Point of View

How NC tax-reform plans could fray safety nets that churches supply

July 5, 2013 

The Senate bill and a proposal from the governor’s office would require some sales-tax payments from the largest nonprofits; for churches, the primary effect would be on large construction projects. But we believe this sets a dangerous precedent that could ultimately lead to all charitable nonprofit organizations paying sales tax to the state.

Proposals for significant changes to our state tax system now making their way through the General Assembly are cause for concern for many people of faith, concerns both for our religious institutions and their missions and for those whom we serve.

The N.C. Council of Churches has worked for all of its 78 years as an advocate for vulnerable people in our midst – people of low income and wealth, working people, those with disabilities, children, racial and ethnic minorities, migrant laborers, immigrants. So an overriding concern for many of us is that proposed tax “reform” would reduce state revenue.

The Senate budget will mean lost revenue of at least $1 billion per year (out of a budget of just over $20 billion). These cuts will lead to reduced funding for public education (pre-K through college), health care (including a pound-foolish move to limit access of pregnant women to health care), environmental protection and other vital services.

We are concerned not only about the loss of funding for important programs helping vulnerable people but also that these reductions in revenue are coming from a flattening and lowering of the personal income tax, the reduction or elimination of the corporate income tax and elimination of the estate tax. While many will cheer at news of tax cuts, cuts in services will not adequately serve our most vulnerable neighbors.

While we understand that not all people of faith will agree with our concern about the effect of lost revenue, most share our concern about the direct effect of two tax provisions on churches, other faith communities and all charitable nonprofits.


One is the proposal to end the tax deduction that a majority of congregants – those who do not itemize on their federal tax returns – can receive for their church and other charitable donations. While most people who contribute to our churches do so for reasons other than a tax break, this provision may be an incentive to some and helps those on a tight budget to make charitable contributions.

The second proposal relates to payment of sales taxes. Currently charitable nonprofits can receive sales-tax refunds. Some proposed tax plans require more charitable nonprofit organizations, including some churches and other faith-based organizations, to pay sales taxes for the first time.

The Senate bill and a proposal from the governor’s office would require some sales-tax payments from the largest nonprofits; for churches, the primary effect would be on large construction projects. But we believe this sets a dangerous precedent that could ultimately lead to all charitable nonprofit organizations paying sales tax to the state.

These tax plans, if enacted, could cost us millions of dollars per year – money that we, and our congregants, don’t have to spare. Churches would have to look carefully at the programs we run – which include food pantries, soup kitchens, health ministries, refugee resettlement, child care, housing, disaster response and other ministries – to try to figure out how best to minimize the effect on our church members and the community at large. Churches, like other charitable nonprofits, would have to consider closing some programs to preserve others. It could also mean leaving those most in need with nowhere to turn.

The sluggish economy and high unemployment rates have put enormous emotional stress and financial strain on many North Carolina families, and faith communities throughout the state are doing their best to respond to these needs with available resources. From my experience with statewide church organizations and other charitable nonprofits, I know that subjecting nonprofits to a new sales tax and eliminating incentives for individuals to make contributions will limit the ability of all of us to serve our local communities.

These are difficult times. We pray that our lawmakers and governor will demonstrate compassion for our fellow North Carolinians who need food, clothing, health care and shelter and for the many charitable nonprofit organizations that provide this support.

The Rev. George Reed of Raleigh is executive director of the N.C. Council of Churches.

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