Challenging the tax exemption for churches

Via Michael Stone I learn that Nome, a town in Alaska facing a serious budget shortfall, is considering a move to eliminate the tax exemption for churches and other non-profits and charities.

With the city budget projected to run a deficit, the council spent a one-hour work session Monday looking at ways to increase tax revenue. After much debate, the council agreed to move forward with a draft ordinance removing sales tax exemptions from nonprofits and churches.

City Finance Director Julie Liew estimates the move could bring in about $300,000 a year. Nome is a regional hub city of about 3,800 people.

Council member Matt Culley said he’s in favor of removing all the exemptions, with the possibility that nonprofits could be given the tax money back in years when the city’s bottom line is in the black.

All of the proposed tax changes are far from law, however; the City Council is still several meetings away from a vote, and the public will have an opportunity to weigh in before the council takes any final action.

Of course the churches will be quick to file a lawsuit because they have got used to being given a totally undeserved benefit, so the city had better line up some good pro bono lawyers if they decide to go ahead.

They will still have a tough time. The controlling precedent is the 1970 US Supreme Court decision in Walz v. Tax Commission of City of New York that I discussed back in 2012 that allowed property tax exemptions for churches. I think it was a bad decision but it will be used against the city of Nome here.

What is different here, if the city goes ahead with the move, is that it is eliminating all charitable institutions, not just churches. While the exemptions to churches can be challenged in Establishment Clause grounds, it is not clear what the basis would be to challenge the exemptions for secular non-profits and charities.

Another wrinkle may be that they are not challenging the right of the federal and state governments to give tax exemptions but are saying that local communities have the right to set their own tax policies.

This would make for an interesting case if Nome goes forward with this.


  1. says

    They should, across the board, remove religion from the tax laws entirely. Let religious and nonreligious nonprofits play by the same rules. Nietzsche fan club gets an exemption? Ok, you Catholics can get the same for your church. Catholics don’t get it, Nietzscheans don’t either. Same rules. Otherwise, someone in the government has to decide what is or isn’t a religion, which should terrify believers. Alternately, they simply take your word for it, in which case so many people would line up that tax revenues would be decimated.

  2. Ed says

    Religions aren’t the only recognized non-profit organizations. I think the problem comes when they are allowed to own such a vast amount of land tax-free. I can’t think of any other NPO that does anything comparable to this. They use the roads and other public infrastructure like everyone else, so they should pay property taxes.

    A group that offered a place to study and discuss Nietzsche or philosophy in general probably could be a non-profit, but certainly wouldn’t have hundreds of gigantic buildings everywhere even if if had a large membership. The headquarters of major charitable organizations are often smaller than typical churches.

    But I don’t think churches` income should be taxed like businesses`.

  3. Galen Charlton says

    I think the problem comes when they are allowed to own such a vast amount of land tax-free. I can’t think of any other NPO that does anything comparable to this.

    Many colleges and universities have significant tax-exempt property holdings.

  4. Ed says

    True. Colleges and universities are another example of a nonprofit with large real estate holdings, though one could argue that they pay for their resource use by improving their student’s ability to contribute to society in terms of skills and knowledge.

    I tried to make the point that I don’t want taxation of places of worship that would be destructive, but given that they take in large amount of tax-free income , have tax-free investments and savings ( both of which I approve of by the way) they could contribute to the transportation systems and other services that make their operation possible.

  5. Paulo Borges says

    A few years ago an english guy caled Thomas Cromwell solved a similar situation in quite a pragmatic way.
    If there is no property there is no nothing to tax!

  6. Crimson Clupeidae says

    Sales tax would be hard to do. However, many cities (ok, a few that I know) still charge property taxes on the grounds that non profits and even churches should still pay for police/fire services.

  7. Glenn says

    How about making the tax due from churches made public and then asking those who support the public support of churches to pay more for them.

    That way those who see the commercial religions as the scams they are won’t have to support these parasites?

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