You have just received a letter in the mail from your favorite children’s charity. It is their annual report highlighting all the great things they have done over the past year. You read through it, fascinated at what your contributions are doing for the children. You finally put it down and see another letter from the same organization. They usually send out donation requests with the annual report and you figure that is what it is. Opening it, you are surprised to find out that the organization is now being forced to pay taxes, equivalent to the amount of $437,563 or be shut down.
This, while not a real scenario, may be the future of your favorite church or religious organization in the near future. There has been a growing movement to make incorporation mandatory for churches. I will be referring to any building used mainly for religious purposes as a “church.” Incorporation is the act of creating a Corporation. Peter Kershaw, head of Heal Our Land Ministries and expert on the issue of church incorporation, quotes a corporation as being, “an artificial person or legal entity created by or under the authority of the laws of a state. An association of persons created by statue as a legal entity.” Incorporation is not mandatory for charities and non-profits because they exist on donations, and we do not discriminate between churches and non-profits, such as Camp Fire USA. To force churches to incorporate without forcing charities to do so as well would be discriminatory. Therefore, to force only churches to incorporate would be discriminatory.
Charities and non-profits hold a special status in business law. They provide services to people for either a free or relatively small fee. They do not get the whole cost of the service from the fee and so they rely on donations to exist. Since they do not make a profit but rather rely on donations they are treated separately by the IRS. Along with charities and non-profits are churches. There is no distinction made between churches and charities in this regard. Most non-profits organizations file for 501(c)3 tax-exempt status. Churches have the option of doing that, but according to page three of an IRS publication,
Churches that meet the requirements of IRC section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS. Although there is no requirement to do so, many churches seek recognition of tax-exempt status from the IRS because such recognition assures church leaders, members, and contributors that the church is recognized as exempt and qualifies for related tax benefits.
So though the option is there, churches do not have to apply for it. Either way, they are tax-exempt, just as charities like Camp Fire USA and the American Cancer Society is.
To force churches to incorporate without forcing charities to do so would be discriminatory. According to Merriam-Webster online, to discriminate as a transitive verb is to simply “mark or perceive the distinguishing or peculiar features of.” But we often think of it in the intransitive verb tense, i.e. “to make a difference in treatment or favor on a basis other than individual merit.” Some people in government want to make church incorporation mandatory, thus discriminating for any other charity except for churches. For the past couple decades we have been fighting for equal rights, and now suddenly some people want to discriminate so blatantly?
Some might argue that it will not be mandatory, but highly encouraged due to the limited liability benefit. I would hasten to compare this to the issue of being 501(c)(3) tax-exempt. Senator Lyndon B. Johnson and lawyers were the major players in getting churches to buy into having 501(c)(3) tax-exempt status. It is a surprising fact to most that that part of the tax code was only added in 1954. Churches could “avoid” paying taxes and were already tax deductible before that section was added. According to Peter Kershaw, “what it actually did was prevent churches from speaking in opposition to anything that the government declares ‘legal.’” The same situation is playing out with regard to incorporation. The major benefit we are told is that it brings the church limited liability. Churches, are not subject to the jurisdiction of any court, that is, until they incorporate. Legally, a corporation may sue and be sued. What a good benefit it would bring.
Some may argue that incorporation is necessary because a clergy member may take advantage of a person or group of people. Incorporation would mean that there would be only so much that the church could be sued for. I point to the above argument that incorporation would mean the church could be sued for the fault of one bad person, when it couldn’t be before. There are many frivolous lawsuits and I understand this may be someone’s way of trying to protect churches from it, but I think they have misunderstood the legal implications of it.
But on the issue of the person who took advantage of the church (you can also substitute other non-profits here) I agree that just because the person was “working” for a church they should not just get off. But I also believe that the church should not be punished for that one person. There should be criminal charges pressed on the individual. People should be held responsible for their actions, regardless of where they occur and under whose eyes. It does not seem fair for an organization to be held accountable and sued for one person’s actions, especially since most survive on donations and are on a tight budget as it is.
In America, charities and non-profit organizations have a special place in the hearts and minds of the American people as well as in the tax code of the IRS. They survive on donations from the appreciative, whether they are churches or YMCAs. To force churches to incorporate without forcing charities to would be discrimination. If you were the parishioners of America’s churches, you would wonder why your favorite “charity” is being forced to do something, while other beloved ones are not. Wouldn’t you feel that this was discrimination? Don’t we, as Americans, value freedom and equality? Isn’t American the land of the free? Why should American churches be held tightly in the clutches of discrimination, hovering over the pit of tyranny? Mandatory incorporation would be the second finger on the hand of injustice to be released. Tax-exempt status was the first. If this goes, who knows how quickly the others will. Please. No incorporation.