…the tax laws in question don’t apply to churches alone; they apply to a whole class of charitable organizations””organizations that share certain qualities that aren’t about sectarianism. The Supreme Court cited the breadth of this category when it upheld the tax exemption for churches in 1970. The Court also cited with approval its understanding that state governments see all such 501(c)(3) organizations as having “a harmonious relationship to the community at large,” as being “beneficial and stabilizing influences in community life.”
Obviously, this is just one perspective on what churches are, and a rather optimistic one at that. But there’s no question that lots of churches do at least this. And this is an official reason the government has given for continuing to allow charities to be tax exempt: because they serve the general welfare of the community.
It follows that a charity shouldn’t exist to back one side in a zero-sum contest within that community. [Matthew] Yglesias seems to think this is pretty much what churches do””they save souls from following that other, wrong religion””so we should just tax them already. I
Churches were considered to be tax exempt prior to the enactment of the income tax, on the grounds of the First Amendment protection of religious freedom. That issue is still there: churches’ tax exempt status was recognized by 501(c)(3), it wasn’t created by the statute. That is why churches don’t have to file a Form 1023 to get exemption like other organizations, they are automatically entitled to it. This is also why there is an underlying constitutional question (which neither the IRS nor the churches so far have been willing to really fight), whether the IRS can actually regulate the political speech of churches under the threat of taking away their tax-exempt status. The fear though, is that after so many years of being under 501(c)(3), the courts will conveniently forget that once upon a time, churches were considered constitutionally exempt from government taxation, apart from the Tax Code.
I think it is quite clear that it has been forgotten. Tax exemption is treated as a privilege which can be given or taken away by the government.