When you start trying to put in rules about who does and does not qualify for exemptions, you're just inviting certain parties with enough at stake to employ lawyers and accountants to make sure they qualify for those exemptions on paper, even if they do not in practice. The only way to put a fair end to that abuse is to eliminate nonprofit/tax-exempt status entirely, but then you're killing off thousands of reputable charities that actually do put their money where their mouth is. It's a painful proposition either way.

 

For what it's worth, I don't think that simply being a church should qualify an organization for tax-exempt status. Simple reason? The First Amendment establishes a separation of church and state, and lifting taxation on a church is stepping across that line into displaying favoritism towards religion. Of course, we all know what that would accomplish: the church down the street that has an attendance of 50 and regularly has volunteer groups at retirement homes, cleaning up the roads and feeding the homeless would be forced to shut down while the mega-church two miles away simply cuts back on its charitable activities (if it really does any in the first place) and has the pastor tag a line about needing more donations to counter the government attack on their beliefs at the end of his sermon.

 

I think the best answer is to remove tax-exempt status, but to allow any charitable organization or church to write off taxes on any actual charitable expenses. Basically, tax them like we're taxed when it comes to charitable spending. Depending on the size of the organization, the percentage of income spent on payroll (to prevent a CEO from making a disproportionate amount of money, like many charitable CEOs do) and the amount of its annual income that is put towards charitable endeavors, additional exemptions or an increase in the tax deductions, up to a real dollar-for-dollar ratio, could be in play to help the organization with 5 employees, each of whom makes $35,000 per year, to continue functioning. Basically, the bigger you are, the more you pay, period, and no mega-church or 5,000-employee charity will be able to hide behind accountants to dodge significant tax bills, but all entities can realize significant tax reductions by devoting more income to charitable spending.

 

I know, it's not perfect, and it still leaves lots of potential for loophole exploits, but it's unquestionably an improvement over a system in which the NFL would still not be paying any corporate taxes had they not voluntarily done so. Lots of churches in this country do a great deal of charitable work; lots of others don't. Lots of charities put all their time and money into their work; many others pocket large sums of money and send as little as ten cents of every dollar taken in back into the community. There has to be a check in place to make sure that the small churches with members who bust their butts improving their community are taken care of, and the moneymaking machines hiding behind the veil of religion are forced to pay the same taxes that any other business bringing in cash by the busload would.

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