In the early American republic, the tradition of exempting churches from taxation was carried over from England. But over time, these exemptions were challenged on the grounds of separation of church and state and equitable and uniform taxation. By 1875, there was fear that churches were accumulating vast amounts of wealth and property that the government could not tax. In his 7th annual address, Ulysses S. Grant called this lack of taxation an evil that would lead to great trouble in our land.
" . . . I would also call your attention to the importance of correcting an evil that, if permitted to continue, will probably lead to great trouble in our land before the close of the nineteenth century. It is the accumulation of vast amounts of untaxed church property. In 1850, I believe, the church property of the United States which paid no tax, municipal or State, amounted to about eighty-three million dollars . In 1860 the amount had doubled; in 1875 it is about one billion dollars. By 1900, without check, it is safe to say this property will reach a sum exceeding three billion dollars. So vast a sum, receiving all the protection and benefits of Government without bearing its proportion of the burdens and expenses of the same, will not be looked upon acquiescently by those who have to pay the taxes. In a growing country, where real estate enhances so rapidly with time as in the United States, there is scarcely a limit to the wealth that may be acquired by corporations, religious or otherwise, if allowed to retain real estate without taxation. . . . I would suggest the taxation of all property equally, whether church or corporation, exempting only the last resting place of the dead and possibly, with proper restrictions, church edifices." -- Ulysses S. Grant
Despite President Grant’s early warning, Congress failed to act. By 1971, U.S. churches collectively owned around $110 billion in real and personal property. In New York City alone, church property values rose sharply—from $750 million in 1969 to $1 billion by 1982, and an estimated $3 billion by 1989.
ReferencesPresidency.ucsb.edu. (2018). Ulysses S. Grant: Seventh Annual Message. [online]
Available at: http://www.presidency.ucsb.edu/ws/index.php?pid=29516 [Accessed 19 Jan. 2018].
Churches Should Pay Taxes
• Churches don't have to apply for 501(c)(3) status to be recognized as tax-exempt by the IRS. While other charities must file Form 1023 to get an official determination letter, churches aren't required to do so.
• Churches get special treatment in the U.S. tax system. They don’t pay income or property taxes, and clergy get housing tax breaks.
• Churches also don’t have to publicly report their finances like other nonprofits do. They don't have to file Form 990 with the IRS, which is the annual financial disclosure required of most tax-exempt groups.
• This leads to legal confusion, as some groups try to claim religious status just to get tax benefits. The government then has to decide what counts as a religion.
• Churches are exempt from financial transparency laws, meaning they don’t have to disclose income, expenses, assets, or salaries.
• They can receive tax-deductible donations without showing how those funds are used.
This lack of oversight has led to ongoing debates about accountability, especially given the large amounts of property and revenue some churches manage.
• Churches weren't supposed to endorse political candidates, but many used loopholes to influence elections anyway.
• Recent legal changes (2025): The IRS now allows churches to endorse political candidates without losing their tax-exempt status. This weakens the separation between church and state even more.
• Taxing churches wouldn’t violate religious freedom. If a church can’t afford taxes, it can still meet in homes or public spaces. Freedom of religion doesn’t mean freedom from financial responsibility.
• Unlike charities or schools, churches can discriminate based on beliefs, gender, sexuality, and more—yet still get tax break.
• Many churches make huge profits, and some leaders live in luxury. Are they keeping account of their income and paying individual taxes?
• Studies show nonreligious people are just as moral as religious ones, so churches don’t deserve tax breaks for “promoting morality.”
• Because churches don’t pay taxes, everyone else pays more to make up for it.
• Church tax exemptions also hurt the free market, letting churches buy land and hold onto it, and run services without the same rules or costs as other businesses.
Religious groups continue to be given a free ride. If churches want to contribute to our society and actually help even those who don't attend their services, they should pay taxes just like every other business.