How'd This Mess Start? What does the IRS Have to do with LWCC?

This post will try to explain how LWCC’s governance and financial dealings with Mac Hammond came to the attention of the IRS, which put LWCC in a negative light in the eyes of some.

What Taxes Do

As everyone knows, the programs of our government, from the federal to the state, county and city levels, are paid for through our taxes. At the federal level, military operations, including the weapons, vehicles, rations and other supplies of our men and women overseas, are paid for through tax dollars. So are the service academies, air traffic control, homeland security, weather service, Medicare and more. The CDC and health departments do research, testing and/or sharing of information to help identify illnesses like H1N1 and prevent the spread of disease.

State funds pay for state highway construction & repair, bridges, state court system, state park management, highway patrol and more. Regionally, we support our airports and public transportation system. City or county funds pay for hospitals, road maintenance, sidewalks, streetlights, sewer, police and fire protection, and other local needs. Of course there are many other functions of government, all of which cost money.

Tax-Exemption under IRS Code 501(c)(3)

There are some who (very loudly!) object to paying taxes, say taxes are too high, or argue that their tax dollars are not being spent the way they want. I doubt if anyone agrees 100% with the way public funds are spent. But we all use or benefit from government services to a greater or lesser degree.

Most people and businesses are expected to pay income, sales and property taxes to support these various levels of government. But under section 501(c)(3) of the IRS code, religious, charitable, educational, and certain other organizations may be exempt from tax so long as they meet certain requirements. IRS Charities article

Non-profit organizations were exempted from tax in recognition of their benefit to the community. A large church such as LWCC will still use certain public services such as infrastructure (road, sewage, streetlight, etc.), fire and police protection. But unlike its residential and business neighbors, LWCC is exempt from property taxes because of 501(c)(3).

In order to keep its tax-exempt status, a church or other entity must be organized and operated for exempt purposes only (like religion, helping the poor, education, etc.) and none of its earnings may “inure to” (benefit) any individual--more about that in futures posts. In addition, it it may not participate in any campaign activity for or against political candidates. IRS on exemption requirements

More about tax exemption and the "Bachmann episode" in the next post.