Archive for February, 2011

Mars Hill Church and the 80/20 Rule

February 26, 2011 5 comments

Mars Hill Church released its Fiscal Year 2010 Annual Report back on February 16 [link]; I’ve cached a copy [PDF] and recommend reading it. Also, I need to get back to it to refine some wild guesses I made about Mars Hill Albuquerque salaries.

This is an annual report, and as such is a mix of numbers and stories. Most annual reports are a mix of real information and public relations, meant to convey a sense of both transparency and enthusiasm. Sometimes it’s hard to tell one from the other. There is no Securities and Exchange Commission monitoring these reports and making minimal guarantees under threat of force the way there would be for a for-profit company. Churches especially aren’t obligated by the government to be accountable for every dollar they touch, etc.

All that being said the Mars Hill Annual Report makes for an interesting read; it makes clear what Mars Hill considers its distinctives (pages 14-15) and what distinguishes them from e.g. Calvary Chapel or Sovereign Grace Ministries or any other paradenominational organization.

One of the nuggets is on page 54-55 under the heading “Mars Hill Church Attendees by Annual Giving Range,” where there’s a pie chart with slices representing people who attend Mars Hill campus churches and and their giving levels: 21% give $0, 43% give $1-500, 15% give $501-1500, 11% give $1501-4000, and 10% give >$4000.  This general pattern is familiar among churches: a small number of people give most of the money, most people give little or nothing, and there’s a third group in the middle that’s hard to describe.

Here’s how the annual report describes giving overall:

The top 21 percent of givers made up 86 percent of all of the 2010 donations. Among those who contributed nothing, some were non-Christians or visitors. As long as Mars Hill continues to grow at the present rate, these ratios will likely remain static as new attendees join while present attendees mature spiritually. The goal is not that 100 percent of attendees would give over $4,000, but that all Christians would learn to give regularly, generously, and sacrificially, each according to their means. Because giving is an act of worship and love for Jesus, we don’t expect non-Christians to give. Therefore, since we want non-Christians to continue coming to Mars Hill Church, there should always be some $0 givers. Christians who give $0 may need to repent, but non-Christians who give $0 should feel welcome as guests.

Yeah there’s a fair amount of Christianese here, but basically they’re saying that their donors more or less follow the 80/20 rule [link], which is fairly typical for churches generally. They don’t touch the question of tithing (the word “tithe” doesn’t appear in the report), so there’s no discussion of giving as a percentage of income. I am guessing this is because they were able to calculate this number (how they estimated donor numbers for cash donations I can’t imagine), whereas they would need a lot of personal data to calculate tithing rates accurately.

I don’t know why the Pareto number describes above tends to settle where it does, nor do I know how one would go about shifting it. Ideally a church would consist of believers who are giving (somewhere) at a sacrificial level; I’m not sure that money should all always go to their local church. It’s not reasonable to expect the Pareto number to be 50 (50% of the people giving 50% of the money) since almost any church has rich people and poor people. Having the donations concentrated in the hands of a relative few (where a power clique sponsors most of the church’s activities) tends to concentrate power in a handful of pews; I’m not sure what happens on the other end of the spectrum. I’ve never seen it.


The Grassley staff report and the pastoral housing allowance

February 25, 2011 Leave a comment

The staff report to Senator Charles Grassley written by Pattara and Barnett [PDF] deals primarily with tax status of four items:

  1. Pastoral housing allowances
  2. Love offerings
  3. For-profit integrated auxiliaries
  4. Politicking

Today I want to deal with the history of pastoral housing allowances; in a later post I’ll deal with some of the problematic uses of the pastoral housing allowance.

Congress first excluded from gross income the rental value of parsonages furnished to ministers of the gospel in the Revenue Act of 1921. (page 11)

The authors go on to say that this was intended to treat pastors who received a housing allowance the same as those who got use of a church property (a parsonage) instead. I might gently suggest that in the current climate if we were facing the same inequity the recommendation might go the other way, and the recommendation would be to tax the pastor for his use of the parsonage. I say this on the basis of current discussion of e.g. tax-free insurance premiums [link]. Also, I would note the use of the language “minister of the gospel” here; in this document and elsewhere it serves as the point of entry for discussing revoking this exemption on the basis of Establishment Clause issues. On which more later.

In 1954, Congress adopted section 107(2) [of the Tax Code], thereby allowing a minister of the gospel to designate a portion of compensation as a housing allowance and exclude that amount from income. (page 11)

The authors cite the language used by Congressman Peter Mack [link] to justify the extension:

Certainly, in these times when we are being threatened by a godless and antireligious world movement, we should correct this discrimination against certain ministers of the gospel who are carrying on such a courageous fight against this foe. Certainly, this is not too much to do for these people who are caring for our spiritual welfare. (page 12)

Mack also claimed that preachers made less money than average workers:

Of our clergymen, 55 percent are receiving less than $2,500 per year. This is some $256 less than the $2,668 annual median income for our labor force. (page 12)

So the justification the Grassley staffers cite in Mack’s comments is basically this: preachers are poor and they’re our allies against godless Communism. Remember, this was 1954, early in the Eisenhower Administration. I would be inclined to cite this as an example of a step in the process of the American conservative Church being co-opted into, well, a certain segment of the American political Right, let’s say. In retrospect it’s hard not to see Congressman Mack’s comments as a quid pro quo.

The original intent, that the tax break would benefits “ministers of the gospel” is problematic nowadays, too, since many religious figures would not self-identify this way. I have a hard time believing that this language would pass Constitutional muster today. See discussion here and elsewhere. The alignment between preachers and “godless Communism” is not a going concern in quite the same way it was during the Eisenhower Administration; in fact it might be argued that the alignment between some preachers and some politicians makes the housing allowance more of a political football than it was then.

That brings us to the issue of whether preachers are poor and in need of a tax break. The staff report deals mostly with cases where preachers clearly are not poor and are not using the tax break for its intended purpose.

They don’t attempt to project Mack’s numbers forward; they do mention how many churches there are in the States:

the Yearbook of American and Canadian Churches reports that there are 331,000 church congregations in the United States (page 59)

But they don’t break this down into the useful number: how many people take the housing allowance exemption? How many of these have annual incomes below the median?

I think this is mostly because the Grassley staffers are mostly interested with six particular ministries, none of which are anywhere near the median income line. Or at least wouldn’t be by any reasonable measure of income, we suspect, if we knew what they actually made.

Regardless, the Grassley staffers cite a paper by Kamron Keele [link, link] that calls for “scrapping the exclusion entirely:”

Parts IV and V conclude that, as the parsonage allowance exclusion is not required for genuine clergy to exclude legitimate rental values of furnished parsonages as part of their compensation under section 119, Congress should scrap the exclusion entirely.

So it is important to keep in mind what’s at stake here: that the behavior of what we hope are a few outliers could be used as justification for revoking the exemption altogether.


The Grassley staff report and the First Amendment

February 24, 2011 Leave a comment

One of the things that really jumped out at me when I was reading the Grassley staff memo [PDF] was the way in which it deals with Constitutional questions, particularly First Amendment [link] questions, before focusing on narrow tax-related questions. The pertinent language is familiar to most Americans:

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

The first clause, before the comma, is referred to as the Establishment Clause; the second as the Free Exercise Clause. “Establishment” traditionally meant there was a state church, but has come to mean something broader today. I think we as conservative Christians tend to focus more on the Free Exercise Clause; our traditional legal adversaries tend to focus more on the Establishment Clause, so we mean different things when we say “separation of Church and State.” We sort of take our interpretation for granted, as if somehow the Free Exercise Clause came down off a mountain with Moses, or as if it were a magic formula that guarantees freedoms we’ve grown accustomed to.

In particular I think we’ve assumed that the tax-exempt status churches enjoy (and the rather liberal reporting requirements mentioned in the Grassley staff report) were guaranteed by the Free Exercise Clause, not least because donations to churches are tax-deductible. Without tax-deductible donations many churches would receive smaller donations, fewer large one-time donations, etc., their churches would fail to function financially, and the freedom to practice their religion would be moot.

Unfortunately Pattara and Barnett, the report authors, don’t see it that way. While they note on a couple of occasions that they lacked a Constitutional scholar, so they felt ill-equipped to judge the Constitutional issues involved, but they deal with the Constitutional issues anyway. Here are some quotes:

Unlike the tax law, the U.S. Constitution does not distinguish churches from other religious organizations. The word “church” does not appear in the Constitution; the First Amendment refers to “religion,” not “church.”
The Constitution does not require the government to exempt churches from federal income taxation or from filing tax and information returns. Although tax exemption for religious institutions has been incorporated into American income tax statutes since the inception of the modern income tax in 1894, such exemption is a privilege, not a constitutional right. (page 17-18)

Also, in the context of whether the government can require religious organizations to file the IRS Form 990, they cite an older case that deals with the Establishment Clause but not the Free Exercise Clause:

The only constitutional problem we would foresee … would be if a statute differentiated between religious denominations in filing requirement in a manner that favored one denomination over another. (page 20)

It is popular in some circles today to ask why churches should be tax-exempt at all [link], and it is troubling for some accustomed to seeing these issues examined from a Free Exercise perspective to see them instead examined from an Establishment perspective, given that it is also popular today to consider any tax break a government subsidy, e.g.

Both tax exemptions and tax-deductibility are a form of subsidy that is administered through the tax system. A tax exemption has much the same effect as a cash grant to the organization of the amount of tax it would have to pay on its income. (page 50)

If we think of tax breaks this way it’s hard to avoid the impression that the Grassley staffers, at least, would be inclined to think in terms of questions like “what does the Government get for its money when it gives a church a tax break?” rather than in terms of Constitutionally guaranteed freedoms and the legal structures required to preserve them.

I think the takeaway for me from this report on this particular question is that when we see a document like this, generally disposed to distinguishing between well-run, well-monitored religious organizations and a few bad actors, but still viewing tax-exempt status this way, we should take it as read that at some point in the future the tax-exempt status we’re accustomed to is at the very least up for reconsideration.

The Grassley Investigation: an overview

February 23, 2011 Leave a comment

I’ve cached a copy of the staff memo to Senator Grassley (R-IA), written by Theresa Pattara and Sean Barnett, locally [PDF] and I would encourage all interested parties to have a look at it. Here’s my quick overview:

The inquiry dealt directly with some narrow questions pertaining to tax law and “media-based ministries,” namely

  1. Benny Hinn Ministries
  2. Joyce Meyer Ministries
  3. Creflo and Taffi Dollar/World Changers Church International
  4. Randy and Paula White/Without Walls International Church
  5. Kenneth Copeland Ministries
  6. Eddie Long/New Birth Missionary Baptist Church

And questions regarding their tax status and the appropriateness of tax-free compensation, including but not limited to

  • Housing allowances; these are under current law explicitly tax-exempt compensation for pastors, and have been subject to interpretations that seem very much at variance with the original intent of the governing law
  • “Love offerings;” this is a term that is used differently by different people, but in the Grassley staff report always refers to an untaxed transfer of money to ministers. It is also apparently treated as a tax loophole under some circumstances.
  • Companies owned by ministries that would be taxable if they were not church-owned

There are also some broader issues, including but not limited to

  • Whether churches should file the IRS Form 990
  • How donors can make well-informed giving decisions
  • Conflict of interest in churches
  • The legal definition of a church for tax purposes

It’s important to keep these distinctions clear; the staff report goes back and forth between broad issues and narrow issues, but it becomes clear that no sweeping changes were seriously being considered, so only the narrow issues are really of interest.

Two of the six ministries responded to Senator Grassley’s inquiries: Benny Hinn Ministries and Joyce Meyer Ministries. The histories of two of the other ministries (Eddie Long and the Whites) have become complicated due to unrelated scandals and business issues. Also, the relationship between Benny Hinn and Paula White merits mention and not much else [link].

The inquiry ended with more a whimper than with a bang. Senator Grassley asked the Evangelical Council for Financial Accountability (ECFA) to form an independent commission to make recommendations to him. He made it clear that he wants the community to correct various practices itself under threat of legislation [link]. The reaction to this request etc. has mostly been greeted with disdain [link, link, link] and only occasionally seen as a shot across the bow, wake-up call, whatever [link]. Of these only the Nonprofit Quarterly article notes the important political reality that Grassley is not currently as powerful a Senator as he was in say 2006 and so may be biding his time.

Meyer joined the ECFA and got a top rating from them [link], making her the big winner in this story (about which more later). It isn’t clear to me at present what Hinn did apart from cooperating with the inquiry.

For the record and up front let me say that I think churches currently benefit from advantages they had at say mid-century that they will not have fifty years from now, among them the housing allowance, that if they were new law today would not pass Constitutional tests they would face in the current political climate. I really do think because there’s so much money in the hands of so many large ministries, and because of the questionable things they’ve done with that money, they will eventually forfeit at least some of the current tax-exempt status churches have today. And finally: I think churches should have to file the IRS Form 990, primarily because of the disclosure it requires about executive compensation, conflict of interest, and politicking.  But more on all those things later.

Phoenix First Assembly of God

February 22, 2011 2 comments

I had to be in Scottsdale this past weekend on family business, with a flight early Sunday afternoon. A 10AM service would have been too late for us, so our options were limited to churches with early (8AM or 9AM) services. We had been wanting to visit a real megachurch for a while, so I picked Phoenix First Assembly (PFA) [link] out of the Hartford Institute list for Arizona [link]. According to self-reported numbers they run 16,000 a week, placing them in the largest 1% of megachurches in the United States. If I had done a little more research (well, clicked a clearly presented banner on the main page of their website) I would have noticed that their senior pastor Tommy Barnett would not be preaching, due to heart valve surgery [link].

We arrived early at the church’s multi-building campus and had a look around, visiting the youth facility (something like a cross between a big lecture hall and a concert venue) and the children’s facility (a big open room in what appeared to be a converted garage with a big sound board in the back and a drama stage in the front), noted their relationships with Crown Financial Ministries, the National Association for Marriage Enhancement [link], and Starbucks and headed into the main sanctuary. The entire campus is very pretty and well-placed back against a hillside with an expansive view of at least part of Phoenix. The sanctuary is round and done up in a sort of a maybe Mission Revival style; the rest of the campus is concrete, metal, and glass.

By the time we got into the sanctuary the music had already started; our greeter handed us flyer and a small white flag. The flyer wasn’t a liturgy or an order of service; it was just a list of announcements and a schedule of other events taking place at PFA, some of which were highlighted. The white flag was about 6″ x 8″, glued to a small dowel rod, and our greeter made it clear that she wouldn’t explain it to us but that all would become clear during the service.

The sanctuary is big, round, and flat; there are balcony sections, but most of the seats are on the floor. The stage is huge and backed by five video screens. There was a live band with guitar, bass, and drums, along with a horn section including a tin whistle, a piano, and several singers placed evenly across the stage. There was one woman who was clearly the lead singer as she got most of the camera time. There was no backing choir, and no choir loft. Lyrics were projected onto the various screens. The music was not your standard praise choruses (nor was it traditional hymns); the lyrics were less repetitive than your standard Hosanna! Music stuff but was pretty much in that ballpark. Off to the far right “live worship artist” William Butler [link] was painting on a canvas.

The service was “produced” like a television show, with multiple cameras (including a crane jib camera), but I’m not sure why; the church video archive is currently empty [link], and PFA does not appear to have a television presence.

After the music there was a “news brief” segment, a fast-paced, tightly-edited video complete with an anchorwoman standing and talking directly into the camera, telling us about the many services offered at PFA, upcoming sermon series. This included a segment on Joyce Meyer, who is holding a conference at PFA February 24-26; there was a drop-in from one of Meyer’s appearances where she said something flattering about Tommy Barnett and his strong faith.

Most of the sanctuary was roped off; I am guessing this was to pack the small early-service crowd into the front rows and make the sanctuary look full on video. The sanctuary was maybe one-quarter full, and with all the video, lights, and sound coming from the stage the effect was almost overwhelming. My traveling companion likened it to a rock concert, saying

I’m a little surprised they let us in here for free.

After the news segment the ushers passed the offering buckets. These were shaped like KFC buckets, or large round movie popcorn containers, but were made of gray plastic. There was another song from the band featuring the tin whistle. After that there was an update on Tommy Barnett’s health from Angel Barnett (see e.g. this video); she told us an amusing story featuring Tommy and his hotel room. This transitioned neatly to the introduction of Tommy’s son Luke who preached the sermon.

The text for the sermon was 2 Chronicles 16:9a [NIV]; just the part about God looking for someone whose heart is totally committed to Him; not the part about being at war. The bulk of the sermon was a recap of the life of Mother Teresa [link] with life lessons for us drawn from her biography. The white flags we had been given figured into the “surrender” aspect of her life story somewhere. To his credit Luke Barnett didn’t try to make the points rhyme, but the word choices were sometimes obscure; he seemed to have a compelling story to tell but lacked the sermoncraft chops to bring it off. Also, his delivery is of the loud, almost strained type popular in many churches today where the pastor attempts to convey the importance of what he’s saying by shouting even though he’s adequately mic’d and amplified.

If there was a Gospel message I missed it; if there was a mention of Jesus I missed it. Because the nominal text was from the Old Testament I would have expected at least a hand-wave at connecting it to us as Christians rather than its original audience (Asa, king of Judah).

Our baby became restless and we had to leave well before the sermon finished; we visited the bookstore and beverage area and noted the various items for sale. They were a mix of homegrown stuff (books, CDs and DVDs by Tommy Barnett) and evangelical names big and small. The book area was surprisingly small given the size of the church; compared to the churches of comparable size I’ve seen I’d call it a token bookstore.

On balance I’d say this was a tightly-marketed, slickly-produced experience; I definitely got the impression that a fair number of development and marketing people are involved in making PFA what it is. Everything has a brand name at PFA, and the campaigns and their brand names appear to change very frequently, I guess so it doesn’t get dull. I got the impression that most of the message originates in an executive creative meeting or some such. There was a mention of small groups “starting up again;” I took this to mean that they are seasonal. I sort of expected a Pentecostal church, but apart from a handful of people raising their hands I didn’t see any evidence that this is an Assemblies of God church [link] rather than a non-denominational church.

Finally, I didn’t see evidence of there being 16,000 people at this church. It’s huge, but it seemed smaller than Thomas Road Baptist Church (~13,000) and Calvary Albuquerque (also ~13,000). Perhaps the PFA reported number includes campus churches; I didn’t see any evidence of these, either, so I can’t be sure.

IRS Form 990-EZ

February 21, 2011 Leave a comment

About three years ago Senator Charles Grassley (R-IA) opened an review of “media-based ministries” and their tax status and asked six prominent ministries for financial details. Last month he concluded his review and released a report. It’s 61 pages long and I’ve read about half of it; it’s some of the most fascinating stuff I’ve ever read.

The top page for the review  is here; the report I’m referring to is here.

One of the results most Baptists would have heard about is this: the Evangelical Council for Financial Accountability (ECFA) is forming a commission to respond to issues Grassley raised. Michael Foust/The Baptist Press covered it [link], interpreting it as potentially having “a major impact on the tax status of churches and pastors nationwide” and included quotes from among others Dan Busby, head of the ECFA. Here is one of the bullets, regarding IRS Form 990:

Whether churches should be required to file the highly detailed IRS Form 990 that other nonprofits must file. The ECFA historically has opposed forcing churches to file the form, arguing it would lead to an “excessive entanglement” between the church and state.

Busby said many small churches — if forced to complete the form — “would probably have to engage professional assistance and pay several thousands of dollars.”

I would encourage dispassionate readers to consider the fact that Busby is the head of an organization that helps ministries (broadly defined) present their financial results in ways other than through the Form 990, and so doing may have a vested interest in continuing the status quo rather than having churches file the Form 990.

Very broadly speaking Form 990 is the counterpart to the 1040 Form that individuals file each year with their income tax returns. The difference being that it is filed by nonprofits, so it is a disclosure form, required to maintain their tax-exempt status. Churches are explicitly exempt, not only from paying taxes, but also from filing Form 990.

Form 990, like the 1040, comes in several flavors, including a four-page “EZ” short form [PDF]. It describes money flowing in and out of a non-profit in a given year, along with net assets, balance sheet, executive compensation, and some status qualifying questions regarding things like political contributions. I would encourage readers to take a look at the EZ form I’ve linked above and make up their own minds regarding whether it is “highly detailed” as Mr Busby claims, and imagine for themselves whether their local small church would need to spend “several thousands of dollars” to fill in the information it requires.

The staff report is a godsend for a blogger like me, and I’m looking forward to digging into it. I’m surprised it hasn’t gotten more attention.

Frank Turk vs. Michael Horton

February 19, 2011 5 comments

I’m not a fan of Frank Turk; I think he’s condescending and occasionally mean-spirited, and I generally find the tone of the Pyromaniacs blog to be self-congratulatory and sarcastic (yeah yeah: pot/kettle/black), and his ongoing “open letters” series to be beyond the pale.

So intellectual honesty requires that I own up to this: I think he’s on to something in his open letter to Michael Horton of the White Horse Inn and other outlets [link]. Turk’s post really could have been edited for brevity and clarity; if I had to do it I might just have pulled this quote:

There is much to be gained from the Law/Gospel, imperative/indicative distinction in Scripture, but not everything is resolved by it. And one of the things which is not resolved by it is what manner of people the Gospel makes us – which is actually part and parcel of the Good News.

This could partly be summarized as “there’s not just Law and Gospel; there’s also sanctification.” Or words to that effect. I’d recommend reading the whole article and the comments at the link above; it’s a mix of “good Frank Turk” and “bad Frank Turk” and is worthwhile even for those of us who read him rarely and as such are tempted to scorn.