church, church-state-separation, taxationIn the United States, the IRS (our tax collection agency) allows churches to file as non-profit organizations (501(c)3); thereby granting tax breaks above and beyond those that traditional (e.g. non-church) organizations would get. How did this come about and why is this tradition still in place?
(Specifically I’m asking about the US, however this applies to other countries as well and reasons underlying this status in other countries are appreciated too.)
US Churches usually fall under the 501(c)3 tax exemption rules, as do a number of other organizational types.
Churches can be organized in a number of different ways
Essentially churches agree to not participate directly in politics and to abide by certain guidelines from the federal government in how their finances are arranged.
This gets very very complicated because the US tax code is byzantine, and religion is just as complicated. Churches, IE, a group of people who gather together to worship something get an automatic 501(c)3 status with no filing requirements. This can be challenged in court by the IRS.
Para-church, or religious organizations like Focus on the Family have to apply for and be recognized as 501(c)3 organizations.
Many religious groups have both a church component, a religious organization component and a business component
Tax exemption is not a 1st Amendment right, it's a privileged status and a recognition of the social mores of the time when the tax law was passed. It's something that can and likely will evolve.
Here's an interesting debate on the issue from the LA Times in 2008
If you are deeply interested in this (former religious studies major here) you should check out some details on the financials and legal troubles of some independent Pentecostals (who skate very very close to the edge with the IRS), independent faith healers like Benny Hinn and the Church of Jesus Christ of Latter-day Saints (which is set up like a corporation).
Saying that the religious exemption from taxation is a function of the mores of the time is an incomplete answer I believe. The exemption is a response to unequal taxation and fees levied on old european religions/cults by the powers that be. The notion of religious freedom from interference by the government also included a freedom from the possibility of being penalized for the crime of being catholic or protestant.
Churches are granted that status so that the state cannot penalize you for being the wrong faith or drive your church’s con-game out of existence.
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