Columns Government & Politics Mark Silk: Spiritual Politics Opinion

The new tax bill’s war on churches (and other nonprofits)

House Speaker Paul Ryan speaks at the 2016 Conservative Political Action Conference in National Harbor, Md. Photo by Gage Skidmore/Creative Commons

(RNS) — If you need another reason to understand why the Republicans aren’t running on their brand-new tax law, take a look at 26 U.S. Code § 512 (a) 7. It’s titled “Increase in unrelated business taxable income by disallowed fringe benefits,” but you can call it the “Soak churches and other nonprofits to pay for rich people’s tax cuts” provision.

When it came time to pass their tax cut last year, House Speaker Paul Ryan & Co. had at least to gesture toward offsetting the revenue that would be lost in making America greater for millionaires and billionaires. One place they looked was the fringe benefits provided to people who work for houses of worship, charities, private schools and suchlike 501(c)(3)s.

Many of these institutions allow their employees to park or work out in onsite exercise rooms free of charge. Whether they pick up the tab for these benefits directly or permit employees to deduct the cost from their paychecks, the IRS now requires institutions to report these perks as “unrelated business income” and pay taxes on the value of the benefit.

Photo by John Matychuk/Creative Commons

This has caused some agita in the evangelical world. Having sold their souls to the GOP, evangelicals figure they ought to be able to avoid filling out pesky tax forms.

“There’s going to be huge headaches,” Galen Carey, vice president of government relations at the National Association of Evangelicals, told Politico when the new provision came to light a few months ago. “The cost of compliance, especially for churches that have small staffs or maybe volunteer accountants and bookkeepers — we don’t need this kind of hassle.”

Concerned as I am about the hassle for understaffed houses of worship, there are more consequential problems. Consider New York City, where nonprofits with more than six employees are required by law to underwrite their transportation to and from work. Under 512 (a) 7, that also counts as unrelated business income.

Robert J. Vanni, an attorney who consults with the Nonprofit Coordinating Committee of New York, helped me with the math. Imagine a nonprofit health care agency with 500 employees who deduct $100 per month from their paychecks for the cost of commuting. At the 21 percent corporate rate, the total annual deduction of $600,000 would result in a federal tax bill for the agency of $126,000. For hard-pressed nonprofit service providers — most of them these days — that’s real money.

In all, the Evangelical Council for Financial Accountability estimates, the IRS will pick up $1 billion from all nonprofits under the provision this year. Think of it as 10,000 yachts @ $100k per. Heckuva job, Paulie.

Photo by Mike Petrucci/Creative Commons

But that’s not all the tax law does to weaken nonprofits. By doubling the standard deduction, it vastly reduces the number of taxpayers who itemize, eliminating the tax incentive for most of us to make charitable donations. Some states and localities could try to compensate for the loss of federal deductions for charitable giving, but the tax bill also cuts how much state and local tax may be deducted from the federal taxes, giving those authorities less room to make up for the nonprofits’ loss in individual contributions.

Vanni calls it “a triple whammy.”

Once upon a time there was a Republican president who, in the name of “compassionate conservatism,” sought to encourage faith-based nonprofits to help the poor and needy. The tax law does the opposite.

About the author

Mark Silk

Mark Silk is Professor of Religion in Public Life at Trinity College and director of the college's Leonard E. Greenberg Center for the Study of Religion in Public Life. He is a Contributing Editor of the Religion News Service

28 Comments

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  • Lots of generalizations here, Mark. The entire evangelical world sold its soul to the GOP? All Republicans have yachts?

  • And what exactly are upset Evangelicals going to do about it? Threaten to vote Democrat? Ha! As if they would ever do that. The GOP can do nearly anything they want to their Christian constituents, it’s not going to matter. As long as they pay lip service to Christianity, promise to get rid of abortion, and piss of liberals, Evangelicals will do anything they want.

  • Yes. it is another step in soak the poor and middle class to enable the already rich to become even richer. But, as long as Republicans can play the crowd with the “illegal immigrants are rapists” and keep pretending they will actually end the legality of abortion, they can get away with it.

    I do wonder if some of those who claim to be such fervent followers of Jesus really remember what hHe said about the difficulty rich men will have in getting into heaven and the importance of feeding the hungry, clothing the naked, caring for our neighbor.

    I did not know about that little piece of legislation in the proposed tax bill. Thanks for bringing it out of the shrouds of secrecy.

  • There are different opinions as to what a religion really is or what a non-profit is. To be fair therefore, there should be no tax-exemptions for any group and that includes the Democratic and Republican Parties. Faith and community initiative grant monies should also be cancelled and there should also be no tax deductions for contributions made to charities and non-profits.

  • No, it is not another step to soak the poor and middle class to make the rich richer.

    Unless, of course, you believe there are large number of poor and middle class persons filing as 501 (c) 3 corporations.

  • It’s nothing he hasn’t written or implied before.

    In fact it’s classic Mark Silk, designed to sell to the True Believers who think “evangelicals” are yellow running dogs for the GOP, which they believe is the country club for rich political string pullers.

    Thus the “This story is available for republication” appended to it.

  • The Republicans who don’t have yachts either live in landlocked areas or vote in favor of the ones who do.

    Anyone who works for a living and supports the Republican tax plan is either woefully ignorant of its effects or self destructive.

  • I won’t go as far as you are suggesting. Taxing Boy Scouts and Girl Scouts, Habitat for Humanity groups, Meals on Wheels, etc won’t help our world and could put them out of business.

    Tax money should only go to groups that don’t discriminate against anyone–homosexuals, people of other faiths or no faiths, etc. Tax money should only go to groups that don’t demand a quid pro quo–you have to accept our beliefs, listen to our religious message in order to get the help you need.

    Tax money shouldn’t be used to spread a groups religious message!

    As to tax exemptions for donations? I have never been in a tax bracket that I could deduct the money I have spent helping not for profit groups. I suspect that if the tax deductions for donations to non-profits were eliminated a lot of non-profits would have to shut their doors, the rich would just keep the money to themselves.

  • Many non-profits are simply tax havens for the founders. You might also want to review their IRS form 1099s to see the assets, expenses and salaries. 1099s are open to the public and available for viewing on line at no charge e.g. the Billy Graham charities pay Franklin G a million dollars a year plus expenses. Billy who is retired still rakes in $400,000 per year. And Gates and Buffet ? Why not simply put their billions into a fund for Obama Care and eliminate the Gates Foundation bureaucracy?

  • SO instead of tarring all non-profits with the same brush we need to have laws that distinguish between tax havens and those that are actually doing important work!

  • Indeed but who is to decide who is doing important work? And who is to decide what salaries are to be paid to the CEO’s et al of “non-profits”.

  • I remember that in the Gospels where Jesus said “For I was hungry, and you gave Me something to eat; I was thirsty, and you gave Me something to drink; I was a stranger, and you invited Me in, but don’t feed the liberals, don’t give water to the liberals, and don’t invite in the liberals. Matthew 25:35 (Ayn Ryand Translation)

  • All tax bills have “technical corrections fixes.”

    Problem solved, Mark.

    Let me guess, you are not a tax code expert, huh ?

  • No, liberal elitist who believes anything that Dan Rather or Rachel Madcow or The NY Slimes tells him.

    Most of the rich are liberal Democrats.

  • Good questions. BUT I think the problems can be dealt with. IF that is their is the will to deal with them.

  • Their money? They deposit it their “non-profits” reducing their taxes making your tax bite higher.

  • Doesn’t affect my taxes. Just means they give less to the Feds.

    NO dog in this hunt, let it go the way of the SALT deduction. Or limit it to $1,000,000.

  • Providing benefit to an employee… that is taxable. Easy to understand. This is just trying to fire up anger because it was a Republican bill.

  • “Tax money” goes to those who receive government funds such as Boeing or the recipient of a research grant.

    Money which belongs to others and is not grabbed by the government is NOT “tax money”.

    Religions are not taxed for two reasons: the first is the common law exemption inherited from English law exempting charitable and religious organizations; the second is the First Amendment which more or less precludes the government involving itself in religion by a taxation scheme.

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