March 4th 2012

Tax-exempt non-profits

By MarieAlena Castle
[Sent to the Minneapolis Star Tribune today. As usual, don’t hold your breath waiting to see it in print.]

Jason Lewis is exactly right about the unfair tax exemptions for non-profits (“One’s break is another’s tax burden” Mar. 4). We all pay more because they pay nothing. However, there is little chance of getting relief for the burdened. This is because religious groups are also designated non-profit and it’s all or nothing. The U.S. Supreme Court in its 1970 Walz v. Tax Commission of the City of New York decision ruled 8 to 1 that religious organizations can be tax-exempt. This was extended to all non-profits because not to do so would be unconstitutionally discriminatory.

What is often overlooked about the ruling is that it did not say (as many suppose) that churches must be tax-exempt, only that they could not be denied tax exemption if secular non-profits were exempt. States were free to tax or exempt all or none. The states chose to exempt all. Because both groups, secular and religious, want to keep their exemptions, it is unlikely that any fair-taxation effort can be effective against that combined force.

It appears that Lewis would like to deny exemptions only to the unworthy (in his view) non-profits. Unworthiness certainly does exist, but it abides in both religious and secular non-profits. There is no hope of ever determining where the unworthiness line would be drawn, so the burden continues.

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