“Separation of Church and State”: The Tax-Exempt LDS Church

Should the LDS Church lose its tax-exempt status because of its involvement in government? Has the LDS Church overstepped its bounds with its involvement in politics?

As controversial as it is, the short answer to these questions is "no."

For the sake of understanding, however, let’s also discuss the long answer.

I frequently come across these arguments against the LDS Church that go something like, “If the LDS Church is going to act like a business, it should be taxed like a business,” or, “If the LDS Church is going to get involved in politics and influence legislation, then it should lose its tax-exempt status – separation of church and state!”

These arguments are non sequitur, and mostly come from a lack of understanding about the LDS Church, the U.S. government, and the relationship that is allowed between them. So let’s explore this relationship a little bit and clear up some of these commonly used misconceptions.

“Separation of Church and State”

Before we get into the details surrounding the LDS Church’s tax-exempt relationship with the U.S. government, it is important to understand the phrase “separation of church and state”. I commonly hear this “supporting” argument thrown around indolently by individuals who do not understand it, in a context for which it was not intended. Which is important, because this misuse of the phrase can have a substantial impact on the validity of the argument for which it is used.

Indeed, the statement “separation of church and state” probably does not mean what you think it means.

"Separation of church and state” appears nowhere in the U.S. Constitution, Declaration of Independence, or Bill of Rights. Instead, the quote comes from a letter written by Thomas Jefferson to the Danbury Baptist Association in Connecticut in 1802, which letter was later mainstreamed via publication in a Massachusetts newspaper (Source). When he made this statement, Jefferson was referring to the Establishment Clause and Free Exercise Clause of the First Amendment to the Constitution of the United States (the “free speech” amendment). These clauses together read:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof. (Source)

These clauses appear in the free speech amendment of the Constitution because the Founding Fathers wanted to ensure that government did not interfere with the freedom to practice religion independently; this is the main reason for the United States’ original secession from Great Britain and the subsequent Revolutionary War. Therefore, these two clauses were added to the first amendment of the U.S. Constitution to do three things - none of them to prohibit religious institutions from existing in or interacting with government affairs.

First, the Establishment Clause and Free Exercise Clause stand to prohibit of the U.S. government from passing legislation that would require individuals in the country to adhere to a specific religion or religious practice (including anti-theism, depending on who you talk to).

Second, they prohibit the government from preferring one religion over another.

And finally, these clauses state that the government cannot interfere with religious beliefs; though it can sometimes interfere with religious practices. For example, the U.S. Supreme Court ruled in Reynolds v. United States in 1878 that “‘religious duty’ to engage in plural marriage was not a valid defense to prosecutions for violating laws against polygamy,” among other criminal indictments.

(Sources: Establishment Clause, Free Exercise Clause, Reynolds v. United States)

In effect, the Establishment Clause and Free Exercise Clause do not prohibit religion from interacting with government, nor do they imply that religion has no place (and is not to be tolerated) in state-governed institutions like public schools and workplaces. They were instead established to protect the freedom to practice religion from the potential oppression of government.

So if you are using the phase “separation of church and state” as a supporting argument in your defense against religion in politics, you are citing your source incorrectly. The authentic meaning of the phrase is actually to keep the government out of religion.

Ergo, using the argument “separation of church and state” to discourage religion (i.e. the LDS Church) from influencing government is an invalid argument in the form of emotional fallacy.

The LDS Church IS Taxed “Like a Business"                                                                                                       

The LDS Church is, in fact, a business; and it is taxed like one. The LDS Church is a registered 501(c)(3) nonprofit organization. This is where the Church’s tax-exempt status comes from: just like all 501(c)(3) nonprofit organizations, the LDS Church is exempt from paying federal taxes, sales tax, and property tax. 501(c)(3) nonprofit organizations do, however, “pay employee taxes (Social Security and Medicare) just like any for-profit company” (Source).

The LDS Church and California’s Proposition 8

Before we get into this, I should mention that the LDS Church is a nonpartisan nonprofit organization. The LDS Church does urge members to be involved in politics, and members of the LDS Church tend to be conservative, so a layman may sometimes misinterpret this to mean the LDS Church promotes conservative agendas.

Instead, the LDS Church does not “endorse, promote or oppose political parties, candidates or platforms”, “allow its church buildings, membership lists or other resources to be used for partisan political purposes”, “attempt to direct its members as to which candidate or party they should give their votes to”, or “attempt to direct or dictate to a government leader” (Source).

Read those statements carefully. None of these things happened as a result of the LDS Church’s involvement in the passing of Proposition 8 in California in 2008. And yet, the Church still received a lot of negative attention for their involvement in these government affairs.

Why is that?

In 2008, the LDS Church issued a statement to its members informing them that “a broad-based coalition of churches and other organizations placed the proposed amendment [supporting Proposition 8] on the ballot," and that "the Church will participate with this coalition in seeking its passage”. In the same statement, the LDS Church urged members to do all they can to "support the proposed constitutional amendment by donating of [their] means and time to assure that marriage in California is legally defined as being between a man and a woman” (Source).

This involvement by the LDS Church was assumed to be one of the significant factors in the passing of Proposition 8 in California in favor of traditional marriage, and gained the Church a lot of notoriety with the nonreligious community (Source).

The LDS Church did not endorse or promote a political party or platform, direct its members to vote for a certain person, or attempt to dictate a government leader with its call to action in this case. It simply urged members to be politically involved (like it always has) by standing up for what they believe to be morally right (like it always does) in a very significant and specific way.

What makes people generally uncomfortable with this involvement is that the LDS Church urged its members to vote a specific way, on a specific piece of legislation, that it helped to get on to the ballot. Many people feel that overstepped the Church’s boundaries as a religious institution, and consequently deems the Church unworthy of maintaining its tax-exempt status.

Which begs the question: was the LDS Church’s involvement in California’s Proposition 8 an inappropriate contribution to politics?

Legally, the answer is "no".

Nonprofits Can be Involved in Politics

Critics of the LDS Church’s tax-exempt status often refer to a specific statement as the basis of this argument, which comes from the IRS’s Tax Guide for Religious Churches and Organizations. The statement reads:

In general, no organization, including a church, may qualify for IRC section of 501(c)(3) status [tax-exemption] if a substantial part of its activities is attempting to influence legislation (commonly known as lobbying). (Source)

It is important to understand, however, that this is not the only statement by the IRS regarding nonprofit involvement in politics. When it comes to lobbying and political activity, 501(c)(3) organizations can appeal directly to legislative bodies and representatives and may support issue-based legislation. To do this, the nonprofit organization must notify the IRS of their intent to lobby by filing form 5768, which formally informs the federal government that the nonprofit organization has elected to use the expenditure test to have its lobbying activity measured.

Under this test, lobbying capacity is typically limited to spending less than 5 - 20% of the “organizational budget on lobbying activities, depending on the size of [the] organization” (Source). Remember, a 501(c)(3) organization no longer qualifies as tax-exempt if “a substantial part of its activities is attempting to influence legislation."

The LDS Church did not make any cash donation to the successful passage of Proposition 8 in California in 2008. The LDS Church did provide in-kind donations consisting of “video production from its studios, Church employee time, airfare and lodging for Church leaders”, but no monetary donations were made to the campaign (Source). These in-kind non-monetary donations by the LDS Church to the Protect Marriage coalition in 2008 totaled $189,903.58 (Source). 

5% of $7 million (the LDS Church’s estimated annual revenue) is $350,000; 20% is $1.4 million. So the LDS church could have contributed anywhere between $160,000 and $1.2 million more that it did to the lobbying efforts and political activity involved in the passing Preposition 8 in California, and still remained well within these guidelines set forth by the IRS.

Moreover, the $189,903.58 donated by the LDS Church to the Protect Marriage coalition “is less than one half of one percent of the total funds (approximately $40 million) raised for the ‘Yes on 8’ campaign” (Source).

Also, we should note that the LDS Church is involved in many, many activities globally, and influencing legislation as a whole (including all of its involvement in California's Proposition 8) is extraordinarily minute in comparison. Projects that take up a substantial part of the LDS Church's activities include the many global welfare and humanitarian projects with which they are involved, in addition to its ecclesiastical projects including: missionary, temple, education, and genealogy efforts (Source).

So according to the restrictions put in place by the IRS, the LDS Church did not contribute substantially to the passing of Proposition 8 in California in 2008, nor was a substantial part of the LDS Church’s activities dedicated to this cause, or to any political agendas in general. There is no reason, then, for the LDS Church to lose its tax-exempt status for its involvement in politics according to this statement by the IRS.

Nonprofits Can Influence Legislation (Lobby) and Still Qualify for Tax-Exemption

If the LDS Church did want to dedicate a substantial part of its efforts to influencing legislation, however, they actually could. Let me illustrate with an example.

In February of 2015, I had the opportunity to visit the Utah State Capitol building to lobby with the nonprofit organization American Cancer Society Cancer Action Network (ACS CAN). We were petitioning to Utah Governor Gary Herbert to donate the final $2 million that ASC CAN needed to begin building a Hope Lodge in Salt Lake City, Utah. ACS CAN had already raised $12 million for this cause, and the LDS Church donated the land back in 2011 on which the lodge would sit (Source).

Our lobbying efforts were successful: ground broke for the lodge in May 2014, and the facility was finished in August 2015. The lodge now serves cancer patients as the only facility of its kind currently accessible to cancer patients and their families that travel to the Intermountain West for treatment. (As an aside: seriously, take a look at this info about the Hope Lodge; it’s a way cool facility - Source.)

But wait – ASC CAN is a nonprofit organization. According to the IRS, nonprofit organizations are not allowed to lobby or otherwise influence legislation, and maintain their tax-exempt status. Right? Otherwise, there would not be such heated debate about the LDS Church being involved in the passing of California’s Proposition 8 in 2008 (among other political involvement).

So how does this work?

ACS CAN is a tax-exempt “nonprofit, nonpartisan advocacy affiliate of the American Cancer Society [that] supports evidence-based policy and legislative solutions designed to eliminate cancer as a major health problem. ACS CAN works to encourage elected officials and candidates to make cancer a top national priority” (Source). They can do this as a nonprofit organization and maintain their tax-exempt status because they are not a 501(c)(3) nonprofit organization, but are instead registered as a 501(c)(4) nonprofit organization.

What's the difference?

According to the IRS, 501(c)(3)s and 501(c)(4)s are both “nonprofit organizations that are exempt from paying federal income tax. 501(c)(3) organizations are either a public charity, private foundation or private operating foundation with open membership, whereas 501(c)(4) organizations are civic leagues or associations operated exclusively for the promotion of social welfare or local associations of employees with limited membership.” (Source)

So if the LDS Church wanted to make a substantial part of its organization focused on influencing U.S. government legislation and being involved in politics (which is unlikely, but in the case that it did), it could potentially establish a 501(c)(4) sister organization solely for the purpose of passing such legislation, just like the American Cancer Society (a 501(c)(3)) and ASC CAN (a 501(c)(4)). The LDS Church would then be able to influence legislation and still maintain its tax-exempt status.

Conclusion

The LDS Church will not likely lose its tax-exempt status because of its involvement in government and politics. These arguments are emotional, and largely unfounded or misunderstood.

The true meaning of the phrase “separation of church and state” is actually to keep government out of religion, though it is often paradoxically used by people that want to keep religion out of government. Interestingly, this argument is often used by people that believe churches ought to be taxed, which would involve government in religion. So they don’t actually want a "separation of church and state" after all - what they want is to get religion out of government, and to instead involve government in religion.

The Establishment Clause and Free Exercise Clause of the First Amendment to the Constitution of the United States (the “free speech” amendment) was intended to protect churches from government, as this is one of the main reasons that the U.S. originally seceded from Great Britain and colonized in America. Under these restrictions established by the Founding Fathers, if the U.S. government got involved in religion by requiring churches to be taxed, such legislation would precariously border unconstitutional.

But this is still beside the point; the point is that the LDS Church has done nothing unconstitutional with their involvement in government and politics. And while it is sensational to argue that the LDS Church should be taxed, the logic is not sound for these arguments. And even if they were, and the LDS Church wanted to remain prominent in political affairs and dedicate a large portion of its efforts to influencing legislation, it could establish a sister organization to do this and still maintain its tax-exemption.  

So please stop saying that the LDS Church has overstepped their bounds with their involvement politics, and that it should be taxed by the U.S. government. The LDS Church has followed all of the laws set forth by the constitution and the IRS regarding church and nonprofit involvement in influencing legislation.

And please stop using "separation of church and state" as an argument for removing religion from all government affairs if you do not also mean to disassociate government from religious affairs. Taxing churches requires a relationship between the church and the government, and a relationship between religion and government is not separating "church and state".

Just please make sure that when making claims and arguing a cause, you understand the argument and the cause for which you are affiliated. Otherwise, please be quiet until you have gained that understanding.

Thanks.