(Photo: Greg Locke preaching about praise and thankfulness.)
Last week The Roys Report reported that pastor Greg Locke’s church doesn’t show up in the IRS Tax Exempt Organization Search. So let’s explore this exemption in the tax code.
To become a non-profit in America, most organizations are required to file the Form 1023, Application for Recognition of Tax-Exemption. However, churches, synagogues and mosques–organizations that operate as places of worship–are exempt.
Following the Jim Bakker scandal, in 1987 Congress held a hearing to discuss oversight of religious organizations.
O. Donaldson Chapoton, Assistant Treasury Secretary for Tax Policy, told the oversight committee, “Exempting churches from reporting requirements and placing restrictions on IRS audit activities reduce the ability of the IRS to administer and enforce the law.”
Congressman Charles Rangel later commented, “From what I understand from the testimony of this panel, any person or organization could declare themselves a church, enjoy tax exemption, and you would have no way of knowing.”
Chapoton responded, “That is correct.”
In 2011, staffers for Senator Chuck Grassley compiled a list of loopholes exploited by religious organizations. Grassley requested the Evangelical Council for Accountability (ECFA) create a policy commission to study the loopholes and offer solutions to fix problems.
Issues Under Consideration:
“Should new entities claiming church status at least be required to notify the IRS of its intent to claim church status?
Alternatively, should new entities claiming church status only be required to notify the IRS of church status if they intend to solicit contributions from the public?
Would any of the limitations to the filing exception discussed above, or requiring an e-postcard for certain organizations, be feasible without violating constitutional principles?”
ECFA’s commission failed to include church whistleblowers as policy experts. Representatives from MinistryWatch and Trinity Foundation would have provided alternative views to the ministry leaders and church attorneys on the commission.
When the ECFA commission completed its report, it failed to call for any substantial reforms or reporting requirements for religious non-profits.
For anyone concerned about church and ministry financial integrity that wants to better understand the issues, we recommend the Senate Finance Committee memo outlining loopholes exploited by religious leaders. The 61-page report is worth reading.