Study suggests getting tough on tax-exempt groups may help the budget

The IRS announced this week that there would be a probable delay of one to two weeks to the start of the 2014 filing season “to allow adequate time to program and test tax processing systems.”
Mike Krumboltz

Ever-increasing pressure on the U.S. budget has inspired some unconventional thinking on how to balance it, or at least make a dent.

One idea gaining traction: Get stricter with tax-exempt groups.

Newsweek, citing a study from the Secular Coalition of America, reports that if the IRS were to stringently enforce section 501(c)(3) by getting tougher on religious groups that promote political candidates or use funds for noncharitable purposes, it could lead to an additional $16.75 billion in revenue.

Via Newsweek:

"We're trying to use the current budget crisis as an example, as a way to show lawmakers what can be done," says Lauren Anderson Youngblood, Secular Coalition for America spokeswoman. "We're not doing this to hurt anyone. We're not doing this to attack churches or attack religion. We simply want things to be fair."

All told, in 2012, there were 1,616,053 tax-exempt organizations in the U.S., according to Time magazine. That list includes educational institutions, sports leagues, and potentially polarizing groups like the Heritage Foundation and Planned Parenthood.

The National Football League, for example, enjoys tax-exempt status, albeit a different type section 501(c)(6) than religious organizations. Recently, that status has been called into question.

Earlier this year, Sen. Tom Coburn (R-Okla.) proposed an amendment to the Marketplace Fairness Act, which would end the NFL's tax-exempt status. The wildly popular NFL is a $9 to $10 billion-per-year organization, but does not pay federal taxes. A petition asking that Congress revoke the NFL's tax-exempt status has over 282,000 signatures.

According to Coburn's report, if professional sports organizations including the NFL, Professional Golfers Association (PGA), and National Hockey League (NHL) weren't exempt from federal income taxes on earnings, the government would be able to generate an additional $91 million annually. Major League Baseball gave up its tax-exempt status in 2007.

Of course, $91 million is a big number, but when it comes to the overall budget, it's a drop in the bucket. Another idea, more controversial, is to tax all churches. While many would no doubt find that distasteful (dare we say sacrilegious), the tax influx would have a significant effect on the budget, according to Ryan T. Cragun, a sociologist of religion cited by the Washington Post in August.

Via the Washington Post:

"Cragun et al estimate the total subsidy at $71 billion. That's almost certainly a lowball, as they didn't estimate the cost of a number of subsidies, like local income and property tax exemptions, the sales tax exemption, and — most importantly — the charitable deduction for religious giving. Their estimate that religious groups own $600 billion in property is also probably low, since it leaves out property besides actual churches, mosques, etc."

Gaudy numbers, but ones that are more than likely to remain theoretical. Newsweek spoke with Chuck McLean, vice president of research at charity watchdog organization GuideStar, about the prospects of the IRS — which faced intense criticism over its scrutiny of tea-party-related charities — going after tax-exempt churches.

Via Newsweek:

"If they flipped a coin and it came up heads, then they would go after tax exemption of churches. If it came up tails, they would poke themselves in the eye with a red hot needle," he says. "It's a no-win proposition for them to go after churches under the best circumstances."