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I was dismayed, at first, when I heard summaries of a recent complaint by a former employee of the Church’s investment company (called a “whistleblower”) alleging the Church has misled members about its finances and dodged tax laws. However, as I try always to do, I read the Salt Lake Tribue article about the complaint as unemotionally, analytically, and objectively as possible – and my overall feelings changed significantly. I still am bothered enough by the claim of the size of the Church’s investment assets that I am continuing to consider paying tithing on what I calculate as my “increase” (defining that as my “extra” income after I have paid my essential bills and living costs), but I am nowhere near dismayed anymore.
I don’t have access to the actual report or numbers I can state confidently are accurate, nor am I a tax lawyer, but I have worked long enough in non-profit organizations at various points in my life to understand more than just a little about that world. The following is a brief summary of why I look at it differently after reading the actual details of the complaint:
1) If the Church truly does have $100 billion in investment portfolio assets, I am bothered it hasn’t given more directly to non-LDS-Church charitable causes. Over $2 billion in actual giving in that arena is great, but it isn’t as impressive if the claim about investment assets is correct. That probably wouldn’t change no matter what else I read.
2) The claim is that the Church receives about $7 billion per year in tithing. The claim is that $6 billion of that is used to run the church and all of its operational costs. The claim is that the remaining $1 billion per year is used to invest and create the investment asset total – which is claimed to be $100 billion currently. I have no idea if that is accurate, but money the Church uses to cover its own expenses are, by definition, charitable contributions – albeit to itself. That is important. If those numbers are accurate, the LDS Church actually spends a MUCH higher percentage of its charitable “income” (86%) on charitable expenses than most charities do – and a MUCH higher percentage than is required by law. I get the concern about how much the Church might have stockpiled in investments, intellectually and emotionally, but the headlines distort the actual complaint badly by claiming the Church has misled its members. I am not aware of any statements whatsoever from the Church that are misleading; rather, it is the fact that the Church doesn’t comment substantively at all that bothers most people. That isn’t “misleading”; it simply is uncooperative and confidential / secretive.
3) The Church has said for a long time that one of its goals is to operate debt-free, with enough reserves to follow the Old Testament rule of being able to survive a financial “famine”. Again, assuming the numbers reported are accurate (which I can’t claim to know), the Church has enough in investment worth currently to cover approximately 16 years of operating costs. 16 years is much longer than the 7 year assumption of the Old Testament model, but that 16-year cushion is if the assets don’t drop at all and the costs remain constant at the current level. Neither of those things is likely to happen in the case of an economic / financial crisis. It is common for portfolios to drop significantly in such times – often dramatically, and the operating expenses are likely to increase as the Church continues to build temples and also meetinghouses in underprivileged countries (just as two examples). If the portfolio took a 33% hit with a financial crash, it would leave $67 billion. If the operating costs increased to $7 billion per year, that would leave the Church with approximately enough money to last for 9 years – which is close enough to the Biblical 7-year standard that I can accept the math and intent.
4) Summary: I have issues with how much investment money the Church appears to have, how much it costs to operate the Church fully, as presently constituted, and how much it gives to non-LDS-Church charities. Those issues are large enough that I am considering paying tithing based on a model that would decrease my contribution significantly. However, when I do the actual math concerning the actual numbers in the complaint, I am left with a, “Meh,” about the complaint itself. I can’t see any law that is being broken, and I can’t see any active misleading of the membership. I just see someone who is upset about exactly how rich the LDS Church appears to be.
POSTSCRIPT: The final issue is minor enough to me that it does NOT factor into my analysis of the claim – but it also is relevant, since it is a contributing factor.1) The person who filed the complaint resigned from the Church after the rest of his family did so and at their urging. It appears the financial issue was not the driving force behind their departure, but I can’t be certain about that.
2) More importantly, the person who filed the complaint has stated they are filing for the whistleblower “reward” – which is a percentage of all tax money not paid properly if the Church is found to have dodged taxes in some way. Given how much is being alleged, that is an
extremeincentive to present the situation in as negative a light as possible. I have NO idea if that actually was a motivation, but it certainly clouds any claim of objectivity. Is there a link you can give us? I for one, didn’t hear about this story. (Here in the wilderness we rarely do.) This is an excellent article by someone who understands tax law. It has a link to the original national article. There are some very good comments in the thread, as well.
Not surprised. The Church is wealthy and led by a lot of wealthy people. Every Bishop I had was successful in business and life. I just feel bad for the poor who scrape by on the widows mite. Tithing is a lot, sending missionaries is expensive. Need I say more. I have mixed thoughts on the whole thing (I was going to say feelings, but they are more thoughts than feelings and this issue does not really strike any strong emotions for me). I think those who have paid even minor attention to what people say about church finances have recognized for a long time that the church is wallowing in money. From that point of view, it does make one wonder why the emphasis on tithing, especially in places like Africa. FWIW, tithing (or lack thereof) was a topic of discussion in a recent stake council with the majority orthodox view being that the church doesn’t need the money but the people need to pay if for no other reason than obedience and worthiness (some of the context of the discussion dealt with priesthood strength in smaller branches, not just here but worldwide and the discussion had been preceded by a returned missionary report). I do recall GBH addressing church finances once where he said the investment money could not sustain the church for very long and tithing was still very necessary – but that was then and it seems that the investment pot has grown significantly larger. It does cost money to build churches and temples (hundreds of millions) but couldn’t we build fewer and smaller temples and even more simple meeting houses? I’m sure there are other costs that could be reduced (the amount of the mission presidents’ expense accounts, for instance). This news item hit the big time on major news outlets, but who cares other than the antis? The rest of it will be all behind closed doors with only lawyers present.
The biggest emotional response in me came from the church’s response:
Quote:We take seriously the responsibility to care for the tithes and donations received from members. The vast majority of these funds are used immediately to meet the needs of the growing church including more meetinghouses, temples, education, humanitarian work and missionary efforts throughout the world. Over many years, a portion is methodically safeguarded through wise financial management and the building of a prudent reserve for the future. This is a sound doctrinal and financial principle taught by the Savior in the Parable of the Talents and lived by the church and its members. All church funds exist for no other reason than to support the church’s divinely appointed mission.
“Claims being currently circulated are based on a narrow perspective and limited information. The church complies with all applicable law governing our donations, investments, taxes and reserves. We continue to welcome the opportunity to work with officials to address questions they may have.
Not a strong emotion, and not at all an unexpected response. Very orthodox, very “pay no attention to that man behind the curtain.” Of course the church obeys all laws because they pay lots of money to lawyers to find the loopholes and make sure they do stay within the bounds – just like all major corporations.
Then there is the motivation aspect. I think it’s easy to dismiss the “whistle blower” as a disgruntled former employee (and you can bet the church will play that angle) and it’s also easy to point at him and say he’s just after the money himself. I think both of those are true.
I’ve almost gone to orthodox forums to see what people there are saying but I can’t bring myself to do that because I think it would become emotional for me then. I did have a brief discussion with a more orthodox friend who really doesn’t get why I thought people who think the church has too much money might decide not to give any more or give to some other humanitarian cause instead. Like Curt I have considered paying on what I consider to be my increase before. With the new year beginning (and changes in tax laws where I don’t itemize any more anyway) I’m considering it again.
The Church recently put out the following news bulletin: https://newsroom.churchofjesuschrist.org/article/first-presidency-statement-church-finances It is very interesting.
I have done a good bit of reading about this subject today. My takeaways are as follows: 1) It’s their money. The church can do what it wants with its reported $100 billion nest egg. (as long as it does so in a moral, honest, and legal fashion)
2) As an incredibly frugal person, I understand the impulse to save for a rainy day. Money creates the ability to act on opportunities. The church investing to revitalize areas near temples is a good example of exercising “options” that the church might not have had if it was low on funds.
3) How much is too much? Good question but it is not my money so I am not sure I get a vote. For me personally a nest egg helps me to feel prepared for an unknown future. How much is enough to hedge against the unknown?
4) From the available information and several expert opinions, it would seem that the church might not have broken any tax rules (and absent any sure evidence of wrongdoing the IRS might not bother to investigate investigate). There just does not appear to be any smoking gun or even smoke at all.
Old Timer wrote:
2) The claim is that the Church receives about $7 billion per year in tithing. The claim is that $6 billion of that is used to run the church and all of its operational costs. The claim is that the remaining $1 billion per year is used to invest and create the investment asset total – which is claimed to be $100 billion currently. I have no idea if that is accurate, but money the Church uses to cover its own expenses are, by definition, charitable contributions – albeit to itself. That is important. If those numbers are accurate, the LDS Church actually spends a MUCH higher percentage of its charitable “income” (86%) on charitable expenses than most charities do – and a MUCH higher percentage than is required by law. [snip]
If I’ve understood the complaint correctly, and I likely haven’t, Ensign Peak Advisors (EPA) operates as a nonprofit organization that is distinct from the church (or any other church formed nonprofits). The EPA may fall under the umbrella of church control but it was created as it’s own nonprofit supporting organization. If that’s the case, I’m guessing that the EPA would have to meet it’s own requirements separately from any requirements the church fulfills to maintain the church’s nonprofit status.
Faulty analogy time: There’s a mountain bike relay race that has 10 legs of the race and a $100 fee for each group that enters the race.
A decades old Group A has 25 members and decides to enter the race. Group A pays the $100 fee but there’s a problem, only 10 members can enter the race and there are 25 members in the group. 10 members from Group A decide to form a new group, Group A2, so they can also participate in the race. The event organizers approach Group A2 for their entrance fee and they reply, “No, we’re actually from Group A and Group A already paid.” It doesn’t work that way. They formed a new group, they want in on the race, as a newly formed group they have to meet the requirements expected of each group despite their “parent” group having already met all the requirements.
To beat a dead horse, if the EPA is defined as a separate organization, the $6 billion per year operating expenses of the church wouldn’t meet any charitable contribution requirements for the EPA.
But I’m assuming a lot. I’m assuming that the EPA exists as a discrete entity, that it would have to meet its own requirements of elibility, that there is a minimum charitable contribution in order to maintain 509(a)(3) status, and that the EPA hasn’t met those obligations. Lots of assumptions.
The BCC article singles out three main issues:
1) Does the church have $100 billion in securities-type investments?
2) Should the church have $100 billion in securities-type investments?
3) Does the $100 billion in investments violate the tax law?
But as far as I can tell none of those three main issues are related to the whistleblower’s accusation. The very high level accusations are:
1) The EPA doesn’t spend enough on religious/nonprofit/charitable causes to maintain tax free status (the claim is that not one penny has gone to such things in 22 years).
2) There have only been two withdrawals from the EPA, (1) bailing out Beneficial Life to the tune of $600 million (2) City Creek overruns to the tune of $1.4 billion. The argument is that neither were charitable contributions.
I think it’s helpful to understand our emotions so we can process them. I’ll make this post about the emotions that get tied up in all of this. First some quotes:
This one is hardly from an authoritative source, but it was shared in the December 2012 Ensign, a magazine where every article undergoes a very arduous vetting process:
Quote:After reading these scriptures together, Bishop Orellana looked at the new convert and said, “
If paying tithing means that you can’t pay for water or electricity, pay tithing. If paying tithing means that you can’t pay your rent, pay tithing. Even if paying tithing means that you don’t have enough money to feed your family, pay tithing.The next Sunday, Amado approached Bishop Orellana again. This time he didn’t ask any questions. He simply handed his bishop an envelope and said, “Bishop, here is our tithing.”
Right away I will point out that technically this counsel is officially “unjustified” by the church (and has been since 1970). The official policy:
Handbook 1 – 14.4.1.1 – Definition of Tithing wrote:The First Presidency has written: “The simplest statement we know of is the statement of the Lord himself, namely, that the members of the Church should pay ‘one-tenth of all their interest annually,’ which is understood to mean income. No one is justified in making any other statement than this” (First Presidency letter, Mar. 19, 1970; see also Doctrine and Covenants 119:4).
I say that the counsel of this particular bishop, echoed in church publications, is unjustified because it effectively rules out the “surplus” method of paying tithing and counsels something other than “one-tenth of all their interest annually.” Another similar quote said more recently from the pulpit during general conference:
Elder Valeri V. Cordón – The Language of the Gospel – April 2017 General Conference wrote:… One day during those difficult times, I heard my parents discussing whether they should pay tithing or buy food for the children.
On Sunday, I followed my father to see what he was going to do. After our Church meetings, I saw him take an envelope and put his tithing in it. …
Again, I’d say that this teaching is unjustified according to policy. If the lord tells me that it’s okay to pay 10% on my income after all essential expenses have been paid, that’s between me an the lord, but here we have two examples of council to pay tithing before essential expenses like food and water are paid, which would seem to invalidate a surplus model agreement with the lord.
Now I get to my point. I’m imagining people that have sacrificed food, shelter, retirement, health, etc. to pay tithing. It’s a great sacrifice and it can be extremely hard to reflect back on deep sacrifices when faced with information about the church sitting on a $100+ billion stockpile. Sacrifices feel more meaningful when they go towards people or causes that we believe
neededour sacrifice; it was hard, but it made a difference. It may start to feel like a waste if we believe the sacrifice went to the opulent, a sacrifice made for someone or something that was already several orders of magnitude better off than the person that may have sacrificed all. The whistleblower makes the following assertions: 1) The operating expenses of the church are currently between $5 and $6 billion per year.
2) The EPA investments generate a 7% return annually, or $7 billion per year.
3) With no other revenue coming in, the EPA could fund the entire operating expense of the church year on year and still run a surplus.
Others have pointed out the following, said by Joseph Fielding Smith during a 1907 general conference address:
Quote:Furthermore, I want to say to you, we may not be able to reach it right away, but we expect to see the day when we will not have to ask you for one dollar of donation for any purpose, except that which you volunteer to give of your own accord, because we will have tithes sufficient in the storehouse of the Lord to pay everything that is needful for the advancement of the kingdom of God. I want to live to see that day, if the Lord will spare my life. It does not make any difference, though, so far as that is concerned, whether I live or not. That is the true policy, the true purpose of the Lord in the management of the affairs of His Church.
If what the whistleblower says is true, are we close to that day? Could (or should) the official policy on tithing change? Should the leaders of the church continue to teach or imply that tithing should be paid before essential living expenses are met? Would it be moral to do so?
There is benefit and lessons to learn from sacrifice but is there more benefit in sacrificing for… say the local homeless shelter or giving until it hurts for Jeff Bezos?
Based on my research on this issue, it seems pretty clear that tax laws were violated in two places. Under their articles of incorporation, Ensign Peak Advisors exists as a 509 a3 and investing arm of the church and a charitable organization. They pay no taxes but as I understand the tax law , they’re supposed to allocate all out go to charitable, educational or humanitarian purposes. The records given to the IRS suggest they haven’t given any money to those purposes. Rather they have taken approximately $1 billion/year in excess tithing (tithing money not needed cover expenses of the church) and over 20 some years got it up to over $100 billion. As I understand it, the money sits in a treasury fund for a while , building up, then is invested in a number of ways. As of now, none of that money has been used for charitable purposes and no taxes have been paid. That’s problem one. How can EPA claim they are a charitable organization when for 20 + years they’ve done no charity? Problem two is that two payments were made from that treasury fund.. not from any of the investing funds, where one might argue consisted of interest or revenue bearing accounts that were a step removed from tithing, but rather the fund holding the excess tithing money. One of these payments was to bail out Beneficial Life, an insurance company owned by the church. The other was to bail out or fund the final parts of the City Creek Mall project. Tithing funds may not have been used to build it, but it seems like they were used to finish building it.
Those two payments were illegal, based on my understanding.
Granted, my bank account will help testify that I’m far from a financial guru, but this story bothered me enough to investigate and this is what I learned. I’m sure there’s more to come.
This one is hard for me. I have read plenty of analysis. As it is a hot button issue, I will reserve making too many comments. I am saddened, embarrassed, and heart broken. Even Joseph Smith’s version of tithing would not have supported this. I believe in rainy day funds. I understand that we are a world wide church but in my wildest scriptural understanding this doesn’t make sense.
I also work with the poor and needy – directly. I have been blessed by the church’s generosity – or perceived generosity. Now seeing it in this light, it hurts.
I am trying to keep space for forgiveness for whomever made the choices. I understand that charitable organizations do a lot with their funds that sometimes seems in-congruent to the idea of “charitable organizations”, but there is much here that just breaks my heart.
Roy wrote:
4) From the available information and several expert opinions, it would seem that the church might not have broken any tax rules (and absent any sure evidence of wrongdoing the IRS might not bother to investigate investigate). There just does not appear to be any smoking gun or even smoke at all.
To elaborate on my understanding, some opinions that I have read indicate that church subsidiaries can qualify as tax free and that churches have a fair degree of autonomy in this area.Quote:I don’t think David Nielsen will be able to retire on the reward from this case. That’s because there is not much of a case. The argument is that a private foundation is supposed to distribute 5% of its assets. Ensign is not a private foundation. It is an integrated auxiliary of a church. And there is nothing in the tax law that prevents churches from accumulating wealth.
Paul Streckfus of the EO Tax Journal agrees that this matter does not merit IRS attention.
“The IRS does not attempt to question the beliefs or purposes of churches unless extreme (law violations, for example). In the case of the Mormon Church, if they honestly believe they should be saving for the `second coming of Christ,’ why should the IRS question that? Just because there is $100 billion involved? If so, how much is too much? While church leaders have not been forthcoming about this pot of gold, church members can always withdraw their support if they object to this extreme saving or seek to remove the leadership.”
On the expenditures that the whistleblower objected to, Mr. Streckfus wrote me:
“As far as bailing out the insurance company and the shopping mall, who is to say this was not a justified use of funds to try to save failing investments? In order for section 4958 on excess benefit transactions to come into play, I think the IRS would have to show some individuals benefiting personally from the bail out. Poor business judgment would not be sufficient.”
For most people I imagine it’s less about the legality of amassing a hoard and more about the morality of amassing a hoard. Consider the lilies of the field, how they grow… their portfolio?
Maybe Jacob Marley and some ghosts will visit someone this Christmas Eve.
I agree that morality is the key issue in most people’s minds who are troubled by this – and most people who accept it see it as moral. Thus, it is not a simple issue.
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