Tax Free Churches

Straight Talk

The Question:

Doesn’t it appear to be a contradiction that Jesus told us to pay our taxes personally, then, today’s churches are commonly organized as 501c3 organizations to avoid taxes? If churches were not 501c3 and the people gave from the heart with no promise of tax advantage, couldn’t the blessing be greater? Why do preachers commonly tell others to pay taxes, then the church goes to legal extremes to avoid taxes? Jesus apparently paid his tax and was not exempt. Why, then, are we?

– RT from Flora, Illinois

The Answer
Part 1: Blessings by design
Part 2: Whose advantage?
Part 3: The heart of the matter

Blessings by design (Part 1)

Your question makes some assumptions which I’m not sure are entirely correct. I would gently like to challenge you on a few things if you don’t mind. For instance, you presume that the reason churches organize themselves as 501(c)(3) is to avoid taxes. You also assume people are not giving from their heart but because of tax advantages. Additionally you feel that since Jesus did not exempt himself from taxes, churches shouldn’t either.

Before we address churches, let’s examine personal taxes. Do you, for instance, follow the IRS tax code when you file your yearly return? Do you take the tax deduction for your mortgage interest or the tax deferment on any 401k contributions you may participate in? If you have children do you claim them and thereby reduce your tax bill?

I hope you do – and I do not therefore believe you are shirking your Christian duty not paying all the taxes you owe. Jesus said “‘Then render to Caesar the things that are Caesar’s; and to God the things that are God’s.'” (Matthew 22:21) He was setting forth a principle that ALL need to follow; whether as individuals, businesses or churches.

The principle is to properly pay taxes (and obey laws) according to the rules for our own various jurisdictions. We don’t decide that the tax code isn’t asking enough of us so ignore it and pay more. As a 501(c)(3), a church is not going to “legal extremes” in avoiding taxes; it is simply following the rules.

It is our government that wisely established this designation which, by the way, covers non-profit charities, not just churches. In fact, it is the idea that a church IS a non-profit charity that no doubt causes its inclusion. I don’t know how long “501(c)(3)” has been on the books but did you ever think that maybe it was a God inspired idea?

Whose advantage? (Part 2)

Not all countries exempt churches from taxes but any that don’t should consider it. The U.S. government realizes that providing breaks to non-profits is really to its own advantage. Why?

Churches supply untold amounts of charitable services. One of the reasons they are able to do so is because, without heavy tax burdens, they have more to give. Suppose the government was suddenly responsible for all the things that churches give away? I would think taxes would have to rise substantially to cover it all – much more than what the churches would have paid if they were not exempt.

Perhaps giving tax breaks to churches even positions governments to be in line for God’s favor. It honors churches for their work in our society. In a certain sense a government is saying thank you. Since God has commissioned his church to feed the poor and clothe the naked etc., I can see him smiling on those governments that acknowledge it. Favoring God’s people is in the best interest of a country desiring God’s blessing.

The same thing applies to the charitable deduction that individuals can claim. The tax advantage is to both the giver and the receiver. Ultimately, it leaves more money on the table for God’s work to be funded. Shouldn’t we gratefully receive those exemptions for ourselves and for our church?

So, I take a different approach than you do in your question. I don’t see the tax exemptions as avoidance or an indication of not giving from the heart. I don’t see any hypocrisy in preachers who tell congregants to pay their lawful taxes while being under tax exempt status as a church. Remember, if you are first taxed on your income and then give to the church and it is taxed, aren’t you being double taxed?

The heart of the matter (Part 3)

There is one final aspect to your question that I have not yet covered. You wonder if the blessing would be greater to people who give with no promise of a tax advantage. That might be true IF that is the reason they are giving. But why assume that?

Actually, I recently read that only a very small percentage of American Christians give a tithe (a tenth) of their income to church. Giving overall continues to decrease in spite of full tax advantage. That leads me to think that those who believe in tithing would do so even if the tax exemption were eliminated. Those who don’t want to give are not inspired to do so even with one.

God’s principles apply to believers regardless of the tax code of their home country. As scripture tells us: “God loves a cheerful giver.” (2 Corinthians 9:7) And after all, we really can’t fool God. He knows not only how much we give but with what motives. Taxed or not taxed, that is the heart of the matter.