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When reading an article in the Huffington Post about how easy it is to register a church (as shown by John Oliver) I was wondering why the practice is not more widespread.

The American IRS does not take a position on religions so a minimal effort to check the marks would easily allow for tax benefits. I would guess that the more money is on the table, the more "organized" the organization could be (I am not talking about the philosophical aspect but the formal one, that is having all the processes in place so that an audit comes clean)).

I am from Europe where the financing of churches is more around taxing the believers, rather than having the church exempted from paying taxes so the usefulness of having a church is smaller (this is visible through the small number of recent churches, and when these arise it is rather a matter of dogma)). It seems however than in the US it is different.

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    Are you asking why people don't create fake churches with the intent to evade taxes? – Ross Ridge Aug 27 at 14:53
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    It wouldn't be legal, that's why. When you register a fake church you'd be committing a crime because you were lying to the government. When you failed to pay taxes on the profits you made and distributed for non-charitable purposes (eg. paid to yourself) you'd be committing a crime. – Ross Ridge Aug 27 at 14:58
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    @RossRidge: what is a "fake church"? Apparently there are documented processes you need to have in place and that's all. – WoJ Aug 27 at 15:08
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    @RossRidge: honestly, I do not understand what you are trying to say. Which part of the registration would be a lie? Pastafarianism is a registered religion, you can hardly do better and still - a religion (not for tax exemption, though but for more noble causes) – WoJ Aug 27 at 15:25
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    When the law doesn't define a word, the legal definition is the ordinary one. – Ross Ridge Aug 27 at 18:42
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Ignoring the question of whether knowingly trying to deceive the IRS about the nature and purposes of an organization is a crime or even a lie, running any sort of tax-exempt organization for your own benefit is tax evasion and a crime.

What you propose actually does happen in the US, but it's non commonly done by claiming tax exempt status a religious organization. Instead of registering fake churches (which strictly speaking isn't necessary as user6726's answer says), it's simpler just to register a fake charity. You don't need any of those things that you've noted that the IRS says a religious organization must have.

Done intelligently, people running these scam charities do just enough charitable work to avoid investigation by the authorities while diverting the majority of earnings and donations of the organization to themselves through salaries and payments to for-profit businesses they own.

Done not-so-intelligently, virtually all the proceeds of the scam charity end up in the hands the people running it, and those people often get caught and end up in jail. If proven, the charges against Steve Bannon would be a notable recent example of this. While it's less common with religious organizations, people have done time for misusing a religious organization's tax exempt status. For example a Virginia couple were sentenced to prison for crimes relating to a scheme to route profits from a business through a religion organization they had set up.

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  • Thanks for your answer (+1) despite the fact that I truly do not understand the part about deceiving anyone. If my church states that the doctrine is, say, "to think" (just "think") and I do, then I do not see the problem (really, honestly). I am interested in the technical/legal aspects of why not having this financial construction more often (since it is legally allowed and provided) – WoJ Aug 27 at 18:13
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In the US, there is no required registering of churches and religion is an unregulated industry because of the First Amendment to the Constitution:

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof".

Congress does have the power to levy taxes, and makes certain exceptions to the general rule requiring paying taxes on income, for organizations to have certain purposes – organizations that do certain things. This includes, but is not limited to, churches.

As long as you do those things that allow you to have this tax exemption, and don't do the things that prevent you from having that exemption, you can gain tax exempt status.

The "Free Exercise Clause" means that you can't do things that prevent churches from exercising their religion (this is a hugely controversial balancing act). The specifics of what you must/must not do for exemption under 501(c)(3) are explained here.

There are no "content" requirements so a so-called "church" could look nothing like a conventional church, it just has to follow the specific rules about what the organization does.

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It may well be the case that registering a phony church is easy and that there are no particular checks. However, this by itself would gain you no tax benefits.

In order to actually reduce your personal taxes, you'd have to do something like funneling some part of your income into the church, and then having the church pay for expenses that you'd otherwise pay for by yourself (your house, your car, etc). It's this last part that will get you busted for tax fraud. Churches and other nonprofits are only allowed to spend their funds in ways that further their religious or charitable mission, with record-keeping and reporting requirements and the possibility of audits. If the church's expenditures consist mainly of buying stuff for the founder, it'll be obvious to the IRS that this isn't a "real" church, and the founder will be taxed and/or prosecuted accordingly.

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