Carolyn Nsimpasi
Associate Editor
Loyola University Chicago School of Law, JD 2026
In the United States, churches and religious organizations qualify for exemptions from federal income tax under IRS Section 501(c)(3) and are generally eligible to receive tax-deductible contributions. While the intention behind this exemption is to protect religious freedom and support nonprofit missions, the lack of robust regulatory frameworks has opened the door to potential misuse. As religious institutions grow in both size and financial complexity, the public benefits they provide do not always receive the same scrutiny as their financial practices. Consequently, it is time for this exemption to be either eliminated entirely or significantly modified following an intensive evaluation of its regulation.
Exploitation of the Tax-Exempt Status
All charitable nonprofits, including churches, are not required to pay taxes on their revenue, and donors can deduct the value of their gifts from their taxable income. Moreover, in contrast to other tax-exempt charities, churches do not have to file 990 forms. As a result, the public does not have access to churches’ staff compensation, board composition, funding details, and more, which are listed in this publicly available tax form that all other charities must complete every year. 990 forms promote transparency and reinforce accountability throughout the nonprofit sector, which churches invariably bypass.
The exploitation of the IRS Section 501(c)(3) status has been called into question on multiple occasions. For instance, in August 2022, Congressional House Democrats asked the IRS to review the tax-exempt status of a prominent conservative advocacy group, that had recently reclassified as a church. Family Research Council (“FRC”) had successfully applied to be reclassified as a “group of churches” two years prior. Lawmakers argued that while FRC often appealed to faith and advocates for a “biblical worldview” the status change was skeptical due to the group operating primarily as a “political advocacy organization.” FRC did not hold religious services, have a congregation or affiliated congregations, nor did they possess many of the other attributes listed by the IRS. This re-classification was a ploy to advance right-wing ideologies while exploiting tax advantages.
An eligibility requirement under IRS Section 501(c)(3) includes a prohibition of contributions to political campaign funds or public statements of position made by or on behalf of the organization in favor of, or in opposition to, any candidate for public office. Leaders of churches or religious organizations can speak for themselves; however, for their respective organizations to remain tax exempt, religious leaders cannot make partisan comments in official organization publications or at official church functions. Despite this, there have been reports that at least 20 different churches across the country have violated these provisions in various ways. For instance, pastors at Mercy Culture in Fort Worth, Texas expressed support for political candidates in at least three sermons in 2022; pastor Ronnie W. Goines at Koinonia Christina Church implored his congregation to vote for Benita Reed in a local nonpartisan race, stating she was the “most qualified candidate”; and pastor Brandon Burden from Kingdom Life Church told churchgoers that God was working through the congregation to take the country, and particularly North Texas, back to its Christian roots and encouraged constituents to vote for one candidate over the other. There needs to be consequences for churches that violate the conditions under IRS Section 501(c)(3).
At a certain point the issue becomes less about compliance and more about basic fairness. It is increasingly difficult to justify why some of the wealthiest religious institutions in the country are allowed to operate behind a veil of secrecy while benefiting from public subsidies in the form of tax exemptions. Many Americans who are not affiliated with a religious community or who simply believe in equitable public policy find themselves indirectly supporting organizations whose values or political agendas they may not share. This imbalance fuels resentment and raises legitimate questions about whether the government is unintentionally favoring certain belief systems over others. If tax exemptions are meant to reflect a reciprocal relationship between institutions and the public good, then it is reasonable to expect transparency and accountability in return.
The current framework provides broad privileges with minimal accountability, allowing some organizations to operate with little financial transparency or oversight. Strengthening or revising these rules would ensure that tax benefits are reserved for institutions that truly serve charitable, educational, and community-focused missions rather than those that exploit religious status for personal gain. By reassessing the scope and requirements of these exemptions, policymakers can promote fairness, prevent abuse, and better align the tax code with the public interest.