When A Church Is Not A Church

By Warren Cole Smith - Posted at Ministry Watch:

Non-profit organizations do great work in this country. Non-profits employ more than 12-million people and contribute $2-trillion to our national economy. They also mobilize millions more in volunteer activities, reducing and sometimes eliminating the need for government services.

The value of non-profits is so great that our tax code treats them in a special way. Donors can deduct gifts to non-profits. The non-profits themselves are exempt from most taxes. In fact, what most of us think of as “non-profits” or “ministries” are identified by law as “tax-exempt” organizations. Historically, we have gladly given these tax exemptions recognize the great value these organizations bring to our country and the world.

But we require tax-exempt organizations to do one important thing. We ask them to provide evidence they are doing what they say they are doing. An important way that exempt organizations meet this requirement is by completing an annual Form 990.

The Form 990 looks like a tax return, and it includes important information about the organization, including annual revenue, salaries of key employees, names of board members and large contractors, and the amount of money the organization spends on its core mission. Also highlighted are the amounts it spends on administrative and fundraising. This information is valuable to donors wanting to assess the effectiveness of a ministry.

But there’s an exception to this requirement. If your organization is a church, you do not have to submit your Form 990 to the public. The logic goes like this: Churches have leadership and members who live in community with each other. Almost all the donors come from within that community. Whatever transparency and accountability are necessary will be provided by the rules and structure of the church. The government has no business interfering in a church’s internal affairs.

It’s a system that has worked well for decades, but it is a system that is rapidly breaking down as more tax-exempt organizations that clearly are not churches are claiming the church exception. These organizations are using this exception to keep not only the government, but also donors, from seeing how their money is being spent.


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