State Tax Statutes and Religious Exemptions

This chapter examines the states’ statutory approaches to taxing and exempting churches. Here too an important theme is diversity. The various states and their taxes treat religious institutions diversely. Sometimes, churches and religious institutions are taxed like secular entities. In other contexts, sectarian entities and persons are tax-exempted along with secular eleemosynary institutions and actors. Yet other state tax provisions narrowly exempt religious organizations. Within the states’ broad statutory consensus exempting religious and other eleemosynary properties from taxation, there are notable differences. The states’ state sales tax statutes are highly diverse in their approaches to religious institutions. In contrast, the states’ income tax statutes all mirror the Internal Revenue Code’s income tax exemption of eleemosynary entities including religious entities. Real estate transfer taxes typically apply to sales and purchases by churches and other religious institutions. State unemployment taxes generally exempt churches while taxing nonchurch religious entities.