Religious groups fear `open season’ on tax-exempt status

c. 1996 Religion News Service WASHINGTON _ When Colorado voters go to the polls next week, they may hold the tax status of churches, synagogues and mosques across the nation in their hands. Up for grabs on the Colorado ballot is Amendment 11, an unprecedented initiative that would change the state constitution to require most […]

c. 1996 Religion News Service

WASHINGTON _ When Colorado voters go to the polls next week, they may hold the tax status of churches, synagogues and mosques across the nation in their hands.

Up for grabs on the Colorado ballot is Amendment 11, an unprecedented initiative that would change the state constitution to require most nonprofit groups _ including churches and religious organizations _ to pay property taxes.


The ramifications of the vote will likely be felt well beyond the Rocky Mountains. Many church-state experts believe the 200-year-old practice of keeping religious organizations off the tax rolls is under serious threat on many fronts.”Any kind of tax imposed on charities would open the door to all taxes,”warns Steven McFarland, director of the Center for Law and Religious Freedom in Annandale, Va.”The implications for the religious community are just stunning.” Already, a growing number of states and local municipalities are seeking revenue from traditionally exempt charities, including faith-based groups:

_ In Harrison, Maine, officials imposed property taxes on a Christian Science summer camp because 95 percent of the campers came from other states. Maine argued that it should not have to grant tax breaks to a group that”principally benefits”people from outside the state. The camp challenged the taxes in court, and the case is currently pending in the U.S. Supreme Court.

_ In Philadelphia, in order to stave off the imposition of full-scale property taxes, a coalition of 50 nonprofit groups voluntarily agreed to pay 40 percent of what their property taxes would be.

_ In Montgomery County, Md., an extra fee to help pay off a new incinerator is being tagged onto local property tax bills. Churches and other nonprofits were also billed, even though they don’t pay property taxes.

_ In Buffalo, N.Y., local officials began a new policy Oct. 1 of charging all groups a separate fee for trash collection. The fee, also levied against religious groups, was previously part of the real estate tax that non-profits don’t have to pay. “There is a whole wave of resistance to tax exemptions for religious organizations and all nonprofits,”says Marc Stern, attorney for the American Jewish Congress in New York. While this paring down of tax exemptions affects nonprofits across the board, churches and religious organizations are in a unique situation because taxation can raise new concerns about unconstitutional church-state entanglement.”Under the First Amendment, government can’t promote or fund religion, but religious organizations also shouldn’t have to fund the government,”says Oliver Thomas, special counsel to the National Council of Churches. Thomas helps coordinate an ad-hoc group of religious organizations that consults with the Internal Revenue Service on tax issues.

Many religious groups point to Supreme Court Justice John Marshall’s assertion 150 years ago that”the power to tax is the power to destroy.” But others believe tax exemption is an unfair government benefit that does, in fact, unconstitutionally fund religious organizations.”It is not the taxpayers’ duty to support all the other churches, religious organizations, non-profits, fraternal organizations or corporations,”asserts a statement by Coloradoans for Fair Property Taxation, the group behind Colorado’s ballot initiative. The issue is a controversial one, even for strict church-state separationists.”Tax exemption is a privilege, not a right,”says Barry Lynn, executive director of the Washington-based Americans United for Separation of Church and State, a grassroots organization that aggressively opposes any kind of government support for religious organizations.

But Lynn acknowledges that even within his own organization, there is a significant split over whether tax exemption for religious groups is appropriate.”Our members argue both sides,”he says.


Americans United opposes the Colorado measure because of language that would allow some nonprofits with a”strictly charitable purpose”to retain the property tax exemption. Lynn says the government should not be in the business of determining which religious charities conduct work that is worthy of tax exemption.

The equity question is resonating deeply in many communities, as the Coloradoans for Fair Property Taxation coalition discovered while campaigning for its ballot initiative.”Since (religious nonprofits) receive police and fire protection and other public services, they should pay their fair share,”says coalition chairman John Patrick Michael Murphy.”The current practice of exempting all nonprofits forces homeowners, renters and businesses to subsidize them by paying their property taxes.” Small business owners are increasingly taking up the same arguments. Kenton Pattie, executive director of the Annandale, Va.-based Business Coalition for Fair Competition, believes that too many nonprofit charities have now become”aggressively commercial”in the selling of goods and services. He says these charities compete with local small businesses, and therefore have an unjust advantage through tax exemption, lower postal rates and other nonprofit benefits.”It’s an unfair playing field, and the nonprofits are taking advantage of it,”Pattie alleges.

But opponents in the nonprofit community argue that the Colorado measure is itself unfair. Tom Minnery, vice president of public policy at the Colorado Springs-based Focus on the Family, takes issue with the fact that under Amendment 11, most religious groups would have to pay property taxes, but schools wouldn’t.”The fire department is called to school buildings a whole lot more than they are called to Focus on the Family. The police are called to schools a whole lot more than they are called to churches,”he says.

If the measure passes, Focus will be required to pay more than $500,000 annually in property taxes, Minnery says. Many religious charities in Colorado, particularly smaller ones, say they would be forced to shut their doors if the amendment is adopted.

Baptist Joint Committee General Counsel Brent Walker believes it would be unfair to tax an entity that exists to benefit the community.”If you want to weigh out the tremendous benefits that churches and nonprofits bring to the community against very incidental and sporadic police and fire protection, I think the community wins every time,”he says.

Thomas argues that constitutional issues aside, granting tax exemptions makes good policy sense.”Taxing churches and synagogues is like cutting off their noses to spite their faces,”he says, asserting that no local or state governments could replace the”quality or the efficiency”of the community services that nonprofits provide.”When (churches and synagogues) don’t have money to do their ministries … then obviously, society is going to suffer,”he says.


Overall, Barry Lynn says this is a”good, healthy debate”for society. He does not believe the discussion will”lead to a floodgate of taxes”on churches.

But many other church-state attorneys predict the Colorado initiative and the Supreme Court case from Maine will set the tone for the rest of the nation.”Religious nonprofits will be very tempting targets for revenue-hungry states and municipalities,”says McFarland of the Center for Law and Religious Freedom.

Walker agrees.”If the initiative in Colorado passes and if the Supreme Court affirms the decision out of Maine, it will be open season in all 50 states in every community on the tax-exempt status of churches and religious organizations,”he says.

In Colorado, Murphy confirms that he has already been approached by officials in several other states, including California, New York and Nebraska, for advice on how they can launch similar efforts in their own jurisdictions.

MJP END LAWTON

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