Religion, Politics and Taxes

The saying goes that you should never discuss religion and politics because you might offend someone. In Texas I might add taxes as a third item never to discuss in polite company. Being one that is less than politically correct, however, I plan to address all three in this blog. Of course you might be thinking what do these three dangerous topics have in common – especially from a CPA perspective? The answer is actually fairly simple. You (might) get to take a charitable deduction for a donation to a religious organization, but you don’t get to take one for a donation to a political organization and it is up to the IRS to define which type of organization is which.

The reason I say you might get to take a deduction for a donation to a religious organization is because the ability to take the deduction is wholly dependent on your filing status. If you take the standard deduction, you get no additional deduction for a charitable contribution of any kind, including to a religious organization. So all those promises of a deduction to the fullest extent of the law are not false, but they might be very misleading to someone who doesn’t understand how the tax code works. At least those taking the standard deduction, and not eligible for a charitable contribution deduction, don’t have to worry about if their religious organization qualifies as a charity.

The rest of us are at the mercy of how the IRS defines charities versus political organizations. Historically the IRS has treaded softly in this area. The IRS typically did not audit churches or require them to file for 501(c)(3) status – it was conferred on them automatically. But even though they don’t have to file for 501(c)(3) status, they do have to abide by those rules. One of those rules in the “Johnson Amendment” (name after Lyndon Baines Johnson when he was a Senator) that prohibits charitable groups from endorsing or opposing specific candidates.

There are those that believe such a requirement is a violation of the first amendment on free speech and others that believe the law does not go far enough and that charitable organizations should be barred from any political discussion including taking side on political issues. But the legal question isn’t as simple as it may sound to either side.

The problem is that political topics can mean just about any topic today with issues such as marriage, abortion and health care all having moral implications to many religions as well as strong political implications. One of the core tenants of any religion is a moral philosophy on how to live life. If you restrict a religion from speaking out on that, you are restricting the most basic aspect of religion which clearly is a first amendment violation. But is the government restricting the exercise of free speech, or only the tax benefits to a member that might be associated with being in one type of organization versus another; and does the government have the right to determine how to tax such donations?

Maybe this is why we should stop trying to make the tax code into some sort of social engineering tool and keep it to its simple base – how to raise revenue in the most efficient manner possible. I guess when it comes to religion, politics and taxes, that is the one thing I can count on never happening.

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