The Brewing Storm of Tax-Exempt Status

Bill High


On the surface, life seems normal for Christian schools and organizations. But challenges lie ahead with a brewing storm.


There’s a growing movement to label Christian schools and organizations as hate groups, affecting their tax-exempt status and funding.


Few people know that in September 2019, in Washington, D.C., the House Ways and Means Committee in the House of Representatives held a hearing, “How the Tax Code Subsidizes Hate.” Representative John Lewis, who later passed away in July 2020, presided as chairman over the subcommittee. Lewis defined hate groups as organizations that “promote hate based on race, gender, religion, sexual orientation, or ethnic background.” 1 The committee heard witness testimony from various shootings such as the Pulse Nightclub shooting in Orlando and the Walmart shooting in El Paso. They then discussed whether the IRS should grant tax-exempt status to groups with discriminatory viewpoints, and ultimately whether tax-exempt status should be removed.


However, none of the discriminatory groups the shooters were involved in had tax-exempt status. So why is the Ways and Means Committee focusing on tax-exempt groups?


Reporter Nihal Krishan, writing for the Washington Examiner, explains the move is a cover to target “socially conservative organizations, anti-immigration entities, and religious groups.” In his article, “House Democrats call for stripping tax-exempt status from 60 ‘hate groups,’” he describes their list of hate groups as follows: “Some of the bigger organizations on the list include the fundamentalist Protestant group American Family Association, which opposes gay rights, the anti-immigration organization Federation for American Immigration Reform, the conservative think tank the Center for Security Policy, and the socially conservative group the Family Research Council.” 2


Stated succinctly, a “hate group” would include any group that holds a biblical view of marriage and sanctity of life.


If you think this view is far-fetched, consider that in January 2020, Christianity Today published a cover-story by Paul Matzko titled “The Hidden Cost of Tax Exemption.” There, Matzko cited a Democratic town hall where then-Congressman Beto O’Rourke was asked whether religious institutions should lose their tax-exempt status if they oppose same-sex marriage. O’Rourke responded: “There can be no reward, no benefit, no tax break for anyone, or any institution, any organization in America, that denies the full human rights and the full civil rights of every single one of us.”


Will Christian Schools and Organizations Lose Funding?

This is not a trivial conversation. Loss of tax-exempt status will mean the loss of funding. As part of these overall tax-exempt strategies, the Amalgamated Foundation started a campaign called “Hate Is Not Charitable.” The campaign encourages donor-advised fund (DAF) entities like Schwab, Fidelity, and Vanguard to stop giving to these so-called “hate groups.”


To give a little background, DAFs are the most prevalent form of giving in the country, next to writing a check. There are over 700,000 DAFs in the country, representing over $100 billion in assets. 3 The danger is that once a fund-holding organization accepts this “Hate Is Not Charitable” stance, they will refuse to grant to organizations with biblical worldviews. If successful, the campaign will cut off a significant source of funding. Money from DAFs will be stuck with fund-holding organizations that refuse to give to conservative Christian groups.


Christian schools and organizations need to recognize the pressure placed on the major commercial foundations to stop giving to Christian groups. If your school or your donors have a commercial DAF, it may not be able to fund your school for long. But there are DAF entities more aligned with Christian purposes, such as The Signatry (thesignatry.com).


Four Points of Action

  1. Stay current on legislation. Don’t assume tax-exempt status will be around forever. Christian families need to educate themselves on the risks at hand and then share this information with others in their circle of influence. Tax exemption is not a guaranteed right. Be prepared to defend the tax-exempt status of Christian schools and organizations when it is attacked.

  2. Go after major gifts. The U.S. is currently undergoing the greatest wealth transfer in history as the Boomer generation retires, sells businesses and real estate holdings, and prepares their estate. However, not all of their wealth will go to children and grandchildren. It will also go to ministries. Now is the time to pursue major gifts as wealth changes hands. Pursuing major gifts is more important than ever since Christian schools and organizations’ tax-exempt status may not last.

  3. Evaluate which donors use DAFs, and be sure their accounts are with entities that align with their values. Tell your donors the risk of the “Hate Is Not Charitable” campaign and how it is being used to discriminate against religious organizations. Encourage donors to move their DAFs to fund-holding organizations that share their biblical worldview while they still can.

  4. Build an endowment/reserve fund. Focus on building up a reserves fund or an endowment fund that will sustain your school or organization through hard times. Now is the best time to do so while the U.S. wealth transfer takes place. And since it’s unclear how much longer Christian schools and organizations will be able to receive funding, now may be the only time to build a reserve.

Imagine what would happen if Christian schools and organizations (and all that they represent) disappeared? So much of the good fabric of our country could disappear. These issues are not going away, and the Christian public needs to build this awareness. Now is the time for action to weather the storm ahead.

Bill High practiced law for 12 years before becoming the CEO of The Signatry. As CEO, he has spent over 18 years helping families live simply and give generously. He specializes in coaching families, individual givers, and financial advisers regarding biblical generosity and family legacy. He and his wife, Brooke, have four children and three grandchildren. He can be found at billhigh.com.

ENDNOTES

1. “Hearing on How the Tax Code Subsidizes Hate,” Committee on Ways And Means, U.S. House of Representatives, September 19, 2019, https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/Final%20Hearing%20Transcript%20-%2011-21-2019.pdf.

2. Nihal Krishan, “House Democrats call for stripping tax-exempt status from 60 ‘hate groups’” Washington Examiner, September 19, 2019, https://www.washingtonexaminer.com/policy/economy/house-democrats-call-for-stripping-tax-exempt-status-from-60-hate-groups.

3. “The 2019 DAF Report,” National Philanthropic Trust, accessed September 3, 2020, https://www.nptrust.org/reports/daf-report.