Articles

From his column God, Government and Me – Money in the Church

Tgod-government-me-07-13-1he last major reform of the tax code was in 1986. Since then, Congress had made more than 15,000 changes to the code. Over the past three years, the Senate Finance Committee (SFC) has been working on tax reform with more than 30 hearings.

On June 27, SFC Chairman Max Baucus and ranking member Orrin Hatch announced they are starting with a “blank slate”—that is, a tax code without all of the special provisions in the form of exclusions, deductions and credits and other preferences. They acknowledge that some of the special provisions “serve important objectives” and “should be preserved in some form.”

Baucus and Hatch observe that the tax code is “littered with preferences for special interests. To make sure that we clear out all the unproductive provisions and simplify in tax reform, we plan to operate from an assumption that all special provisions are out unless there is clear evidence that they: (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.”

Senators were asked to submit legislative language or detailed proposals relating to what should be included in a reformed tax code, as well as other provisions that should be added, repealed or reformed. These submissions are due July 26. Senator Baucus intends for SFC staff to work over the August recess on a bill that will be released in the fall.

House Ways and Means Chairman Dave Camp applauded the Senate’s effort saying “the Senate and House are on the same page” as they work “to fix our broken tax code.”

Potential Impact on Churches

From the list of hundreds of possible changes to the tax code, perhaps the three most significant areas of interest to churches include:

  • Charitable Gift Deduction – The elimination of all deductions would include the charitable gift deduction. While one would hope Congress would preserve this deduction in its current form, there certainly are no guarantees.
  • Clergy Housing Exclusion – The “blank slate” would wipe away this exclusion which is so beneficial to hundreds of thousands of clergy.
  • Employer Contributions for Health Insurance Premiums – These payments can currently be made on a tax-free basis for church and other employees. Eliminating this benefit would have the impact of reducing the take-home pay for employees who currently receive this benefit.

So, it appears we are on a four-to-five month trip during which Congress may try to change the landscape of taxation in the U.S. In its wake, churches and clergy could be significantly affected. If this effort at tax reform fails, insiders suggest it will be years before another major effort will be mounted.

Response of the ECFA

We will primarily focus on the first two issues. This is the most dangerous threat to private giving since serious talk of comprehensive tax reform began, and we are committed to preserve the current charitable giving incentives. The clergy housing exclusion is also extremely important to both clergy and congregations. We will diligently work to educate key leaders on Capitol Hill, raising awareness of the potential impact of these changes.

We are posting a special webpage where you can follow the latest developments on issues of interest to churches and other Christ-centered nonprofits on this page.

What You Can Do

You can play an important role by making an effective case for why charitable giving incentives and other tax provisions are important to your church. For example, you are in the best position to tell your own story of what will happen to your church if tax reform causes private giving to decline and increase employee costs because special tax benefits such as the clergy housing allowance and tax-free health insurance provided by congregations disappear.

Our special webpage will provide talking points and ways you can share any concerns you have about the direction of tax reform.

Dan Busby, President of the Evangelical Council for Financial Accountability (ECFA), is a nationally recognized author and speaker and a member of the Commission on Accountability and Policy for Religious Organizations.

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