Last updated on: 8/8/2019 | Author:

US churches* received an official federal income tax exemption in 1894, and they have been unofficially tax-exempt since the country’s founding. All 50 US states and the District of Columbia exempt churches from paying property tax. Donations to churches are tax-deductible. The debate continues over whether or not these tax benefits should be retained.

Proponents argue that a tax exemption keeps government out of church finances and upholds the separation of church and state. They say that churches deserve a tax break because they provide crucial social services, and that 200 years of church tax exemptions have not turned America into a theocracy.

Opponents argue that giving churches special tax exemptions violates the separation of church and state, and that tax exemptions are a privilege, not a constitutional right. They say that in tough economic times the government cannot afford what amounts to a subsidy worth billions of dollars every year. Read more background…

The IRS Tax Guide for Churches and Religious Organizations uses the term church “in its generic sense as a place of worship including, for example, mosques and synagogues.” 


Pro & Con Arguments

Pro 1

Exempting churches from taxation upholds the separation of church and state embodied by the Establishment Clause of the First Amendment of the US Constitution.

The US Supreme Court, in a majority opinion written by Chief Justice Warren E. Burger in Walz v. Tax Commission of the City of New York, decided May 4, 1970, stated: “The exemption creates only a minimal and remote involvement between church and state, and far less than taxation of churches. It restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other.” [5]

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Pro 2

Requiring churches to pay taxes would endanger the free expression of religion and violate the Free Exercise Clause of the First Amendment of the US Constitution.

By taxing churches, the government would be empowered to penalize or shut them down if they default on their payments. [12] The US Supreme Court confirmed this in McCulloch v. Maryland (1819) when it stated: “the power to tax involves the power to destroy.” [13]

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Pro 3

Churches earn their tax exemption by contributing to the public good.

[14] Churches offer numerous social services to people in need, including soup kitchens, homeless shelters, afterschool programs for poor families, assistance to victims of domestic violence, etc. [15] These efforts relieve government of doing work it would otherwise be obliged to undertake.

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Pro 4

Taxing churches would place government above religion.

The Biblical book of Judges says that those who rule society are appointed directly by God. [2] Evangelist and former USA Today columnist Don Boys, PhD, asked “will any Bible believer maintain that government is over the Church of the Living God? I thought Christ was preeminent over all.” [16]

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Pro 5

A tax exemption for churches is not a subsidy to religion, and is therefore constitutional.

As stated by US Supreme Court Chief Justice Warren E. Burger in his majority opinion in Walz v. Tax Commission of the City of New York (1970), “The grant of a tax exemption is not sponsorship, since the government does not transfer part of its revenue to churches, but simply abstains from demanding that the church support the state. No one has ever suggested that tax exemption has converted libraries, art galleries, or hospitals into arms of the state or put employees ‘on the public payroll.’ There is no genuine nexus between tax exemption and establishment of religion.” [5]

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Pro 6

Poor and disadvantaged people relying on assistance from their local churches would suffer if churches were to lose their tax-exempt status.

According to Vincent Becker, Monsignor of the Immaculate Conception Church in Wellsville, NY, the food and clothing programs his church offers would be threatened by a tax burden: “All of a sudden, we would be hit with something we haven’t had to face in the past… We base all the things that we do on the fact that we do not have to pay taxes on the buildings.” [17] Crucial services would either be eliminated or relegated to cash-strapped local governments if churches were to lose their tax exemptions.

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Pro 7

US churches have been tax-exempt for over 200 years, yet there are no signs that America has become a theocracy.

If the tax exemption were a serious threat to the separation of church and state, the US government would have succumbed to religious rule long ago. As the Supreme Court ruled in Walz v. Tax Commission of the City of New York (1970), “freedom from taxation for two centuries has not led to an established church or religion, and, on the contrary, has helped to guarantee the free exercise of all forms of religious belief.” [18]

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Pro 8

Taxing churches when their members receive no monetary gain would amount to double taxation.

The late Rev. Dean M. Kelley, a leading proponent of religious freedom, explained that church members are already taxed on their individual incomes, so “to tax them again for participation in voluntary organizations from which they derive no monetary gain would be ‘double taxation’ indeed, and would effectively serve to discourage them from devoting time, money, and energy to organizations which contribute to the up building of the fabric of democracy.” [19]

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Pro 9

The only constitutionally valid way of taxing churches would be to tax all nonprofits, which would place undue financial pressure on the 960,000 public charities that aid and enrich US society.

If only churches were taxed, government would be treating churches differently, purely because of their religious nature. [20] [21]

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Pro 10

Small churches, already struggling to survive, would be further endangered by a new tax burden.

A 2010 survey by the Hartford Institute for Religion Research found that congregations facing financial strain more than doubled to almost 20% in the past decade, with 5% of congregations unlikely to recover. [22] If these churches were obliged to pay taxes, their existence would be threatened and government would thus be impeding religious expression. [20]

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Pro 11

The vast majority of churches refrain from political campaigning and should not be punished for the actions of the few that are political.

The Internal Revenue Code (IRC) gives churches the freedom to either accept a tax benefit and refrain from political campaigning like all other nonprofit charities, or reject the exemption and speak freely about political candidates. [1] [23] There are 450,000 churches in the US, yet only 500 pastors made political statements as part of Pulpit Freedom Sunday on Oct. 2, 2011. [35] [58] The tax exemption should remain in place to benefit the vast majority of churches.

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Pro 12

Withdrawing the “parsonage exemption” on ministers’ housing would cost American clergy members $2.3 billion over five years, which would be a major blow to modestly paid men and women who dedicate their lives to helping people in need.

[60] According to the National Association of Church Business Administration (NACBA), the average American pastor with a congregation of 300 people earns less than $28,000 per year. The NACBA also states that one in five pastors takes on a second job to earn extra income, and that only 5% of pastors earn more than $50,000. [59] As stated by D. August Boto, Executive Vice President and General Counsel of the Executive Committee of the Southern Baptist Convention, “the housing allowance is critically important for making ends meet—it is not a luxury.” [62]

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Con 1

Tax exemptions for churches violate the separation of church and state enshrined in the Establishment Clause of the First Amendment of the US Constitution.

By providing a financial benefit to religious institutions, government is supporting religion. Associate Justice of the US Supreme court, William O. Douglas, in his dissenting opinion in Walz v. Tax Commission of the City of New York, decided May 4, 1970, stated: “If believers are entitled to public financial support, so are nonbelievers. A believer and nonbeliever under the present law are treated differently because of the articles of their faith… I conclude that this tax exemption is unconstitutional.” [24]

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Con 2

A tax exemption is a privilege, not a right.

Governments have traditionally granted this privilege to churches because of the positive contribution they are presumed to make to the community, but there is no such provision in the US Constitution. [25]

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Con 3

Churches receive special treatment from the IRS beyond what other nonprofits receive, and such favoritism is unconstitutional.

While secular charities are compelled to report their income and financial structure to the IRS using Form 990 (Return of Organization Exempt From Income Tax), churches are granted automatic exemption from federal income tax without having to file a tax return. [1]

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Con 4

A tax break for churches forces all American taxpayers to support religion, even if they oppose some or all religious doctrines.

As Mark Twain argued: “no church property is taxed and so the infidel and the atheist and the man without religion are taxed to make up the deficit in the public income thus caused.” [26]

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Con 5

A tax exemption is a form of subsidy, and the Constitution bars government from subsidizing religion.

William H. Rehnquist, then-Chief Justice of the US Supreme Court, declared on behalf of a unanimous court in Regan v. Taxation with Representation (1983): “Both tax exemptions and tax deductibility are a form of subsidy that is administered through the tax system. A tax exemption has much the same effect as a cash grant to the organization of the amount of tax it would have to pay on its income.” [27]

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Con 6

The tax code makes no distinction between authentic religions and fraudulent startup “faiths,” which benefit at taxpayers’ expense.

In spring 2010, Oklahoma awarded tax exempt status to Satanist group The Church of the IV Majesties. [8] In Mar. 2004, the IRS warned of an increase in schemes that “exploit legitimate laws to establish sham one-person, nonprofit religious corporations” charging $1,000 or more per person to attend “seminars.” [28] The Church of Scientology, which TIME Magazine described in May 1991 as a “thriving cult of greed and power” and “a hugely profitable global racket,” [29] was granted federal income tax exemption in Oct. 1993. The New York Times reported that this “saved the church tens of millions of dollars in taxes.” [30]

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Con 7

Churches serve a religious purpose that does not aid the government, so their tax exemptions are not justified.

Tax exemptions to secular nonprofits like hospitals and homeless shelters are justified because such organizations do work that would otherwise fall to government. Churches, while they may undertake charitable work, exist primarily for religious worship and instruction, which the US government is constitutionally prevented from performing. [31]

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Con 8

Exempting churches from taxation costs the government billions of dollars in lost revenue, which it cannot afford, especially in tough economic times.

According to former White House senior policy analyst Jeff Schweitzer, PhD, US churches own $300-$500 billion in untaxed property. [9] New York’s nonpartisan Independent Budget Office determined in July 2011 that New York City alone loses $627 million in property tax revenue. [11] Lakewood Church, a “megachurch” in Houston, TX, earns $75 million in annual untaxed revenue, and the Church of Scientology’s annual income exceeds $500 million. [32] [33]

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Con 9

Despite the 1954 law banning political campaigning by tax-exempt groups, many churches are clearly political and therefore should not be receiving tax exemptions.

[9] [34] Every fall, the Alliance Defense Fund, a Christian legal group, organizes “Pulpit Freedom Sunday,” encouraging pastors to defy IRS rules by endorsing candidates from the pulpit. More than 500 pastors participated in Oct. 2011, yet none lost their churches’ exemption status. [35] In Oct. 2010, Minnesota pastor Brad Brandon of Berean Bible Baptist Church endorsed several Republican candidates and dared the “liberal media” to file complaints with the IRS. Brandon later announced on his radio program: “I’m going to explain to you what happened… Nothing happened.” [35]

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Con 10

American taxpayers are supporting the extravagant lifestyles of wealthy pastors, whose lavish “megachurches” accumulate millions of tax-free dollars every year.

US Senator Chuck Grassley, MA (R-IA) launched an investigation into these groups in Nov. 2007 after receiving complaints of church revenue being used to buy pastors private jets, Rolls Royce cars, multimillion-dollar homes, trips to Hawaii and Fiji, and in one case, a $23,000, marble-topped chest of drawers installed in the 150,000 square foot headquarters of Joyce Meyer Ministries in Fenton, Missouri. [36]

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Con 11

The tax break given to churches restricts their freedom of speech because it deters pastors from speaking out for or against political candidates.

[1] As argued by Rev. Carl Gregg, pastor of Maryland’s Broadview Church, “when Christians speak, we shouldn’t have to worry about whether we are biting the hand that feeds us because we shouldn’t be fed from Caesar/Uncle Sam in the first place.” [37]

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Con 12

The “parsonage exemption” on ministers’ homes makes already-wealthy pastors even richer at taxpayers’ expense.

The average annual salary for senior pastors with congregations of 2,000 or more is $147,000, with some earning up to $400,000. [61] In addition to the federal exemption on housing expenses enjoyed by these ministers, they often pay zero dollars in state property tax. Church leaders Creflo and Taffi Dollar of World Changers Church International had three tax-free parsonages: a million-dollar mansion in Atlanta, GA, a two-million-dollar mansion in Fayetteville, GA, [63] and a $2.5 million Manhattan apartment. [64] Kenneth and Gloria Copeland, leaders of Kenneth Copeland Ministries in Fort Worth, TX, live in a church-owned, tax-free $6.2 million lakefront parsonage. [62]

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Did You Know?
1. The first recorded tax exemption for churches was during the Roman Empire, when Constantine, Emperor of Rome from 306-337, granted the Christian church a complete exemption from all forms of taxation following his supposed conversion to Christianity circa 312. [2] [3] [4]
2. The law against churches intervening in political campaigns was passed by the US Congress in 1954. Since then, the Internal Revenue Service (IRS) has been successful in using the law to revoke the tax-exempt status of only one church: the Church at Pierce Creek in Binghamton, NY, which had placed an advertisement in USA Today and the Washington Times rebuking Bill Clinton four days before the 1992 presidential election. [6] [7]
3. If the "parsonage exemption" on religious ministers' housing costs were revoked, American clergy members would cumulatively lose an estimated $2.3 billion over five years. [60]
4. In spring 2010, the state of Oklahoma awarded tax-exempt status to a Satanist group called The Church of the IV Majesties. [8]
5. According to former White House senior policy analyst Jeff Schweitzer, PhD, US churches own $300-$500 billion in untaxed property. [9] New York City alone loses $627 million in annual property tax revenue due to 9,500 churches being tax-exempt, according to a July 2011 analysis by New York's nonpartisan Independent Budget Office. [10] [11]


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