Signs of the Times #52
Church and State – and the IRS
Originally posted, Aug. 7, 2015.
Quotes of the Times:
501(C)(3), definition of: “Refers to an organization that has applied for and obtained tax-exempt status from the IRS (U.S. Taxation Agency) under Section 501(c)(3) of the Internal Revenue Code.” Nolo’s Plain-English Law Dictionary.
“I am not the only IRS employee who’s wondered why churches go to the government and seek permission to be exempted from a tax they didn’t owe to begin with, and to seek a tax deductible status that they’ve always had anyway. Many of us have marvelled at how church leaders want to be regulated and controlled by an agency of government that most Americans have prayed would just get out of their lives. Churches are in an amazingly unique position, but they don’t seem to know or appreciate the implications of what it would mean to be free of government control.” Steve Nestor, IRS Senior Officer, IRS Publication 526, quoted by Peter Kershaw, In Caesar’s Grip, self-published, 2000; See also Thomas Lake, Romans 13 In a Constitutional Republic, Xlibris Corporation, 2011, p. 9.
“Once a church obtains the status of 501(c)(3) under the IRC they are trapped. The only way to be removed from a 501(c)(3) status is if the IRS chooses to remove the exemption. So if you dissolve the corporation and continue on as ABC church, an unincorporated church, you’re still trapped in their web and under their control.” Melvin Blough, IRS Agent, testifying under oath in Federal Court, Tampa, Florida, Jan. 24, 2001.
“Pastor, if you don’t get your house in order, get ready, you are going to have a jail ministry (i.e. got to jail)” – “Pastors need to be ordained by God and the IRS.” Michael Chitwood, of Chitwood and Chitwood, the most prominent certified public accountant firm in America, which specializes in advising churches on IRS compliance.
“First, we need to acknowledge that many pastors are in denial about the truths of the 501c3 Corporation.” Barbara Ketay, lawyer, Biblical Law Center.
The recent change in US law to allow homosexual marriage is almost certainly going to have dire consequences for the churches of America. Already, businesses owned and operated by Christians have been dramatically impacted as a result of the law change. Even before the Supreme Court ruling in 2015, a cake company in Oregon, in 2013, was fined $135,000 under the state’s discriminatory laws, for refusing to bake a wedding cake for a lesbian couple. In another case, a gay man is suing two Bible Printing Companies because Bibles contain offensive homosexual language, which violates his constitutional rights and causes him emotional stress. Such cases are becoming commonplace – there is a militant element in the gay community that are actively seeking revenge on Christianity for their perceived persecution by Christians. So, now that gay marriage is legally allowed throughout the entire nation, what is going to happen when a church refuses to marry a gay couple?
The simplest way for churches to be approved for tax free status from the IRS is to be legally incorporated (become a corporation). And, as a result, about 90% of churches in America are 501(c)(3) corporations registered with the government. Barbara Ketay, of the Biblical Law Center, explains what it means to be a corporation registered with the government:
“O.K. Pastors, Evangelists, Missionaries, Deacons, Trustees, Elders… listen up! Let’s stop all the hocus-pocus, the illusions, the scams, the fairy-tales and the outright lies regarding what the 501(c)(3) incorporated church is and is not. For a change, let’s deal with facts. For those of you who don’t understand “facts,” in the legal arena, facts are used and are supported by documented evidence which would be admissible in a legitimate court of law. Facts are not hyperbole! [i.e. exaggeration].”
And these are the facts, according to Barbara Ketay, as to what a 501c3 church corporation is by lawful state definition:
- The creator of a corporation is the State.
- The State is the sole authority and sovereign head over the corporation.
- The corporation is subject to the laws of the State which limits its powers.
- The corporation has no constitutionally protected rights.
- The corporation is an artificial person.
- The corporation submits to a State Charter declaring it is a creature of the State.
- The corporation is created for the benefit of the public.
- The corporation is a State franchise.
- The corporation is a privilege granted by the State.
Just to make it clear Barbara Ketay, makes the issue disturbingly personal:
- The creator of your church is the State.
- The State is the sole authority and sovereign head over your church.
- Your church is subject to the laws of the State which limits its powers.
- Your church has no constitutionally protected rights.
- Your church is an artificial person.
- Your church submits to a State Charter declaring it is a creature of the State.
- Your church is created for the benefit of the public, not the membership.
- Your church is a State franchise (i.e. an agent of the state).
- Your church is a privilege granted by the State, (which privilege can be taken away by an act of the State, at any time). http://www.gracealoneca.com/sitebuildercontent/sitebuilderfiles/the_real_truth_of_501c3
Since the inception of the 501(c)(3) incorporated church, beginning in 1954, the churches of America have had a tense relationship with the government (especially with the IRS), and the government has shown considerable leniency with churches that have broken ‘the rules’ (probably because the government was not ready to challenge the churches – which would clearly reveal the legal bind the churches are in). But the recent law change allowing gay marriage is a game changer. There are all sorts of State and Federal anti-discriminatory laws that immediately come into effect with the homosexual law change. One 501(c)(3) rule which will be used against the churches is:
“The organization’s purpose and activities may not be illegal or violate fundamental public policy.” IRS Publication: ‘Tax Guide for Churches and Religious Organizations’ section: Jeopardizing Tax-Except Status, p. 5. http://www.irs.gov/pub/irs-pdf/p1828.pdf
This regulation is like a dagger aimed at the heart of the churches. Gay marriage is now legal, if the churches oppose it they will be discriminating and acting illegally – this makes them subject to government censure. Even more alarming is the phrase ‘or violate public policy,’ which means that the churches are obliged to accept (without protesting) whatever government policy might be (or will be) – which now includes gay marriage. The question is: will the churches be able to survive the assault that is certainly coming their way over this issue, especially as the US (and the world at large) is becoming increasingly anti-Christian?
One church in particular (the Seventh-day Adventist Church) is going to be especially impacted. For over 150 years the SDA Church has been preaching that there will eventually be a National Sunday law legislated in the US (just like the original one enacted by the first Christian Roman Emperor, Constantine). When the Sunday law becomes a reality – when it becomes official government policy – how will the SDA Church react? Will it accept the government decree and obey it’s 501(c)3 obligations, or will it resist? What does resisting mean? It means that if a church wants to escape the embrace of the state and get out of the 501(c))3 corporate contract, it will have to surrender most or even all of its assets to the State (because the state considers the assets were procured, in large part, by taxpayers money). This has been the experience already of churches that have tried to sever the 501(c)(3) incorporated connection. Such a severe outcome is in accordance with being a registered 501(c)(3) corporation (but usually not understood when entered into). In other words, the church that tries to escape risks its very existence – it could lose its organisational structure entirely and it could be reduced to individual members only.
The 501(c)3 situation is an issue peculiar to America. However, many other nations have something similar, whereby their governments give churches and charities tax free status. The question is: what conditions are imposed on these churches when they enter into these contracts – most likely the conditions will be similar to the ones in America. It could be time to read the fine print.
Churches, in America, becoming 501(c)(3) registered corporations, is a relatively new phenomena – it was an initiative started by Senator Lyndon Johnson (later President), in 1954. His aim was to muzzle the churches, and prevent them from using the pulpit for political purposes. This was when the civil rights issue was becoming prominent which saw the rise of the fiery preacher Martin Luther King. Now that most churches in America are neutered, by becoming 501(c)(3) corporations, it is unlikely that, there will ever be another Martin Luther King in America.
According to IRS Code § 508(c)(1)(A), the churches of America are automatically tax-exempt. In fact, they always have been, going back to the American colonial times, when churches came under the English Common Law known as the ‘Law of Charities.’ This tax-free status was further enshrined in the new American Republic with the protection offered under the First Amendment to the Constitution: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…”
The State of Virginia, in 1802, made the incorporation of churches illegal in their State. They considered the incorporation of churches by the state to be so egregious, and unconstitutional, that they amended the State constitution of Virginia to ban the practice forever.