What would happen if synagogues were required to pay property taxes to local municipalities? Or capital gains taxes on income generated from their endowment? Or what if synagogue dues were no longer tax deductible for members?
My personal opinion is that in the short term, synagogue leaders don’t have to worry about these issues. But a couple of articles I read recently might offer pause for concern in the years to come.
Last Thursday, a Washington Post article cited a recent study by a University of Tampa sociology professor that estimated that, throughout the United States, charitable exemptions – including property, donations, business enterprises, capital gains and parsonage allowances – totals more than $71 billion on an annual basis.
Most synagogues own their building, and not having to pay local property taxes is a huge benefit. Imagine what such tax requirements would do to current membership dues levels and fundraising efforts?
A couple of weeks ago, my colleagues Robert Evans and Avram Lapin wrote an article in ejewishphilanthropy.com about the PILOT – Payment in Lieu Of Taxes – program that many major cities have instituted with major hospitals, colleges and universities that own property in their communities. The fact that Bob and Evan make no mention of synagogues is of course a good thing.
For right now, anyway.
Last year, many leaders of synagogue and church movements throughout the United States were concerned about a constitutional challenge in the California Courts to parsonage. The amount of the salaries of clergy that is allocated for all housing costs – rent or a mortgage, utilities, property taxes, maintenance and repairs – is not subject to federal or state income taxes. There was a concern that this case might even end up before the U.S. Supreme Court.
While a ruling on a related case in Wisconsin caused the Freedom from Religion Foundation to withdraw its claim in the California Court, this foundation continues to challenge the parsonage exemption. And with the needs of government at all levels to explore every avenue in order to increase tax revenues, I don’t think that we heard the last about any of these issues: the PILOT program, the Parsonage exemption or even being able to deduct synagogue dues on our income taxes.
So what can you as a synagogue leader do about these issues right now?
In terms of parsonage, one thing you can do is be sure that your synagogue is in compliance with all IRS regulations regarding this. You should of course consult with your own accountant and tax advisors.
I believe that each synagogue board must approve an annual resolution affirming the percentage of each clergy member’s salary that is set aside and treated as parsonage.
Rabbis and cantors should also be sure that their professional associations (Rabbinical Assembly, Central Conference of American Rabbis, Cantors Assembly, and the American Conference of Cantors) are keeping them and you informed. Statewide and more local Jewish and Interfaith Clergy Associations should also be another important source of information.
PILOT efforts continue to target hospitals, colleges and universities. Should attempts be made to include houses of worship in such a program, my guess is that there will be many legal challenges that will certainly take much time. Synagogue leaders should also utilize existing local church-synagogue associations in order for neighboring houses of worship to work together in their advocacy efforts. Rabbi David Saperstein and his staff at the Religious Action Center of Reform Judaism would also be an excellent resource.