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Explainer: Federal government expected to repeal tax that affected churches

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December 20, 2019

This week, both the House and Senate passed an appropriations bill, which President Trump is expected to sign, that includes a repeal of the troubling tax on all nonprofits, including churches, found in Section 512(a)(7) of the Internal Revenue Code. If left in the tax code, this small provision would have extracted $1.7 billion from the charitable sector over the next decade.

What tax was repealed?

In 2017, Republicans in Congress passed their long-promised tax reform legislation, the Tax Cuts and Jobs Act. Included in the package was a provision that created a new 21% tax on the value of some of nonprofit employees’ benefits.

Because of the change, tax-exempt organizations that provide parking or transit benefits to their employees were subject to unrelated business income tax on the cost of the parking provided. Even by simply allowing its employees to park in a parking lot or garage, that part of the organization’s facilities was subject to a tax on the cost of the parking provided.

As a result of the law, many churches, charities, religious schools, and hospitals were required to start filing federal Form 990-T, regardless of whether they actually engage in any unrelated business activity. In addition to filing federal income tax returns, some nonprofit employers were  required to file state income tax returns and possibly pay a state income tax.

Why was such a provision included in the original legislation?

The purpose of the change was to provide parity between for-profit and nonprofit employers on taxing employees’ benefits. But as Politico noted at the time, because nonprofits don’t pay income taxes, lawmakers couldn’t take away fringe-benefit deductions. Instead Republican lawmakers created a new 21% tax on the value of some of nonprofit employees’ benefits, such as free parking.

Why should churches and religious organizations receive such tax exemptions?

Like many nonprofit organizations, religious organizations in the United States are almost always exempt from federal, state, and local taxes because they provide vital charitable benefits to society. However, an even stronger reason for maintaining such exemptions is because they maintain a distinction between the state and the church.

As law professors Richard W. Garnett and Paul J. Schierl explain, the separation of church and state is not a reason to invalidate or abandon these tax exemptions but is instead a powerful justification for retaining them:

The point of church-state “separation” is not to create a religion-free public sphere. It is, instead, to safeguard the fundamental right to religious freedom by imposing limits on the regulatory—and, yes, the taxing—powers of governments. After all, as Daniel Webster famously argued in the Supreme Court (and the great Chief Justice John Marshall agreed) the power to tax involves the power to destroy, and so we have very good reasons for exercising that power with care—especially when it comes to religious institutions.

In complying with this tax law, churches would have needed to take new measures—such as hiring tax specialists and filing federal tax returns—that would make it easier for the federal government to regulate houses of worship.

What is ERLC’s official position on the issue?

ERLC joined the Unrelated Business Income Tax (UBIT) coalition, which includes more than 40 tax-exempt organizations, in supporting a repeal of the tax law. When the repeal passed the House of Representatives, ERLC President Russell Moore welcomed this relief for churches and nonprofit organizations throughout the country, stating:

“It’s not every day that Congress finds bipartisan areas of agreement. Thankfully, the House did just that, repealing the parking lot tax on nonprofits and houses of worship in their appropriations bill. This is essential progress in the right direction for an issue with bipartisan and bicameral support. Now it’s time for the Senate to finish the task and end this troublesome tax. Churches must not be seen as untapped sources of government revenue. I am grateful for the House leadership and the members who worked hard for this tax to be repealed and look forward to this burden being lifted from nonprofits around the country.”

Read more:

Does your church need to pay the “parking lot tax”? by Elaine Sommerville and Frank Sommerville

ERLC Supports Technical Fix of Tax Law on Church Parking Taxation by Policy Staff

ERLC Delivers Coalition Letter to Congress Calling for Repeal of Parking & Transportation Tax on Houses of Worship and Non-Profits by Elizabeth Bristow

Article 12: The Future of AI

We affirm that AI will continue to be developed in ways that we cannot currently imagine or understand, including AI that will far surpass many human abilities. God alone has the power to create life, and no future advancements in AI will usurp Him as the Creator of life. The church has a unique role in proclaiming human dignity for all and calling for the humane use of AI in all aspects of society.

We deny that AI will make us more or less human, or that AI will ever obtain a coequal level of worth, dignity, or value to image-bearers. Future advancements in AI will not ultimately fulfill our longings for a perfect world. While we are not able to comprehend or know the future, we do not fear what is to come because we know that God is omniscient and that nothing we create will be able to thwart His redemptive plan for creation or to supplant humanity as His image-bearers.

Genesis 1; Isaiah 42:8; Romans 1:20-21; 5:2; Ephesians 1:4-6; 2 Timothy 1:7-9; Revelation 5:9-10

Article 11: Public Policy

We affirm that the fundamental purposes of government are to protect human beings from harm, punish those who do evil, uphold civil liberties, and to commend those who do good. The public has a role in shaping and crafting policies concerning the use of AI in society, and these decisions should not be left to those who develop these technologies or to governments to set norms.

We deny that AI should be used by governments, corporations, or any entity to infringe upon God-given human rights. AI, even in a highly advanced state, should never be delegated the governing authority that has been granted by an all-sovereign God to human beings alone. 

Romans 13:1-7; Acts 10:35; 1 Peter 2:13-14

Article 10: War

We affirm that the use of AI in warfare should be governed by love of neighbor and the principles of just war. The use of AI may mitigate the loss of human life, provide greater protection of non-combatants, and inform better policymaking. Any lethal action conducted or substantially enabled by AI must employ 5 human oversight or review. All defense-related AI applications, such as underlying data and decision-making processes, must be subject to continual review by legitimate authorities. When these systems are deployed, human agents bear full moral responsibility for any actions taken by the system.

We deny that human agency or moral culpability in war can be delegated to AI. No nation or group has the right to use AI to carry out genocide, terrorism, torture, or other war crimes.

Genesis 4:10; Isaiah 1:16-17; Psalm 37:28; Matthew 5:44; 22:37-39; Romans 13:4

Article 9: Security

We affirm that AI has legitimate applications in policing, intelligence, surveillance, investigation, and other uses supporting the government’s responsibility to respect human rights, to protect and preserve human life, and to pursue justice in a flourishing society.

We deny that AI should be employed for safety and security applications in ways that seek to dehumanize, depersonalize, or harm our fellow human beings. We condemn the use of AI to suppress free expression or other basic human rights granted by God to all human beings.

Romans 13:1-7; 1 Peter 2:13-14

Article 8: Data & Privacy

We affirm that privacy and personal property are intertwined individual rights and choices that should not be violated by governments, corporations, nation-states, and other groups, even in the pursuit of the common good. While God knows all things, it is neither wise nor obligatory to have every detail of one’s life open to society.

We deny the manipulative and coercive uses of data and AI in ways that are inconsistent with the love of God and love of neighbor. Data collection practices should conform to ethical guidelines that uphold the dignity of all people. We further deny that consent, even informed consent, although requisite, is the only necessary ethical standard for the collection, manipulation, or exploitation of personal data—individually or in the aggregate. AI should not be employed in ways that distort truth through the use of generative applications. Data should not be mishandled, misused, or abused for sinful purposes to reinforce bias, strengthen the powerful, or demean the weak.

Exodus 20:15, Psalm 147:5; Isaiah 40:13-14; Matthew 10:16 Galatians 6:2; Hebrews 4:12-13; 1 John 1:7 

Article 7: Work

We affirm that work is part of God’s plan for human beings participating in the cultivation and stewardship of creation. The divine pattern is one of labor and rest in healthy proportion to each other. Our view of work should not be confined to commercial activity; it must also include the many ways that human beings serve each other through their efforts. AI can be used in ways that aid our work or allow us to make fuller use of our gifts. The church has a Spirit-empowered responsibility to help care for those who lose jobs and to encourage individuals, communities, employers, and governments to find ways to invest in the development of human beings and continue making vocational contributions to our lives together.

We deny that human worth and dignity is reducible to an individual’s economic contributions to society alone. Humanity should not use AI and other technological innovations as a reason to move toward lives of pure leisure even if greater social wealth creates such possibilities.

Genesis 1:27; 2:5; 2:15; Isaiah 65:21-24; Romans 12:6-8; Ephesians 4:11-16

Article 6: Sexuality

We affirm the goodness of God’s design for human sexuality which prescribes the sexual union to be an exclusive relationship between a man and a woman in the lifelong covenant of marriage.

We deny that the pursuit of sexual pleasure is a justification for the development or use of AI, and we condemn the objectification of humans that results from employing AI for sexual purposes. AI should not intrude upon or substitute for the biblical expression of sexuality between a husband and wife according to God’s design for human marriage.

Genesis 1:26-29; 2:18-25; Matthew 5:27-30; 1 Thess 4:3-4

Article 5: Bias

We affirm that, as a tool created by humans, AI will be inherently subject to bias and that these biases must be accounted for, minimized, or removed through continual human oversight and discretion. AI should be designed and used in such ways that treat all human beings as having equal worth and dignity. AI should be utilized as a tool to identify and eliminate bias inherent in human decision-making.

We deny that AI should be designed or used in ways that violate the fundamental principle of human dignity for all people. Neither should AI be used in ways that reinforce or further any ideology or agenda, seeking to subjugate human autonomy under the power of the state.

Micah 6:8; John 13:34; Galatians 3:28-29; 5:13-14; Philippians 2:3-4; Romans 12:10

Article 4: Medicine

We affirm that AI-related advances in medical technologies are expressions of God’s common grace through and for people created in His image and that these advances will increase our capacity to provide enhanced medical diagnostics and therapeutic interventions as we seek to care for all people. These advances should be guided by basic principles of medical ethics, including beneficence, non-maleficence, autonomy, and justice, which are all consistent with the biblical principle of loving our neighbor.

We deny that death and disease—effects of the Fall—can ultimately be eradicated apart from Jesus Christ. Utilitarian applications regarding healthcare distribution should not override the dignity of human life. Fur- 3 thermore, we reject the materialist and consequentialist worldview that understands medical applications of AI as a means of improving, changing, or completing human beings.

Matthew 5:45; John 11:25-26; 1 Corinthians 15:55-57; Galatians 6:2; Philippians 2:4

Article 3: Relationship of AI & Humanity

We affirm the use of AI to inform and aid human reasoning and moral decision-making because it is a tool that excels at processing data and making determinations, which often mimics or exceeds human ability. While AI excels in data-based computation, technology is incapable of possessing the capacity for moral agency or responsibility.

We deny that humans can or should cede our moral accountability or responsibilities to any form of AI that will ever be created. Only humanity will be judged by God on the basis of our actions and that of the tools we create. While technology can be created with a moral use in view, it is not a moral agent. Humans alone bear the responsibility for moral decision making.

Romans 2:6-8; Galatians 5:19-21; 2 Peter 1:5-8; 1 John 2:1

Article 2: AI as Technology

We affirm that the development of AI is a demonstration of the unique creative abilities of human beings. When AI is employed in accordance with God’s moral will, it is an example of man’s obedience to the divine command to steward creation and to honor Him. We believe in innovation for the glory of God, the sake of human flourishing, and the love of neighbor. While we acknowledge the reality of the Fall and its consequences on human nature and human innovation, technology can be used in society to uphold human dignity. As a part of our God-given creative nature, human beings should develop and harness technology in ways that lead to greater flourishing and the alleviation of human suffering.

We deny that the use of AI is morally neutral. It is not worthy of man’s hope, worship, or love. Since the Lord Jesus alone can atone for sin and reconcile humanity to its Creator, technology such as AI cannot fulfill humanity’s ultimate needs. We further deny the goodness and benefit of any application of AI that devalues or degrades the dignity and worth of another human being. 

Genesis 2:25; Exodus 20:3; 31:1-11; Proverbs 16:4; Matthew 22:37-40; Romans 3:23

Article 1: Image of God

We affirm that God created each human being in His image with intrinsic and equal worth, dignity, and moral agency, distinct from all creation, and that humanity’s creativity is intended to reflect God’s creative pattern.

We deny that any part of creation, including any form of technology, should ever be used to usurp or subvert the dominion and stewardship which has been entrusted solely to humanity by God; nor should technology be assigned a level of human identity, worth, dignity, or moral agency.

Genesis 1:26-28; 5:1-2; Isaiah 43:6-7; Jeremiah 1:5; John 13:34; Colossians 1:16; 3:10; Ephesians 4:24