Saturday, July 20, 2013

Oregon HB2060 Imposes Restrictions On State Tax Deductions For Certain Non-Profit Charities, But Churches Unlikely To Be Affected

A bill signed into law in Oregon in June 2013 is triggering questions about its applicability to churches. Oregon House Bill 2060, which will eliminate state and local tax subsidies for charities that spend more than 70 percent of donations on management and fundraising over three years, passed in the state house by a 57-0-3 vote on March 15th, 2013 and in the state senate by a 29-0-1 vote on May 22nd. Governor John A. Kitzhaber signed it into law on June 4th.

-- Read the full text of HB2060 HERE.

According to the Oregonian, HB 2060 allows the Attorney General to issue orders disqualifying charitable organization from receiving contributions that are deductible for purpose of Oregon income tax and corporate excise tax if Attorney General finds that charitable organization has failed to expend at least 30 percent of total annual functional expenses on program services when those expenses are averaged over most recent three fiscal years. It also provides that the Attorney General may decline to issue disqualification orders if certain mitigating circumstances exist. It also specifies exempt organizations, imposes mandatory disclosure requirements for charitable organizations subject to disqualification order, and requires the Attorney General to publicly publish a list of charitable organizations that are subject to disqualification orders. Disqualified charities will also lose any property tax exemptions they may have. State officials estimate fewer than 100 charities will be affected by the law in its first year. A search of the Statesman-Journal's database on Oregon charities reveals no entry for LDS Philanthropies.

Charities disqualified do have the right to appeal. This bill has no effect upon Federal tax deductions. Even some non-profits are hailing the legislation; Jim White, executive director of the Nonprofit Association of Oregon, said "We're the first in the country, and we should be proud of that."

The question has arisen whether or not churches will be affected by this law. Considering the nearly unanimous support for the bill in the state legislature, it seems unlikely, since even Oregon lawmakers are unlikely to vote in favor of anything appearing to attack religion. Here are the non-profits exempted from any disqualification orders under this bill, as spelled out in Section 4:

(a) A private foundation as defined in section 509 of the Internal Revenue Code, as in effect on the effective date of this 2013 Act;
(b) A community trust or foundation operating as described in 26 C.F.R. 1.170A-9(f)(10) and (11), as in effect on the effective date of this 2013 Act;
(c) A qualified charitable remainder trust described in section 664 of the Internal Revenue Code, as in effect on the effective date of this 2013 Act;
(d) An organization that does not qualify to receive tax deductible contributions;
(e) An organization that is not required to file annual reports with the Attorney General;
(f) An organization that is not required to file an Internal Revenue Service Form 990 return or an equivalent Internal Revenue Service return;
(g) An organization that receives less than 50 percent of the organization's total annual revenues from contributions or grants identified in accordance with Internal Revenue Service Form 990 or an equivalent form; and
(h) An organization that has been in existence for less than four years.

But since the word "church" doesn't appear in the exemptions, one person contacted an attorney with the Attorney General's office, and documented the results on the anti-Mormon Recovery From Mormonism website:

"Just got off the phone with an attorney at the office of the Oregon Attorney General. We talked first this morning and he researched and confirmed that this law does not apply to churches, he used the term 'mainstream churches'...He said they would accept complaints, but that they were like to not have merit with respect to this law. Complaints are, however, a way to get this conversation started and he did have interest in many of the points being made about how the Mormon church operates financially, politically, and as a charity".

It is obvious from the tone of the post and the entire thread that some ex-Mormons and anti-Mormons would like to use this law to attempt to inflict damage upon the Church of Jesus Christ of Latter-day Saints, so Church headquarters would be prudent to keep an eye on this development.

Nevertheless, the law itself is well-crafted and well-intended, but would be a better law if churches were specifically exempted in the language of the bill.

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