Article raises UBIT Issue with Regard to Churches

In Blurring the Line Between Prayer and Profit, the Hartford Business Journal raises questions about the “corporate” profit-making behavior of certain megachurches:

But while the First Cathedral pushes the power of prayer on its congregation, it isn’t leaving its own finances entirely up to God. T o support its size and mission, First Cathedral, a megachurch with upwards of 11,000 members, behaves less like a tax-exempt nonprofit and more like a full-fledged business — a national trend that’s raising gritty tax issues across the country.

The article makes the very sensible observation that current laws relating to 501(c)(3) organizations are ill-equipped to deal with houses of worship.  That is, houses of worship ought not to be lumped together with all the other charities and then regulated as though they were soup kitchens, museums, or other types of secular charities.  Someone must have made this point already.  Indeed, the de facto status quo ante probably admits that houses of worship are exempt under an unstated 501(c)(3).(5).  There is a palpable sense of “hands-off” that suggests that churches are exempt under a wholly different standard.  Anyway, here is another interesting excerpt from the article that suggests a different standard of unrelated business income likewise applies to houses of worship:

The church bookstore, The First Connection, is open seven days a week and is plugged repeatedly in the church service flyer, giving the word of God a shot of “act now” advertising.  Women are encouraged to buy the next book-of-the-month-club book at The First Connection “as soon as possible” because “this book will bless you.” Teens are “challenged” to read Martin Luther King Jr.’s autobiography, a copy of which can also be found in-house. And just in case anyone needs one, “all bibles are still 15 percent off!”  For those suffering from obesity, the church’s The Good Life Wellness Center pushes a weekly health tip in the flyer. But if turning to God instead of food doesn’t seem to help, the center offers health products for sale Sundays, Tuesdays and Thursdays.   The church’s in-house catering company, First Harvest, offers an after-service feast for church members but also caters to events outside the confines of the church.

I don’t think this sort of behavior is unique to “mega-churches” by the way.  Even the small churches I’ve attended have looked for “mission-related” ways to regularly raise money.  I suppose the present uncomfortable truce between tax law and houses of worship works just as well as an explicit debate regarding the better articulation of separate tax exempt standards for house of worship.  Why open that pandora’s box when, by and large, the present system seems to work (despite occasional dust-up’s that suggest houses of worship are doing something illegal).

dkj