Nome to Vote on Stripping Churches and Nonprofits of Sales Tax Exemption

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November 19, 2014;Wall of Separation (Americans United for Separation of Church and State)

Today, November 24th, the City Council of Nome, Alaska, population 3,797, will be voting on the possible end to a sales tax exemption for houses of worship. Facing a budget deficit, the Council spent an hour earlier this month debating possible revenue-generating strategies and landed on ending the church sales tax exemption as its preferred strategy.

There is nothing in the constitution or in federal law that mandates a tax exemption for religious groups, but a vote by the Nome city council would make Nome the nation’s first to strip churches of this implicit subsidy. The issue of tax exemption for churches has made tiny Nome a bellwether location for the debate pro and con, and the debate has been vibrant: “Giving churches special tax exemptions violates the separation of church and state. By providing a financial benefit to religious institutions, government is supporting religion,” wrote Michael Stone in Patheos. “A tax break for churches forces all American taxpayers to support religion, even if they oppose some or all religious doctrines.”

However, the Nome action would not just affect houses of worship, but all 501(c) nonprofits in the city, an element of the city’s action that has received little attention and discussion. An Associated Press article says that the Nome decision would affect “the regional nonprofit social service group Kawerak, Inc., and more than 40 other organizations.” Contrary to the notion that there would be “hundreds” of churches and other nonprofits affected, the scope of the small city’s action is actually quite targeted. One site counts 14 churches in Nome; another site counts 12. The Nonprofit Locator counts 35 nonprofits in the city (a list that counts some churches). From this small number of entities, the city’s finance director, Julie Liew, estimates that the end of the sales tax exemption for churches and nonprofits would generate $300,000 in revenues for the city.

It is unclear why the city has to strip nonprofits as well as churches of the sales tax exemption; perhaps the rationale is that including nonprofits in the deal adds to the revenue total. Among the groups that would lose their sales tax exemption would be a pre-school group, a community center, an emergency shelter, and a swim team, as well as Kawerak’s day care, Head Start, employment training, and other program offerings. Despite the press coverage, the Nome decision isn’t just about churches, whose tax-exempt status isn’t necessarily rooted in law, but about nonprofits, whose tax-exempt status is.—Rick Cohen