight during the Walz V. Tax Commission of the City of New York Supreme Court Case in 1970. Some of the justices argued that a church being tax-exempt helps uphold the separation of church and state presented in the Establishment Clause of the First Amendment of the U.S. Constitution.
“The exemption creates only a minimal and remote involvement between church and state, and far less than taxation of churches,” Chief Justice Warren Burger stated. “It restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other.”
But Associate Justice William Douglas disagreed and thought that churches being tax-exempt violated the separation clause. “If believers are entitled to public financial support, so are nonbelievers,” Douglas stated. “A believer and nonbeliever under the present law are treated differently because of the articles of their faith … I conclude that this tax exemption is unconstitutional.”
Britannica’s ProCon website looks at the issue and breaks down several arguments for and against churches having tax-exempt status.
Charis Bible College Housing Proposal Brings Back Debate
In August, representatives from Woodland Park’s Charis Bible College brought a proposal to change an agreement they made with the city to be allowed to build housing for the campus under their non-profit tax-exempt status to the city’s planning commission and council.
The original contract drafted 10 years ago had a condition in it that said when the college built housing that it would have to contract with a private company for temporary housing and that the property would have to pay taxes. Charis proposed to remove this condition.
As soon as the college’s proposal was announced, it received backlash from the community. Many argued at public meetings and on social media that the college should have to pay property taxes since they put a strain on the city’s roads and the county’s emergency services.
However, the college contended that it is their constitutional right to not be taxed and that the condition that was in the contract was not legal. They also brought up the fact that local municipalities do not have the authority to claim whether an entity should be tax-exempt. In the end, the council voted to remove the condition and let Charis start construction on the tax-exempt housing units.
Churches are Tax-Exempt for Good Reasons
During the public hearing at the Woodland Park City Council Meeting on Aug. 4, the attorney representing Charis, Andrew Nussbaum, argued that it was unlawful for the city council to prevent Charis from building housing that was exempt from property taxes. He told the council that religious institutions are granted tax-exempt status in the Colorado State Constitution for “common sense reasons.”
“Religious institutions do incredibly good work for the communities they serve,” Nussbaum said. “They minister to the spiritual and material needs of the community. Colorado has wisely said that it wants to encourage that. Religious institutions are also charitable institutions holding in trust donations from others. People do not donate to charity to pay government taxes, but to further the mission of their not-for-profit of choice. And, Colorado has exempted religious ministries from property taxes to avoid entangling the government in questions of religion.”
Churches Should Pay Taxes Since they Operate Like Businesses
Before the city council’s decision was made, several in the community argued that Charis should pay their share of property taxes since they use the city’s roads and local emergency services. Dennis Zerull, who hosts the “This Week in the Bear Cave” podcast and has a doctorate in theology, agrees that churches should be taxed.
“If you go to Salt Lake City or any large community where there are huge organized churches like the Mormon Church, there are gigantic office buildings and banks owned by churches,” Zerull explained. “It is a business and it is run like a business. The larger churches employ a lot of people, but we all know they are tax-exempt. They are run like businesses in the shadows,” Zerull said in an interview. “The prosperity evangelists like Joel Osteen are making huge amounts of money and they are skirting the tax issue. These are guys that are flying around in jets that were bought with donations. And they are driving cars that they don’t pay taxes on because the church has sheltered them from that and authorized them a car to drive.”
But, even though the recent city council decision and public outcries brought the debate back, it remains the law that religious institutions are not subject to property taxes or federal income taxes just like other non-profit organizations.
