The Church’s Tax-Exempt Status, 1860s style

The Church today jealously guards its tax exempt status, and I suspect that there is a group of lawyers whose sole job it is to sit around worrying about the ways in which the IRS might assess taxes against the Church. It turns out that the feds have tried to tax Church properties and income in the past. In 1869, John T. Taggart, the newly appointed U.S. assessor for the territory of Utah cam across a decision of the federal Commissioner of taxation holding that a religious society in Ohio was subject to federal taxes. According to Taggart:

I became convinced that the Mormon church would come under the same rule; I accordingly wrote to the Commissioner with regard to the matter, and received from him instructions to make the assessment on the income of the property of the Church of Jesus Christ of Latter-day Saints. Upon this I notified Brigham Young, through my assistant assessor, to make out a return of the income of the church, of the property of which he is trustee.

At the time, Taggart speculated that the Church had about $3 million of tithing revenue annually and held property valued in excess of $60,000. As part of a Gentile clique in Salt Lake that was trying to push the federal government into more aggressive action against Brigham Young and the Mormon theocracy.

Despite his sometimes frenzied denunciations of lawyers, however, Brigham does not seem to have been above a legal quibble when it would serve the purposes of the Kingdom of God. Brigham responded to Taggart’s request with the following note:

From Brigham Young to the United States answer,

August 20, 1869

We, the government of the United States, have no knowledge of any such person as the trustee in trust of the Church of Jesus Christ of Latter-day Saints, nor of any such organization as the Church of Jesus Christ of Latter-day Saints. If there ever was such an officer, or such an organization, we, the government of the United States, have obliterated them of existence by legal enactment.

Approved July 1, 1862.

The reference here is to the Morril Anti-Bigamy Act, passed in 1862. As part of that law, Congress specifically revoked the corporate charter granted to the Church by the Utah Territorial Legislature in the early 1850s, dissolving the corporation as a legal entity. Of course, Brigham’s argument may have been a bit too cute. There is a common law doctrine of corporation by prescription, under with a group that acts for a prolonged period of time as though it is a separate corporate entity will be treated as such, even in the absence of a formal legal act of incorporation. This argument, had it occurred to Taggart, might still have been problematic in Utah Territory, which had pointedly refused to pass a reception statute making the common law binding and hence it was unclear whether the doctrine of corporation by prescription was valid under Utah law. In any case, Taggart’s plan to tax the Church ultimately came to nothing, and the feds would have to wait twenty years — and two rounds of congressional legislation and Supreme Court litigation — in order to take Church property. Of course, when they did finally get their hands on Church assets in 1890, they made a grab that makes Taggart’s attempts of the 1860s look mild by comparison, confiscating all of the Church’s property.

33 comments for “The Church’s Tax-Exempt Status, 1860s style

  1. herodotus
    December 7, 2006 at 6:02 am

    How do you respond to claims that Rex Lee recusing himself from Bob Jones University vs the United States provides evidence that church leadership feared a change in their tax exempt status leading to a change in our stance on blacks and the priesthood?

    Is the Bruce Olsen quote the best we’ve got?

  2. December 7, 2006 at 10:17 am

    herodotus: I don’t know the details of Bob Jones and Rex Lee, although I believe that the timing is a bit off, namely the Church abandoned the priesthood ban before the Court decided Bob Jones. What is the Bruce Olsen quote you are referring to?

  3. Herodotus
    December 7, 2006 at 11:29 am

    This is the argument that is made:

    When the Bob Jones case came up in 1982 (regarding if a racially discriminatory religious university could claim federal tax exempt status) Rex Lee recused himself from the case explaining that he had previously represented the LDS church in a related matter with the IRS. Critics claim that this suggests that when the church issued Official Declaration 2 in 1978 it was not in response to revelation but under threat from the IRS.

    This idea gained enough steam in some circles that on April 5, 2001 Bruce Olsen from the Church’s public affairs department actually made a statement published in the Salt Lake Tribune refuting it. I quote it below:

    It’s one thing to distort history, quite another to invent it. Kathy Erickson (Forum, March 11) claims that the federal government threatened The Church of Jesus Christ of Latter-day Saints with its tax-exempt status in 1978 because of the church’s position regarding blacks and the priesthood.

    We state categorically that the federal government made no such threat in 1978 or at any other time. The decision to extend the blessings of the priesthood to all worthy males had nothing to do with federal tax policy or any other secular law. In the absence of proof, we conclude that Ms. Erickson is seriously mistaken.

    Bruce L. Olsen
    Public Affairs Department
    The Church of Jesus Christ of Latter-day Saints

  4. Mark B.
    December 7, 2006 at 12:49 pm

    The exemption of church property from taxation rests on different grounds here in the United States than elsewhere–for example, the United Kingdom, resulting in your tithing dollars going to purposes you may never have contemplated, like filling potholes and fixing street lights in the streets of Chorley, Lancashire.

    In a recent case, Church of Jesus Christ of Latter-day Saints v. Gallagher (Valuation Officer) [2006] EWCA Civ 1598, [2006] All ER (D) 344 (Nov), the Court of Appeal upheld a denial of property tax exemption for the Preston England Temple. The case turned on the court’s holding that the temple was not a place used for “public religious worship,” since entry was restricted to members of the Church who have a recommend from their bishop.

    From Lord Justice Neuberger’s decision, it doesn’t appear that counsel for the Church questioned his definition of “public”–he followed the decision of a 1964 case where tax exemption was denied to the London Temple, in which the court defined “public worship” to be a worship service in which the general public might participate. And, the reasoning went, the general public might therefore be benefitted, and exempting those places of worship from property taxation is justified, given that benefit.

    That’s a much tougher standard than, say, New York, where the criteria for property tax exemption are, roughly, that the property be owned by a church, and that the property be used for religious purposes.

  5. Peony
    December 7, 2006 at 1:49 pm

    There was an interesting article in the New York Times a few weeks ago discussing trends concerning the tax exempt status of religious properties. Among properties currently receiving or being considered for an exemption are a biblical theme park in Florida, several fitness centers affiliated with mega churches, and an upscale retirement village in Indiana. Where does the definition of a \”church\” end and of a for-profit enterprise begin? Also included is a discussion of the arcane world of tax-exempt bond financing for religious properties. I\’d be interested to learn more about how the LDS Church holds for-profit properties, and if the Church has made attempts to avoid taxation in some of the \”gray\” areas.

    Here\’s the link to the NYT article:

  6. Margaret Young
    December 7, 2006 at 2:12 pm

    Of course I’ve heard the idea that the priesthood restriction was reversed because the Church feared losing its tax exempt status, but I’ve never understood the rationale behind that suggestion. (And anyone familiar with the LONG struggle with the issue [read a biography of Hugh B. Brown to get a sense of it] would summarily dismiss such an easy rationale.) I understand much better why the Church feared losing its property under the Edmunds/Tucker act over the polygamy issue.
    I remember the Bob Jones University controversies–their rule that nobody at the university could engage in interracial dating. Obviously offensive, but why would a private university be subject to losing its tax-exempt status over having stupid policies? Bob Jones University did finally change its policy, but I don’t believe the change had anything to do with tax exemptions–or am I wrong? I’d love to understand this better.

  7. quandmeme
    December 7, 2006 at 3:01 pm

    Not to take the conversation too far from you historical comment, but I have met some of the minds that help the Church with its tax work. My take would be that the U.S. status is less of a headache, actually. The lawyers have had to be very active overseas getting tithing money (in or) out the many many legal systems where the church operates. I was very impressed with their work and their–what is usually a pejorative when I talk about lawyers’ tactics–creativity.

  8. Craig V.
    December 7, 2006 at 3:09 pm

    Because I have tremendous respect for Margaret (and I haven’t even seen her picture) and in consideration of the obstacles that must have been faced I’m willing to applaud the courage of those who reversed the priesthood restriction in 1978. There are still two things, however, that make the change a little underwhelming from the point of view of an outsider. First of all, it happened in 1978. It seems to me that, given this late date, the civil rights movement did far more towards restoration in this area than the church which claims to be a restoring agent in the world. Secondly, the reversal came without a full repudiation of the restriction. The effect of this was to blame the original restriction on the whimsical revelation of God.

    I apologize, Nate, for veering a bit off topic.

  9. December 7, 2006 at 3:20 pm

    Mark B.: Thanks for the heads upon the Preston case. I hadn’t heard about that one. I do remember reading the case from the House of Lords regarding the London temple back in the 1960s.

    Peony: In practice, I actually worked on a case (with gst if I recall correctly) regarding tax exempt bond financing for religious purposes. I do know that the church holds profit making properties in a seperate corporate entity. Hence, all of the church’s worship buildings etc. are held by a corporate sole under the Utah law entitled the Corporation of the Presiding Bishopric of the Church of Jesus Christ of Latter-day Saints. I believe that for-profit enterprises owned by the church are held by Deseret Managment Corporation. There are other corporate entities with specialized purposes: for examaple Intellectual Reserve Inc. all of the Church’s copyrights. There is also a corporation sole called the Corporation of the First Presidency of the Church of Jesus Christ of Latter-day Saints that holds some properties.

    Margaret: There are two issues in the Bob Jones case. The first is whether or not the federal government could revoke tax-exempt status from a private institution with racially discriminatory policies. I think that the answer here is pretty obviously yes. (The only possible constitutional difficulty that I can think of would be if the tax exempt status was revoked purely on the basis of racists speech, which would fall under the First Amendment’s prohibition on view-point based legislation.) The second question is whether the IRS on its own hook and without any Congressional authorization or even formal rule making can revoke the tax-exempt status of an organization with racist policies. This is what happened in Bob Jones. There was no law passed by congress saying no tax-exemptions for racist organizations. I don’t think that there were even any IRS regulations saying that there are no tax-exemptions for racist organizations. If I recall correctly, the IRS simply said to Bob Jones one day, you are no longer tax-exempt. The Supreme Court then went through various contortions to take jurisdiction in the case and upheld the IRS’s action. Not the finest hour for the rule of law.

  10. Herodotus
    December 7, 2006 at 3:29 pm

    I’m obviously no lawyer, but the one thing that does happen just before the Bob Jones litigation is Runyon v. McCrary which prohibited racial exclusion in private schools.

  11. bbell
    December 7, 2006 at 3:45 pm

    Not interested in the SSM debate again but I think that if you look into the future maybe a generation or 2 you can see that the potential is there for religious organizations to potentially lose tax exempt status over SSM/gay adoptions etc. I am hearing from friends in law school that many of their fellow students seem to feel this way.

    I think its one of the reasons for so much angst in SLC over the issue.

  12. jimbob
    December 7, 2006 at 3:46 pm

    “The effect of this was to blame the original restriction on the whimsical revelation of God.”

    I’m not sure I like the characterization, but I think that’s the official stance.

  13. Mark B.
    December 7, 2006 at 3:48 pm

    Until Elder Zwick became general counsel to the church in the mid-1990’s, ownership of property followed some general rules, but there were some anomalies and anachronisms. The property across from Lincoln Center in New York, for example, was owned by Corporation of the President and most other property owned for worship purposes was held by Corporation of the Presiding Bishop.

    Since that time, there has been an attempt made to rationalize ownership, with religious-use real estate going to Corporation of the Presiding Bishop, investment real estate going to Property Reserve Inc. and intellectual property rights going to Intellectual Reserve Inc.

    I don’t know how that affects Deseret Management–if I were in the legal counsel’s office, I would transfer ownership of that to Property Reserve Inc.

  14. December 7, 2006 at 4:01 pm

    Mark B.: I believe that Deseret Managment Inc. holds the stock of for-profit corporate entities, but I don’t think that it owns other for-profit property like real estate.

    Blacks and the Priesthood: My understanding is that there is no official stance on the origins of the pre-1978 priesthood ban. Indeed, I believe that it was disagreement on the origins of the ban that delayed its repudiation. Some members of the Twelve, etc. thought that it had no basis in revelation or doctrine and could be repudiated without some sort of special revelation from God. Some members of the Twelve etc. thoguht that there was a revelatory/doctrinal basis for the priesthood ban and that therefore it could not be repudiated without a special revelation. My understanding is that all members of the Twelve, FP, etc. agreed that in 1978 there had been a special revelation, but the revelation did not resolve the dispute about the pre-1978 ban.

    For myself, I do not think that there was a doctrinal or revelatory basis for the pre-1978 ban, and that it is best understood as a result of the sort of racist theology that was fairly widespread in the the 19th century and a lingering Mormon touchiness about race coming out of the polygamy battles. (BY’s arguments about race and the Mark of Cain etc. are not especially Mormon, but rather echo ideas current among many 19th century Protestants.)

    And as I have explained in the past, “I am Orthodoxy”

  15. Bill
    December 7, 2006 at 4:32 pm

    Mark B.,

    I could be mistaken, but I was under the impression that the church has owned the site across from Lincoln Center only since about two or three years ago. Before that they had a 99-year lease.

  16. S. P. Bailey
    December 7, 2006 at 4:55 pm

    Mark: you must mean Elder Wickman. Elder Zwick was the owner-director of a construction company, but not an attorney as far as I know.

    Nate: what was the reason for (or historical background of) the pointed refusal to pass the “reception statute making the common law binding” in Utah?

  17. Visorstuff
    December 7, 2006 at 5:09 pm

    Craig – the LDS Church wasn’t the only one with such a late date to change policy toward Blacks. By my last count, at least four major denominations eliminated racial segratory policies in the 1970s, including Southern Baptists, another baptist organization, Churches of Christ and Assembly of God and the Penecostals didn’t officially take it off their books until 1998. Methodists and Presbyterians in America didn’t have official policies, but most taught the doctrines associated with it well into the 1960s. In addition, Catholics, Methodists and others typically didn’t ordain black clergy in areas where they would be in clerical authority over whites in the U.S. well into the 70s and in some cases in the 1980s.

    The differences are that the Southern Baptists apologized for their segratory policies, the CoC and AoG quickly assimilated Black congregants, and the Penecostals integrated and when found the rule in their books got rid of quietly.

    Mormons on the other hand have a harder time as we can’t determine if the ban was from revelation or polilcy. And we have more vocal and organized critics than the above named groups. These reasons and others have made the issue last much longer than it really should have.

  18. Margaret Young
    December 7, 2006 at 5:30 pm

    “These reasons and others have made the issue last much longer than it really should have.”

    I’m sorry, but I’m not sure which issue you’re referring to. Mormons have a reputation for being racist-that’s simply a fact. Are you suggesting that the reputation is because our critics are so well-organized that they’ve managed to persuade the world of a falsehood?
    I’m trying to think how to respond to this without pulling a major threadjack. I think I won’t even attempt it, except to say that ALL religions owe a great debt to the Civil Rights Movement–and not just what we saw in the 60’s, but the whole thing, right back from Harriet Tubman’s time.
    The idea that our consciousness could be raised by a national movement and by men and women using politics to accomplish what were usually (to them) religious ends–or at least societal ends, pulling us from the mires of inequality and moving us towards the higher ground of inclusiveness–that does fit into Nate’s post. Laws DO reflect a nation’s morals, and we actually can legislate morality–or at least make it illegal to have lousy schools for African American children and good ones for white children, etc. And indeed, tax law can be used as an enforcement tool.

  19. Mark B.
    December 7, 2006 at 5:35 pm

    Oops. Yeah, I meant Elder Wickman. Thanks for the correction.

  20. December 7, 2006 at 5:48 pm

    Don’t worry about the thread jack. I seriously doubt that anyone wants to talk about federal taxation in the 1860s ;->.

  21. December 7, 2006 at 5:56 pm

    S.P. Bailey: Take a look at Michael W. Homer, The Judiciary and the Common Law in Utah Territory, 1850-61, DIALOGUE: A JOURNAL OF MORMON THOUGHT, Spring, 1988 at 97. Basically it was part of early Mormon distrust of the legal system. The common law was seen as a real of meaningless technicality that allowed lawyers to frustrate justice and cheat their clients. Homer makes the point in passing that there were other who were distrustful of the common law, but doesn’t make the point that there was a concerted attack on the common law through out the English speaking world in the first half of the nineteenth century. In England it was led by Bentham and the Utilitarians, in the United States it counted Jefferson (who was a sucky lawyer anyway) among its accolates and was ultimately manifested in the Field Code in New York and the codification of the common law in California. Mormons pick up on this and grafted some of their own theological ideas on to.

    The federally appointed territorial courts in Utah had a habit of disgregarding territorial legislation that they disliked or which they found to conflict with the Organic Act (which was pretty vague on these subjects). The result was that the various legislative efforts of the territorial legislature notwithstanding, the territorial courts applied the common law anyways. Indeed, in a wonderfully irnoic decision the Utah Territorial Supreme Court ruled that the people of Utah had implicitly adopted the common law (despite the adoption of a statute explicitly stating that the common law could not be cited in Utah courts)! Of course, in a sense this outcome was inevitable. The Territorial legislature tried to exclude the common law, but didn’t do the hard work of promulgating a code (although they had code commisioners who might have done so). Hence, the courts were left in something of a bind. They had not statutory rule on many subjects and turned naturallly to the common law.

  22. Craig V.
    December 7, 2006 at 5:57 pm

    Visorstuff, it is certainly true that many protestant denominations have much to be ashamed of with respect to institutionalized racism. Such examples should move us (Protestants) to self examination to ensure that they never occur again. There were also, however, church leaders and even denominations that were very active in the civil rights movement. My advice to Protestants is to look at and learn from what went horribly wrong and to look to those who fought for civil rights as examples of how we are called to be salt and light (bring restoration???) to our world. My concern is that the way the LDS church has addressed (and continues to address) this issue makes self examination difficult. So when Margaret points to the struggle of those involved in the reversal, I want to cheer and give credit where it’s due, but there’s still a cloud around the issue for me.

  23. Mark B.
    December 7, 2006 at 5:57 pm


    The church acquired the fee simple interest in the property in the early 1970’s, and entered into a 99-year lease with Two Lincoln Square Associates, pursuant to which the lessee constructed the building, ceded parts of the structure to the church for its use and got rich renting out the remainder of the building.

    That lease was terminated in April 2004, resulting in the Church owning the fee interest in the entire building. Since then it’s entered into leases of the non-religious use parts of the building.

    You can trace the whole history of the property at the city register website:

    The tax block and lot are 1118/9001.

  24. Mark B.
    December 7, 2006 at 6:03 pm

    And, take a look at block 1118 lot 1 as well. Expand the results to 99 lines, and you’ll find the deeds into the COP from the previous owners of the property.

  25. jimbob
    December 7, 2006 at 6:56 pm

    “Don’t worry about the thread jack. I seriously doubt that anyone wants to talk about federal taxation in the 1860s ;->.”

    Probably not, but I do wonder what the state of the law is as to how much politics a church/non-profit religious institution can enter into without forfeiting their non-profit status. Does anyone know? Now and again I see our detractors mention that our active role, for example, in mobilizing votes on various marriage proposals is jeopardizing our tax-exempt status, but I attribute most of that to bluster. Is there a real threat of that as the law stands now?

  26. Peony
    December 7, 2006 at 7:19 pm

    The Bush administration is taking action against the non-profit status of a church in the Los Angeles area that took political stances against the administration in the 2004 election. L.A. Times coverage takes the position that the liberal church did nothing more in opposition than did many evangelical churches who supported Bush in 2004. So perhaps it all depends on if you offend someone who is currently in power and has the ability to go after your tax-exempt status.

  27. Bill
    December 7, 2006 at 9:31 pm

    Thanks, Mark B.

    Very interesting site

  28. Melinda
    December 7, 2006 at 10:50 pm

    jimbob – churches can speak out about issues without jeopardizing their tax exemption. So the church can talk about moral issues such as SSM or abortion. A church crosses the line if it begins to campaign for a particular individual. The church can make a strong statement about a moral issue, but it cannot say that a specific individual agrees with the church’s stand on the issue.

    There are some gray areas, but the bright line rule is that a church can discuss and campaing about issues; it cannot endorse or malign a specific politician.

  29. Melinda
    December 7, 2006 at 11:08 pm

    Nate Oman’s description of the separation between the religious entities and for-profit entites of the Church helps settle some of the fuss about the Church’s project to rebuild the downtown malls in SLC. I’ve read several comments from people who would rather have the Church spend that billion dollars on humanitarian projects. However, the downtown malls are owned by the for-profit entities, and the projects will be financed by the for-profit entities. So that billion dollars is not available for humanitarian projects because the for-profit entities can’t simply hand over all their money to the religious side, and it is the religious side that does humanitarian work. Throwing money back and forth between the for-profit entities and religious entities would really cause the IRS some heartburn. There are tax laws that say the Church can’t use all the money from the for-profit entities for religious purposes such as humanitarian work. Some donations are okay, but not on that scale. They’d run into the limitations on charitable donations that are imposed on companies (there are different limits on individuals).

  30. December 8, 2006 at 9:00 am

    Melinda: I also seriously doubt that the church (or the for profit entities it is controlling) is paying for the redevelopment projects with cash. Rather, I suspect that they are financed with loans secured by the property to be repaid back out of the proceeds generated by the investments. In other words the billion dollars comes not from the church but from the bank, which is betting on the future profits of the venture.

  31. Melinda
    December 8, 2006 at 2:16 pm

    Nate, that’s a very good point. The Church does pay cash for the temples and church buildings (imagine if a bank tried to foreclose on a temple!) but it is probably taking out loans for the downtown project.

  32. Mark B.
    December 8, 2006 at 6:04 pm

    Not the church qua church, but some corporate entity owned by the church. We can be pretty confident that the lender/investor will not require (and it for certain will not get) a guarantee of the debt from the church.

  33. December 10, 2006 at 4:12 pm

    So, Margaret Young, when the racially segregated barracks caught on fire due to bad luck during a rocket attack on Da Nang, in Viet Nam, which religion were the only white men to participate in breeching the building and leading the evacuation?

    I guess you had rather that those racists Mormons should have just done the right thing in 1970 and let the men keep sleeping …

    Guess we all have different concepts of what makes someone racist.

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