Written by G. Ross Stephens   

Recently the Internal (infernal?) Revenue Service (the IRS), subsidiary of the Treasury Department, has been criticized for delving into the political reasons for the creation of new non-profit corporations. Congress has been holding hearings at the behest of irate conservatives concerning the targeting of non-profits with conservative titles like ‘Tea Party’. It turns out that the IRS has also been investigating new non-profits with liberal and/or progressive sounding names.

Non-profit corporations were originally created as non-political entities to procure some public good or pursue some charitable or educational activity. They were supposed to be non-political, though for some of the newer ones all that has changed.

I am the last person who should be defending the IRS, having been audited dozens of times over the last thirty years, but in this case the IRS was only doing its job.

Three years ago I sold an automobile to the pastor of a local church as his personal car. He did not take ownership. He signed the title over to a non-profit corporation so he would not need to pay state and local taxes on the vehicle. Depending on which state you are in that includes sales taxes, property taxes, license and other fees.

This got me to thinking about all the taxes being avoided on income, property, and other financial assets owned by churches and non-profit corporations in the United States. Many churches own businesses that go untaxed using these organizations. Dodging taxes this way on assets worth hundreds of billions, probably trillions of dollars is one of the reasons most state and local governments have such a hard time funding education and other public services.

In 1980 there were about 333,000 churches in the United States; now there are 450,000, an increase of 35 percent.

This increase, however, pales compared to the increasing numbers of non-profit and not-for-profit corporations. In 1980 there were 300,000. According to the most recent count from the IRS, there are 1.8 million for an increase of 500 percent – six-times the 1980 figure. Moreover, the U. S. Supreme Court has allowed the creation of a new type of politically active non-profit corporation, 501(c)(4)s. On the internet there are dozens of sites that will help you create your very own non-profit corporation.

A huge number of the 2 million-plus tax-exempt entities are politically active in partisan (political party) elections and on major public issues that are increasingly partisan. While both political parties use these tax-exempt corporations to augment their support for partisan elections and issues, the Republican/’Tea Party” Party has been most active in the respect. It is therefore necessary to lift the tax-exempt status of all non-profits and religious organizations involved in partisan elections and partisan issues.

At the expense of adequate public services, the tax structures of federal, state, and local governments have been eviscerated by tax exemptions, tax exclusions, tax exceptions, and loopholes – one of the major reasons for the deterioration of the nation’s infrastructure.

It is about time we taxed all politically active churches and non-profits as if they were private individuals or businesses. Sometimes non-profits are created to enable their CEO and other officials to rake in huge salaries and not otherwise be troubled by taxes on their operation. In other instances wealthy individuals or businesses create a non-profit, donate money for its operation, get a tax write-off, but still control the wealth used to fund the operation.

Taxes should apply to all of these organizations if the activity is partisan (political party), an issue that is partisan, or just gaming the system. Many of these entities call their activity ‘educational’ or ‘religious’ when it is actually partisan.

Along with the myriad of tax concessions that have been given to for-profit corporations, non-profits and churches are crippling the tax base of nearly all of our fifty states, seven state-like territories, and 89,000 local governments as well as hurting revenue collection by the national government in Washington, DC. It’s a travesty.

The IRS needs to be far more aggressive in policing churches and non-profits relative to political activity. They should be given the necessary authority and resources to accomplish this task and help to repair revenue deficiencies at all levels of government. Non-profits need to prove they are not political in order to achieve or retain tax-exempt status. Only the sanctuary or temple of churches should be tax-exempt.