A Cautionary Tale of Debt

Operation Market Garden, the attempt to end World War 2 quickly via an airborne invasion of Holland, has been described as a “bad plan, poorly executed”.  Had Operation Market Garden worked it would have ended the war by Christmas of 1944, saving 1000’s of lives.  Only one thing was needed for Market Garden to succeed, everything had to go perfectly.  If any one thing were to go wrong the whole operation would fail.  Something, actually several things, went wrong and Market Garden was a disaster.

A church having a large debt is like operation Market Garden.  If everything goes perfect it will be okay.  The following story is meant as a cautionary tale from my own expensive lessons with church debt.  Names are changed but all the details are accurate.

A Dream come True

When I arrived at Butler Community Church it seemed like a dream come true.  BCC was 6 years old and had an average attendance in the low 60’s to upper 50’s. The church was in a booming suburb, owned 11 acres with a farm house converted to worship space and held about $100K in debt.  Within a one-mile radius of the church, 2500 homes would be constructed in the next 5 years.

With a full time preacher the church began to grow.  Soon 100 worshippers packed the little farmhouse every Sunday, and on special Sundays we had to meet outside.  The Lord was blessing and we were sure the time to build had come. Our offerings were more than covering our expenses.

What I didn’t know was that the church had begun with a very unhealthy start.  This unhealthy congregational DNA would manifest itself when debt arrived.

What had been described as a church plant was in reality a very ugly church split, and no one had ever addressed some root issues.

Time to Build?

It was decided to build a multipurpose building with a main meeting room (seating 375) that could also be used for fellowship, sports, and recreation, and 5 large classrooms.  The farmhouse would be updated with class, conference, and office space.  Construction cost would be about $400K and would give us a total of 11,000 square feet.  Total debt would be just under $500K furnished; the cost would be about $45 per sq. foot.  We were not being opulent.

Once in the building our growth took off again.  Attendance jumped from about 100 to over 140 in about 3 months.  We were seeing decisions for Christ and new families weekly.  It felt like we were going to be one of those church growth super stories.  At the same time, construction began on a subdivision of 800 homes next door to our church building.

New wine began to burst the old wine skins. 

The operational system of a church of 150 is very different from the operational system of a church of 60.  Stress began to develop between the founders and the new vision.

Where once a few good ‘ole boys and girls made decisions, the leadership had shifted to a board.  The result was a power struggle to get rid of the preacher.  The old guard began withholding their offerings until they were satisfied.

If this continued, we would not be able to make our new mortgage payments.  In a show down vote, the attempted coupe failed.  But a few weeks later, while I was out of town, the board was pressured to make three concessions.  The preacher would be asked to, “Preach sermons that made people feel good.   Not to change anything.   Not to try to get new people, but to take care of the ones we’ve got.”

Unable to accept these terms, I left the church.  I was heart broken.  Not only because I was leaving a ministry I loved and hoped to stay with for the rest of my life, but also because I was well aware of what was in store for this church.

In the months that followed my departure, attendance declined rapidly and a number of ministers came and left. Soon the attendance was back close to 60, there were no new families coming in, and the new minister was moved to a part time status.  It was only a matter of time before the death of the church.  Those who remained were faced with a terrible decision.  The property was put on the market for the debt and the end had come.

Debt was not the Problem

The ultimate problem with BCC was not debt, but debt became the one thing that kept the church from surviving its problems.  Had there not been a large loan, the old guard would have had little leverage by withholding their giving.

The Danger of Church Debt

The danger of debt is two fold.  First, it prevents us from taking advantages of opportunities that may present themselves.  Second, it allows for no margin of error.  While debt is not morally wrong, it is dangerous.  It is not a problem if everything goes just right, but, rarely, does everything go just right.

An increase from 7% to over 39% for your church.

The Revenue Tax Act of 1913 set a progressive tax rate of between 1 and 7 percent on all U.S. incomes.  The maximum tax rate applied to those who had an income of $500,000 was 7% of income; currently the top tax rate for that same income is 39.6%.

My point at the moment is not to argue for or against a progressive tax rate, but to point out that taxes are not apt to stay the same, and do have tendency to go up.   I doubt seriously that if in 1913 the advocates of The Revenue Tax Act had proposed a tax rate of over 1/3, the bill would have received much support.  Today, as we look at the possibility of taxes being levied against churches, I doubt there will be much support for an especially aggressive tax.  Part of what made The Revenue Tax Act of 1913 viable was that the upper rates applied to so few people.  In 1913, the average annual income was $800.  There was not going to be a popular resistance to a high tax rate of 7% for those who made $500,000.  We might see the same thing happen when it comes to taxing churches.  Proposed taxes on a very limited number of ministries, that are in popular in one way or another.  Without a ground swell of opposition the proverbial camel might get its nose in the tent.  

Three areas where we might see taxes proposed against churches are:

1) Tele-evangelist excesses

It has been a generation since the PTL scandal, but it has become part of the American consciousness.  While the facts of the PTL scandal are often obscured it has become useful fodder for those who wish to disparage the church.  In 2007, Senator Church Grassley of Iowa held hearings concerning the propriety of six ministries regarding whether their leadership was provided inappropriate benefits from the ministry.  These ministries, by and large, teach a prosperity Gospel.  While the results of the hearings were far from a blanket condemnation of these ministries, there has developed a perspective, rightly or wrongly, that the ministries are little more than moneymaking machines for their leadership.  In popular opinion many people feel that the tax exemptions given to churches and the benefits given to their leadership are unfair.  We might see that large ministries that draw large amounts of money might be a tempting target for those who want to begin taxing churches.

2) Lucrative mega churches

Most mega churches have very nice facilities.  Some sprawling campuses are jokingly called Six-Flags over Jesus.  These facilities are also often on very desirable real estate.  As such, they enjoy great visibility for guests and for those who might envy that property.   Large churches have large offerings; in some cases, a single Sunday offering might be larger than the entire annual budget for a small congregation.  Most folks who attend church in America do not attend a mega church.  We might find the proposal of a progressive tax on churches in which churches with larger offerings would be required to pay a higher tax.  This would be rationalized by arguing that larger churches require greater infrastructure and civil services such as fire and police protection.  Mega churches might be a place where advocates of taxing churches would ask that churches pay their “fair share.”

3) Gay marriage

Any legislative action to tax churches would become a great campaign topic for the next election.  Most elected officials would be very cautious about advocating taxing churches.  Any senator or congressman from the Bible belt would almost guarantee his next election defeat by voting for a tax on churches, but the untouchable court is another matter altogether. 

Here is an exchange between Justice Alito and Solicitor General Donald B. Verrilli Jr., arguing for the same-sex couples on behalf of the Obama administration.

Justice Alito: Well, in the Bob Jones case, the Court held that a college was not entitled to tax exempt status if it opposed interracial marriage or interracial dating.  So would the same apply to a 10 university or a college if it opposed same­-sex marriage?

General Verrilli:  You know, ­­I don’t think I can answer that question without knowing more specifics, but it’s certainly going to be an issue. I don’t deny that. I don’t deny that, Justice Alito.  It is –it is going to be an issue (emphasis added).

Gay marriage is not the only place where the court could revoke the tax-exempt status of the church, but, it is at the moment, a hot button.  If your church refuses to comply with federal determined standards, your church will find itself without the benefits of specific tax breaks.  Currently, there is a lot of latitude for churches, but that can change.

Next week, we are going to discuss what your church can do to strengthen its position whether church taxation occurs or not. 

The press to tax the church has begun.

What would your government do for 83 billion dollars?

  

In the movie Princess Bride, the Sicilian boss named Vizzini has an often repeated one-word line “Inconceivable”.  He keeps seeing things that he believes are beyond the realm of possibility.  He has a difficult time wrapping his mind around what is happening; it seems “Inconceivable”. 

When we talk about the church being taxed many of us, like Vizzini, are apt to say, “Inconceivable.”  Twenty years ago we might have considered it “Inconceivable”:

That the Empire State building would light up green to celebrate the end of the Muslim fast of Ramadan.

That the Supreme Court would legalize gay marriage in all 50 states.

That an Islamic gunman would kill four Marines in Chattanooga.

That a squirrel was "detained" when a woman called police to complain it was stalking her.

The likelihood of taxation of churches may not be a sure thing, but it has moved from the “inconceivable” to the “possible”.  I believe there are three key, interrelated, reasons why it is conceivable that churches will some day be taxed.

3) The ravenous appetite of government

Bonhoeffer states covetousness has an insatiable desire for more.  That is true, not just of individuals, but of governments as well.  The nature of government is to always grow larger and expand and that expansion requires money.  This is a bi-partisan appetite and currently the US debt is 104% of GDP and the US is acquiring interest at an astounding rate of $16,692 per second.   It is enlightening to visit a debt clock and watch the rate of spending by our government.  http://www.usadebtclock.com/ 

Stranger things than churches have at times been or are currently being taxed, including windows in Great Britain (not the software), playing cards (.10 cents per deck in Alabama), cow flatulence ($110 per cow per year for Danish farmers), the performance of visiting professional athletes (the Jordon tax enacted in California after the Bulls defeated the Lakers in the NBA finals), Russian bread tax, British wig powder tax, and a tax in Sweden for naming your baby a name not already in use.  In Canada, makers of children’s breakfast cereal are granted a tax exempt status if their cereals contain free toys. However, this exemption is limited to toys that are not “beer, liquor, or wine.”

Taxing churches seems a little less far fetched than some of these taxes, especially if it could produce meaningful income for the government.

2) Growing secularization

While it is hard to dispute that America was founded with and in a Christian worldview, it is also hard to dispute that the predominate worldview of most American’s is secular.  As a deist, Jefferson was far from orthodox in his faith; nevertheless, he valued highly the moral and ethical teachings of scripture, and appreciated the role of church in culture. 

Today, most people don’t care if the church shapes the ethics and the mores of our nation.  With declining commitment to Christianity in general and the local church in particular, the electorate could easily be convinced to support a tax on churches.   Most people do not have a deeply vested interest in keeping their church tax exempt because most folks do not identify as having a church home.  If the people of America were asked, “If taxing churches would reduce your personal property tax by ‘$X’, would you support taxing churches?”  My guess is that there would be a surprising support for this tax.

1) Loss of community vitality

Once upon a time the church provided almost all the social services now provided by the state.  Beyond the moral, ethical, and religious teaching of the church it was also the social safety net.  It was the source for feeding the hungry, caring for the indigent, providing health for the sick and dying.  In fact, the first international famine relief program in history didn’t happen at the government level, but in the church.  

Over the years the church has relinquished much of its ministry to the government.  The church is seen as, occasionally, providing supplemental aid to the real help of welfare, public housing and food stamps provided by the government.   What if every church in America had the selfless passion and energy that Mother Theresa expressed in India?  If the church were that engaged and involved in meeting the needs of the community then revoking her tax exemption would be ‘inconceivable’. 

The church has, in many cases, used the resources freed up by not doing community ministry to simply feather its own nest.  One advocate of taxing the church wrote:  “You just get a nicer building or a grander Christmas pageant. There's nothing wrong with that. When I was young I always enjoyed the Grace Church Christmas pageant. But this is just a kind of private entertainment (comparable to spending money on snacks for your book club—and indeed what are Bible study groups but the original book clubs?) that doesn't need an implicit subsidy.”

While it is far too early to say that taxing churches is inevitable, it is also far from inconceivable.  The church has allowed itself to be marginalized and seen as little more than a social club or private community.  In view of this it is not hard to see by some believe the time to tax the church has come.

Next week:  Where will the move to tax the churches come from?

The press to tax the church has begun

What would your government do for 83 billion dollars?

Ryan T. Cragan is a professor of sociology of religion at the University of Tampa.  Working with two-research assistants he set out to discover how much money governments are leaving on the table by not taxing churches.  Cragan is no disinterested academic; his findings were reported in Free Inquiry, a publication of the Council for Secular Humanism.   I believe that his methodology is flawed and his predictions are askew, that being said, he concluded that if churches were taxed it would produce $83,000,000,000 for governmental use.  Which brings to mind our question of the day, “What would your government do for 83 billion dollars?”

Would the government tax churches for that kind of money?  I will leave that answer up to you.

The call to tax churches has already begun.  Matt Yglesias is a Harvard graduate and a prolific writer on things philosophical and political.  He is one of a growing number of people who believe that it is time to end tax exemptions for churches.  Yglesias argues for the ending of tax exemptions because if churches were not tax exempt they would be free to express their opinions regarding the personalities in elections.  He also argues that a church’s larger and enhanced facilities will not make it more effective in soul winning.  We may disagree with Yglesias’s conclusions, but we need to be aware that he represents a growing movement to end the tax-exempt status for religious organizations in America.

I will not attempt to debunk the validity of the arguments for ending tax-exempt status.  I believe the debate over religious tax exemptions is coming fast.  This is not alarmism. Alarmism predicts a dire future and proposes a course of action, which will be effective only if that dire future comes about, but otherwise might be harmful.  Prudence is to see a possible dire future and then follow a course of action, which will be helpful whether the dire future occurs or not.   

Examples: Alarmism: The US economy will collapse so buy (from me) hard assets of gold and silver, stock pile food and ammo and hide in the mountains of Utah.
Prudence:  The US economy may collapse so payoff your debts, diversify your holdings, and build strong network of friends that can mutually help each other in difficult times.   

I will not ask you to contribute to my blog to get the ‘message out’ nor send you pleas desperate for help for a political candidate that will fight to maintain tax exemptions for churches.  What I will attempt to do is:

a.     Share the possible places where a church’s tax exempt status could be effected.

b.     Discuss why this move is even thinkable.

c.      Look at the places from which this action might be possible.

d.     Discuss how actions can be taken that will be beneficial whether tax-exempt status is lost or not.

I believe the move for the revocation of tax exempt status has already begun in small ways.  Some years ago I had a conversation with a lawyer that was representing a church in a suit against the county government.  The church had purchased an empty shopping center to use for its operations.  Just before closing, the county tried to stop the sale using eminent domain laws.  The county argued that even though they had no use for the property and were not going to buy the property, they could prevent the church from ownership because of the taxes that would be paid if a retailer purchased the property.  The county believed that gave them a compelling reason to prevent the church’s ownership of the shopping center.  Thankfully, the church won its case.

But the slow creep to tax churches occurs in other ways.  I served a church that considered a small building addition, about 2,500 square feet.  The city government was going to extract close to $100K dollars before we ever turned the first spade of dirt.  These were not building permits, but things such as purchasing trees for the city arborist, donating land for a mass transit/bus stop and building the bus stop shelter.  By the way, there was no bus service on Sundays.  Building sidewalks that went from no where to no where.  On another occasion the city levied a Fire Service Fee on all churches, assessed whether there was ever a fire or not.  Taxation has begun, but only in minor ways.

I believe there are three places where the tax burden could fall on the church.

·      First of all, churches could lose and end up paying property taxes.  According to Cragan, the removal of property tax exemption would result in an additional 26.6 billion dollars in revenue.  The last church I served as pastor had a building worth about $750,000 in a county with a tax rate of 28.5 mil.  The property tax would be annual $21,375.

·      Second, we might see a straight tax on church’s offerings.  Suppose the IRS imposed an adjusted tax rate based on your annual donations, somewhere between 10% and 39.6%, as they do for households.   The result would likely negatively effect giving as will as drain resources.

·      Third, there might be the loss of tax deductions for those giving to churches.  According to the Congressional Business Office charitable giving to all groups costs about $39 billion each year.  The CBO also states that 32% of charitable giving goes to religious organizations.  So, in theory, at least taking the tax deduction for religious giving would amount to about $12.5 billion for use by the government.

 Simply put, the status quo for churches would not survive the church loosing its tax-exempt status.  However, I believe there is a tremendous opportunity for the church in these chaotic possibilities.

Next week we will look at how we got to the place in America where the thought of taxing churches is even being considered.

Great Week, Great Lesson

There are no times like the times you can say remember the old times.

You know it is a lot of fun when most of the conversation begins with, “Do you remember when…”

This last week was a GREAT week.  It started on Sunday afternoon when a dear couple with whom we have been friends for over 30 years came for a visit. About midnight, though the stories were far from exhausted, we had to call it a night.  The next morning, we started all over again.  Finally, about noon we had to let them go; they had other vacation plans and we had to get ready for an important trip.

On Tuesday, I had a client meeting with one of my churches.  This church has a new preacher and as we discussed our strategic plan for our campaign I was impressed by the hopefulness as we talked.  Long before the campaign begins there will be a strong emphasis on developing some deep and abiding relationships.  I was thrilled as the new pastor talked about getting to know people and making friends.  True, this was the pastor’s 2^nd day on the job and there is a long way to go.  But in this circumstance this is a hope-filled beginning.

Wednesday, I spent talking to prospects for my consulting firm.  One of these prospects is a church that meets in the building where I used to minister.  I toured their building, which was built while I was there, and saw that many of the dreams and visions I had for ministry have been fulfilled in their ministry.  Memories flooded over me with every step I took.  This was a profoundly joyful and humbling moment.  

Thursday was about performing a wedding for a dear friend of many years.  When first we met, she had a nine-month-old baby on her hip and a little girl riding a tricycle around our feet.  That baby is now a high school senior and looks like a lineman for the NFL and the kid on the tricycle is a beautiful college girl.  This wedding allowed us to reconnect with other friends from that time and again we sat around and told stories and laughed at those long ago moments.

Friday was a bloody mess.  We were with our daughter and son-in-law. He is a fine country boy and it was butchering day for the chickens.  He and I took 10 chickens from the pen to the freezer and while that will not be the high point of the week, it certainly was a memory moment.    Saturday was my granddaughter’s first birthday party.  She will not remember that party at all, but it was an occasion that people related by birth, marriage, and faith came together to build memories.

Sunday we worshiped with our daughter and grandkids and her preacher, another old acquaintance, shared with me the vision of his ministry.  The speaker of the day was one of a number of younger men he is mentoring to send out to plant churches.   He meets with them for teaching, accountability, coaching and the growing of relationships.

As we drove home on Monday, I asked my wife to get out my yellow legal pad and we began writing down the specific lessons we learned from our friend’s visit the previous Sunday.  In a matter of moments, we have a legal pad full of notes on what they taught us, confirmed in us, or with which they challenged us.   I will forgo sharing these lessons; they are a bit personal.  But one common thread ran through every moment of this fantastic week.

It was nothing other than the incredible value of relationships.  I needed that lesson.  My personality is one that wants to build empires, projects, campaigns, or programs.  I want a checklist of things to do and then delight in making the check marks.  I can be very agenda driven.  But as I had conversations with people who have meant so much to me over the last 30 years we never mentioned projects.  We told stories of the events that shaped our friendships and made memories.

Today, I have a lot of things on my checklist; I was gone for a week.  But in the midst of my strategic planning for the next 6 months I want to take time to do something and build a memory with someone.  Thirty years from now it is possible that the gathering will not be a wedding, but a funeral-mine.  What I hope happens after the service is that people will sit around and eat a potluck dinner and someone will say, “Hey, do you remember when Charlie…?”  To have that moment then, I have to build the relationship now.

So, today, go do something that will build or begin to build that relationship.