The LDS Church collects contributions from members (which is fine).
And it invests some of those contributions, and earns income from them (which is also fine).
And any church can accumulate a nest egg for some period of time to fund larger tax exempt ventures down the road.
But a non-anonymous IRS whistleblower alleges that the LDS church’s investment arm, Ensign Peak Advisors, has never made a charitable contribution, and in fact has twice offered no strings financial support to private businesses in the 9 to 10 figure range.
This is a very big deal.
While accumulating this wealth, Ensign has not directly funded any religious, educational or charitable activities in 22 years …
…
“If you have a charity that simply amasses a war chest year after year and does not spend any money for charity purposes, that does not meet the requirements of tax law,” …
IRS rules dictate that a nonprofit organization must carry out charitable activity that is “commensurate in scope with its financial resources” to maintain its tax-exempt status.
…
… $2 billion from Ensign has been used over the past decade to bail out a church-run insurance company and a shopping mall in Salt Lake City that was a joint venture between the church and a major real estate company.
BTW: I like that mall very much, but I could see how it might too nice be anything but a money pit.
The article also intimates that support for that insurance company may have been done through a chain of church enterprises. If that was track covering, that’s a big no-no too.
The big problem here is that it’s not enough for the Church to have funded charitable activities. In this case, it has created a separate entity that it claims is charitable too (which is fine), but which is alleged to have never engaged in charitable activity of its own (they can’t, at this point, double count charitable work from elsewhere in their enterprises).
While the church may argue Ensign contributes to a broader religious and charitable mission, as a separate corporate entity, it must show that “it furthers a charitable purpose exclusively on its own,” Hackney said.
“Once that money comes in, it’s gotta go back out,” he said. “They have to come up with a justification based on the entity alone. …
The article does take pains to explain that the church’s accumulation of investments are consistent with its millenarian beliefs. So, there is an argument that since end times have not arrived that the church’s behavior is OK. But the two payments to the private firms, and zero to charitable enterprises, are an absolutely killer legal position against that.
In sum, I think the phrase “big deal” is not strong enough. There is no precedent for a church getting away with behavior like this, and there is a sense that this is very, very, large in the history of questionable financial/tax issues (even those done by those big corporations everyone blames for bad dealings).
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Do note two things that the faithful may say in defense of their faith.
- The whistleblower has left the church, and therefore may be disgruntled.
- The whistleblower is entitled to a share of fines if the church is found to be in the wrong.
Both of those are true, and provide some real defense.
Having said that, even if they are both true, the complaint can still be true as well.