Major Evangelical Nonprofits Try New Strategy With IRS

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Several large evangelical organizations have shifted in recent years to a new strategy where they move from non-profit to “church” status with the IRS, allowing them to keep secret exactly how their money is spent and the salaries of their highest paid. employees.

This strategic shift was recently highlighted by MinistryWatch, an independent, donor-based group that monitors evangelical institutions. The change in IRS status allows these groups, including Focus on the Family and the Billy Graham Evangelistic Association, to avoid filling out a form that makes details of their institution’s finances public.

Group leaders say they change status to avoid administrative costs; some also believe that this status with the IRS could allow them additional religious freedom protections in potential LGBT rights lawsuits. The potential cost of applying to become a church is that organizations cannot campaign on behalf of politicians or devote a substantial part of their work to lobbying for legislation. Critics say the option deprives the public of important information about how tax-exempt organizations operate.

“Transparency and accountability sends an important message to the world, which is why this trend is so potentially destructive,” said Warren Cole Smith of MinistryWatch.

For decades, the US tax code allowed nonprofits, including religious ones, to be exempt from most taxes. Donors can also deduct donations to nonprofit groups on their own taxes.

But tax-exempt organizations that aren’t places of worship must also file an annual Form 990. The form includes information on annual income, salaries of the highest paid employees, names of board members and major contractors, and the amount of money the organization spends on administrative costs and fundraising. funds. Instead of a 990, some houses of worship (all of which are generally described as “churches” by the IRS) choose to issue their own audits, but this is not required.

MinistryWatch recently released a list of highly paid Christian ministry executives, but several pastors and nonprofit executives were excluded because many don’t file 990s. not in the same way as most churches, with at least one weekly worship service open to the public.

Smith said he began noticing this trend after writing about evangelist Franklin Graham’s salary in his reports for several years. Several 2015 reports suggested Graham earned $880,000 in salaries from Samaritan’s Purse, the ministry he helped found, and the Billy Graham Evangelistic Association, his father’s ministry. Now that the BGEA is listed as a church, it does not file a 990 but publishes a financial report on its website; this document does not clearly state Graham’s salary from the department. Public records suggest his compensation from Samaritan’s Purse is close to $700,000.

A BGEA spokesperson pointed to a statement from 2016 that explained why the ministry changed status: He said the ministry works with churches, that he feels more protected from “government interference” when it is called a church, and that filing a 990 complaint consumed time and resources.

The IRS classifies churches as a public charity (as opposed to a private foundation) and outlines 14 characteristics of a church, including recognized creed and form of worship, defined and distinct church government, places of established worship, regular and Sunday congregations. schools for the religious instruction of youth. Although many of these larger ministries include elements of these church descriptions, they tend to operate during normal business hours; in the evangelical world, they would generally be called “parecclesiastical ministries,” supplementing the work of churches, not replacing them.

An IRS representative said the agency does not comment on the status of specific organizations.

Smith said identifying as a church was a common practice for televangelists for several years, even if they did not meet several of the above criteria; the issue has come under intense scrutiny under the Obama administration. By not filing 990s, Smith argued, organizations were able to avoid detailing when their leaders spent donor money on mansions, private jets and lavish lifestyles.

From 2008 to 2011, Sen. Charles E. Grassley (R-Iowa) investigated six televangelists — including megachurch pastor Paula White, a close friend and adviser to President Trump — because they failed to disclose their finances to the public. Major evangelical institutions generally filed under nonprofit status during this time, but now they seem to be increasingly following the lead of these televangelists.

Besides Focus on the Family and the Billy Graham Evangelistic Association, ministries classified as “church” with the IRS include Navigators, Gideons International, Ravi Zacharias International Ministries, Willow Creek Association, and Ethnos360.

Although Smith has seen an increase in this trend, some groups have been practicing this practice for decades. A spokeswoman for Cru (formerly known as Campus Crusade), which evangelizes on college campuses, said she filed with the IRS as a church more than 20 years ago. Cru is one of the largest evangelical organizations in the country, with more than $630 million in revenue, according to the Evangelical Council for Financial Accountability.

Smith and other observers say they believe some organizations are also changing their IRS status to give them additional protection against possible future legal disputes over LGBT rights. Some activists have used public records to identify and harass donors to organizations, particularly when those organizations advocate for limiting LGBT adoptions or for other socially conservative causes. Smith pointed out how Mozilla’s chief executive resigned in 2014 after it was made public that he had donated to a group lobbying for a ban on same-sex marriage in California.

“It sent shivers through the ministry world, that donor lists could be weaponized,” he said. “I’m not saying that the concern is not legitimate. I say don’t hide behind church status.

Paul Batura, a spokesperson for Focus on the Family, said in a statement that the organization changed its status to a “church” with the IRS “primarily to protect the privacy of our donors.”

“In recent years, there have been several occasions where non-profit organizations – both right-wing and left-wing – have been targeted for information, including the names and personal details of their donors,” he said. he writes in an email.

However, Focus on the Family still releases its 990s voluntarily, with donor information redacted.

Ruth Malhotra, spokeswoman for Ravi Zacharias International Ministries, said in an email that the Christian Ministry of Apologetics and Evangelism, which had been classified as a “missionary society” in 2014, had been reclassified as a church in April. . The ministry publishes a public finance audit but does not publish a 990.

Some of these organizations have said they consider themselves church-like entities, although they do not hold worship services. Gary Cantwell, a spokesman for Navigators, which is a ministry with an emphasis on spiritual development, said ministry staff members operate the same way as church clergy, even though they don’t are not allowed or ordered. Cantwell said the ministry made the decision about 15 years ago to classify itself as a church because it was the most accurate category it could find.

“We are part of the larger church, theologically,” he said. “Calling us a church is not off base.”

Cantwell said he believes the statute provides the department with protections regarding the beliefs of its employees and the use of its facilities. For example, the department owns property in Colorado Springs that people have used for weddings, and it would refuse to hold a gay wedding. Financially, the Navigators are among the top 20 evangelical organizations, with revenue of nearly $138 million, according to ECFA.

Some religious leaders have expressed concern that the tax-exempt status they enjoy could come under attack, particularly after that status was publicly questioned by then-presidential candidate Beto O’ Rourke, in October. At issue was Christianity Today magazine’s most recent cover story, which suggested it wouldn’t be terrible if churches lost their special IRS status.

David Bea, a Chicago-based attorney, said he has worked with more than a dozen religious institutions to change their status from nonprofit to church. He said that “there is a lot of angst in religious organizations” because leaders fear that anti-discrimination policies will interfere with their ability to hire and fire employees based on their sexual orientation or to refuse to host or perform a same-sex marriage ceremony.

Being classified as a church by the IRS “increases their bona fides as a religious organization,” Bea said. He deemed it “good planning”.

“The law allows them to work on religious principles,” he said. “Having that status is an added stamp of approval.”

Many departmental leaders have expressed fear of possible IRS audits, although such audits are rare. For example, Franklin Graham said in 2013 that his department was targeted by the IRS during the Obama administration. During his presidential campaign, Donald Trump responded to this fear by promising to eliminate what is known as the Johnson Amendment, a provision in the tax code that prohibits churches and other nonprofit groups from endorsing or to expressly oppose any politician and advocate for legislation.

Trump signed an executive order in May 2017 that he said would effectively end the Johnson Amendment for churches. But others say the order only has the power to temporarily change IRS enforcement priorities; a future president could issue a different executive order.

Several observers have said the IRS’ move to “church” status had nothing to do with Trump’s presidency. Many evangelical leaders believe Trump has been supportive of them when it comes to IRS regulations, and many feel he has protected them, said ECFA President Dan Busby.

“Administrations come and go,” he said. “I think with the increased polarization, organizations are concerned about the future.”

Barry F. Howard