(RNS) Like houses of worship across the U.S., Calvary Church in Santa Ana, Calif., typically hasn’t had to worry about filing a federal tax form.
But an obscure provision in the corporate tax overhaul approved by the Republican-controlled Congress at the end of 2017 may change that.
That provision imposes a 21 percent tax on employee parking benefits provided by thousands of congregations and nonprofits from coast to coast.
To pay that tax, some churches may have to file form 990-T paperwork with the IRS if they provide parking for employees.
“No one is ever excited to pay more taxes, especially on what used to be free parking for our employees, but we will comply with whatever the final guidance is on the new tax,” said Michael Welles, executive pastor of Calvary Church, a Southern California megachurch with 2,200 weekend attendees and a $5.5 million annual budget. “We would rather invest our funds into helping our community.”
Many pastors contacted by Religion News Service said they were unaware of the new tax.
Others said they had reviewed the interim guidance on the tax — contained in a 24-page document issued by the Treasury Department this past December — and determined that the new provision won’t affect their congregation.
“This is not something which causes me concern,” said Patrick Ford, preaching minister for the West Islip Church of Christ on Long Island, N.Y. “Although we have significant parking-related costs for snow removal, we do not have any spaces reserved for staff.”
Even if the church did have dedicated parking for staffers, said Ford, it wouldn’t be enough to trigger the tax, based on the reporting threshold the IRS has established. But determining that requires a fair amount of computations.
The fact that houses of worship must make those calculations has upset leaders of national organizations — from the Jewish Federation of North America to the National Council of Nonprofits — that advocate for faith groups and charities.
Brian W. Walsh, a Washington, D.C.-based attorney and executive director of the Faith and Giving Coalition, said the tax sets a “terrible precedent.”
“When you tax the fringe benefits that churches, synagogues, mosques and other houses of worship offer their employees, you’re taking money directly away from their ability to operate,” he said.
A for-profit company, said Walsh, can pass the cost of the tax on to customers. A church or other house of worship can’t do that.
“They can’t raise prices,” he said. “They typically operate on very slim margins. So it can be a huge impact financially.”
Beyond the financial cost, Walsh said he objects to the tax on principle.
“It really runs counter to basic American values about how we understand the proper relationship between the church and the state,” he said. “So that alone is a reason why this provision should be repealed.”