BLOGGovernment Attempting a New Way to Tax Churches and Non-Profits

By Ray Kaselonis Posted on: | September 27, 2018

There is a seemingly small provision in last year’s big tax bill that has gone mostly unnoticed. But it deserves some attention. After all, it could be used to raise a huge amount of money for the government – all at the expense of a historically untaxed group: ministries and churches across America.

There’s a lot left to be determined about how the law will affect these groups. But a plain reading of the law suggests that the government will tax churches and non-profits based on the costs associated with providing employee parking.

This is an unusual approach to raising revenue, to say the least, as it considers parking costs to be income – or, more specifically, “unrelated business taxable income.” First of all, how can the cost of something ever be considered “income”? And second, since when is providing parking to your employees an “unrelated business” of a church or ministry?

These changes to tax law don’t make sense on many levels. The good news is we’re not alone in our desire to see this law fixed. Four separate bills have been introduced in Congress to repeal it.

We at ADF are actively monitoring this situation from both a constitutional and legislative perspective because it has possible religious freedom implications.

The government has historically stayed away from taxing non-profits, and particularly churches. One of many reasons for this practice is the unnecessary government entanglement that often follows.

This, of course, isn’t the first case of government intrusion, nor will it be the last. But when the government does get involved in the affairs of ministries and churches, it often results in unequal and discriminatory applications.

The IRS has not yet issued guidance on how these taxes should be applied – and it is not clear if it will. For now, churches and ministries are left in limbo concerning how much they should be setting aside for these potential new taxes.

This ridiculous new law comes at a time when churches and pastors are facing heightened opposition relating to their tax-exempt status.

  • In October, the U.S. Court of Appeals for the Seventh Circuit will hear oral arguments concerning a legal challenge to the ministerial housing allowance. Pastors benefit from the housing allowance by receiving an income tax exemption for reasonable housing expenses.
  • In August, Alliance Defending Freedom responded to a news release sent by the Hawaii Attorney General, which sought to silence churches and non-profit charitable organizations by inappropriately threatening their tax-exempt status if they speak about political issues during the upcoming election season.

Churches and ministries are facing increasing legal pressure, but they shouldn’t have to bear this legal burden alone. Alliance Defending Freedom launched ADF Church Alliance to help shoulder this burden for churches, and our support for ministries remains unwavering.

Learn about ADF Church Alliance and how we support churches in the midst of a changing culture.

Learn More

Ray Kaselonis

Senior Counsel

Ray Kaselonis serves as senior counsel with Alliance Defending Freedom’s Center for Christian Ministries.

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