FAIR TAX TREATMENT OF CHURCHES AND OTHER NON-PROFIT ORGANIZATIONS

In the FairTax bill, churches come under the definition of not-for-profit organizations. These organizations need to be operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes; as a civic league or social welfare organization; as a labor, agricultural, or horticultural organization; as a chamber of commerce, business league, or trade association; or as a fraternal beneficiary society, order, or association. No part of the net earnings of said not-for-profit organization shall serve to the benefit of any private shareholder or individual. Churches that meet the above criteria are issued a “qualification certificate”.

Individuals making payments or contributions to churches or other non-profits do not pay taxes under the FairTax. Likewise, if churches or non-profits provide taxable services at no charge (such as running a soup kitchen for the poor, etc.), these are also not subject to tax.

Taxable property and services purchased by a qualified non-profit “for business purposes” are not taxable. The organization must present its qualification certificate to the seller when making a purchase in order for the sale to be tax exempt; however, if the church is selling to consumers (such as selling Bibles), then it must collect a sales tax. It bought the Bible without a sales tax, then turns around and sells it with a sales tax. (Remember, goods and services are only taxed once, with the end-user)

Since the FairTax exempts savings and investment, there would be no tax on interest earnings on endowments – assets, funds, or property donated to a not-for profit organization as a source of income.

I have covered the basics of the FairTax in previous weeks. I will spend the next couple of weeks or so covering some of the fringe elements, such as the non-profits above. If you want to go back to the basics, I suggest you start over and read my blog starting in August. I have obtained most of my information from the White Papers in the www.fairtax.org website. If you wish more information on any of these subjects, please go into this website and read the whole thing. I have cut it down considerably for quick and easy reading.