Non-Profit Tax Exemptions

This post contains material originally posted on this blog on September 28, 2009. I have re-posted it today as a reaction to reading Prop 8 Lawyers Push to Remove IRS Rules at The New Civil Rights Movement blog.

     Churches, or any organization claiming IRS-approved Tax Exempt status that desires to engage in politicking should refuse the exemption. After all, they’ve acquired a benefit (tax exemption) for a restriction. Seems like a fair trade to me and easily undone if they don’t agree. Consult the IRS Guide for Churches if that is unclear.

     Individuals and corporations who are subject to taxation are free to engage in such activities; clearly many do. Thus the argument by religious-themed institutions that they are being “muzzled” is disingenuous at best. In order to freely express themselves (subject to libel/ slander/ defamation laws) they just need to refuse exempt status, file full tax returns and pay taxes on profits (and un-allowed expenses such as excessive pay packages).

     Likewise it is time to remove the deduction of donations to political organizations regardless of which of the various sub-sections of 26 USC 501 they claim to meet; lobbying for (or against) a specific subject, political party, individual or ideology is an expression of personal belief that may or may not be of general benefit. Tax deductible status should be limited to donations to non-political organizations whose purpose is to “promote the general Welfare”; a primary constitutional purpose in the USA.

     In fact it may be time for all such non-profit organizations to pay taxes on profits. Organizations could keep their IRS designations (501[c]3 etc.) which allows contributions (to a certain level) to organizations that engage in ‘social welfare’ functions to be tax-deductible for people and ‘for profit’ organizations. Then allow each non-profit to set aside an amount of profits (perhaps to 10% of total income) as exempt from tax if retained by the group for future eligible uses.

     All income above that should be taxed if not used for eligible purposes; such as providing immediate assistance to real people; food, shelter or training. And allow ‘reasonable expenses’ subject to similar IRS tests of reasonableness as ‘for profit’ businesses. Until such time as the erroneous SCOTUS recognition of corporations as being something more than a temporary creation of government is corrected, this will put ‘for-profit’ and ‘non-profit’ corporations on equal footing, distribute the tax “burden” more fairly and ensure that religious corporations that insist on involving themselves in governance in the profane world contribute fully to it.

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