Preliminary Thoughts on the Accusation that the Church Violated Tax Law

In response to the news stories about a whistleblower’s complaint to the IRS regarding the Church’s failure to properly pay taxes on investment returns in a fund managed by Ensign Peak Advisers, a good summary from an expert on the US tax law relative to religious organizations is written by Sam Brunson, a respected tax expert, in the post, “Some Thoughts About Ensign Peak Advisers and the Church” at By Common Consent. It’s a good example of clear-headed analysis rather than sensationalized claims. Yes, there could be real problems and a need to change how excess funds are deployed, though it’s not clear at the moment. In any case, I expect greater transparency in finances will result from this.

A key issue is whether the limited knowledge of the accuser is actually comprehensive and accurate regarding the alleged failure of to use funds from Ensign Peak Advisers for charitable purposes. If  the investment returns have not been used for charitable purposes in recent years, as claimed (based on the whistleblower not knowing of such use), it seems like a serious problem. If the accuser is wrong, the allegations of tax fraud may be groundless, but the details may still be quite unsatisfying. I would be surprised if any clear requirements of the law were not met or if serious steps were not taken to meet them (it’s often hard to know just what tax law means — many of you are probably felons without knowing it!). Given the uncertainties in tax law, there’s also the risk that even if good faith efforts were taken, an adverse ruling could be made that would be extremely painful for the Church. I hope not, of course.

Update, Dec. 24, 2019:

Daniel Peterson in his “LDS, Inc.” series at Sic et Non (see especially “LDS, Inc., Part 17“) makes some valid observations, after having over the past few weeks shown us a series of tongue-in-cheek photos of purported General Authority mansions remarkably similar to the Vatican, Versailles, the famous Neuschwanstein Castle in Germany (the prototype Disney castle and alleged model for Elder Dieter F. Uchtdorf’s home) castle and other manors of the super wealthy to remind us, in his own way, of just how the Church’s funds are not being used: to enrich leaders of the Church. The Church teaches its members to save diligently to be prepared for future challenges. For the Church to have a substantial rainy day fund is hardly immoral, but rather wise. If it were being used to enrich leaders, that would be a different story. But to strengthen its future, ongoing ministry and its ability to do charitable work is a sound practice, even if the amount saved is more than I and others expected.

Peterson also points to some who are not shy about criticizing the Church who recognize that the Church does take great pains to manage money properly. 

I greatly appreciated the perspective shared by Aaron Miller at Public Square (hat tip to Daniel Peterson). Miller teaches nonprofit management and ethics in the Romney Institute at BYU. In his article, “The $100 Billion ‘Mormon Church’ story: A Contextual Analysis,” he directly addresses the charges levied by the whistleblower. Here’s an excerpt (please read the whole article):

Are the Church’s reserve funds illegal or somehow evading taxes?

For tax purposes, as an integrated
auxiliary, the investment arm of the Church, Ensign Peak Advisors, is
under no obligation to make minimum distributions. The allegations
appear to stem from the whistleblower’s misunderstanding of tax law. For
unknown reasons, the whistleblower apparently didn’t hire an attorney
or a tax expert to help write this report.

One can only assume this is why so
many of the conclusions in the whistleblower report diverge from the
law. Not only does the whistleblower report misconstrue the definition
of “charitable,” but it also applies something called the commensurate
test (explained below) in a way never before applied by the IRS, and it
fails to give enough evidence to demonstrate that two alleged investment
disbursements were in fact improper.

For starters, the federal tax code
does not have a minimum disbursement requirement for what are called
“public charities,” a category of 501(c)(3) tax-exempt organizations.
Churches are public charities by default.

There is a requirement that all
501(c)(3) entities carry out charitable activities that are
“commensurate in scope with their resources.” This ostensibly means that
a charity cannot merely accumulate assets and remain a charity. The law
does not set a fixed threshold for this though, and the IRS instead
takes it on a case-by-case basis, applying the commensurate test very
rarely. But, even by the whistleblower’s own admission, each year the
Church is in fact spending $6 Billion a year on its tax-exempt

There is an interesting wrinkle in
this case, though, that the whistleblower’s claim relies on. Ensign Peak
Advisors, the legal entity where the LDS Church holds these
investments, is exempt as a separate 501(c)(3) Supporting Organization.
(Notably, the whistleblower also disputes this status, but without
directly addressing how Ensign fails to meet the legal definition. He
instead focuses on the “spirit” of the status.) As a Supporting
Organization, Ensign is an independent nonprofit. The whistleblower
claims that this requires Ensign to pass the commensurate test all on
its own – and not as part of the larger wh
ole of the Church.

But according to the IRS’s own definition,
Ensign is also an “integrated auxiliary” managed by the Church, a legal
treatment that combines their activities in certain ways. This is a
critical detail that the whistleblower report only briefly mentions and
seems to misunderstand.

If the Church directly held
these investments, it would likely pass any legal tests without concern.
Does it make a legal difference if Ensign does the investing for the
Church as an integrated auxiliary? This difference—a relatively narrow
and technical one—has never been questioned by the IRS or a court, according to Sam Brunson, a Latter-day Saint and Loyola law professor who specializes in tax-exempt organizations.

After looking at the facts and
allegations involved, Peter J. Reilly, a non-Latter-day Saint CPA and
tax specialist, observed in
that “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.” Reilly reached out to Paul Streckfus,
another tax expert who runs a trusted publication focusing on
tax-exempt organizations. He too concluded that the “matter does not merit IRS attention.”

Based on Miller’s comments, the charges from the whistleblower may be irresponsible, though I also recognize that tax law can be murky and this matter could be more complex and painful than we would hope, even if Miller is 100% correct. At the moment, however, I think it’s fair to recognize that the sneering attacks of some anti-Mormon activists based on the whistleblower’s claims may be highly unreasonable. 

Update, Dec. 27, 2019:

Much of the carefully-stoked furor  over these stories arises from the alleged shameful greed of a Church that asks for tithing from all of its members, even the poor, when it has adequate reserves to cover its needs for several years without accepting any tithing at all. “How dare you,” etc. 

In case you missed it, the Owner of the biggest stash of precious metals
on earth and the Owner of the greatest real estate portfolio ever seen
(including large tracts of prime real estate all over this planet and
countless others), most of which is, shockingly, completely untaxed and not even disclosed to relevant government agencies, didn’t stop a poor widow from quietly paying her
tithing when her money truly was not needed. He even held her up as an

There’s something strange about the principle of tithing that
isn’t about how much money God gets, but how much faith and commitment
His children develop. God could tell us to all just party and do our own
thing because He’s got the whole cosmos as collateral for anything He
needs, but in fact He wants us to sacrifice, to be frugal, to pay
tithing, and to put Him first — and, as a matter of sound financial
planning, when possible, to save diligently rather than go into debt.
That the Church should also follow such wise counsel should be no shocker. May we all strive to follow that example and save diligently.

Author: Jeff Lindsay

31 thoughts on “Preliminary Thoughts on the Accusation that the Church Violated Tax Law

  1. There's tax law and then there's common decency. They may or may not be found in violation of tax law. The fact that the church itself is responding so quickly and aggressively tells volumes about their own assessment of the latter.

    Meanwhile, EPA is a single investment instrument that the church holds. The whistleblower spoke to what he had direct knowledge of. We still have NO idea what may be piled up in other holding and investment arms of the church. And we probably never will because they provide ZERO disclosure of assets and provide ZERO transparency into their operations.

    1. Anonymous, do you have a retirement savings? How dare you! Don’t you know there are children starving this very minute and you are greedily hoarding money 💰, is that it? Perhaps you are pointing your finger outward in an attempt to assuage your own guilt. Sigh.

      Here’s some financial transparency for you. God owns everything. He even owns you and me. God could instantly end all suffering. But guess what. Jesus healed the blind, but He didn’t heal everyone who was blind. Jesus showed that there was a reason for the blind man being born to suffer. There is a reason why we chose gladly to come to a telestial world and taste the bitter. God is not going to rob us of that growth.

      You don’t have to believe as we do, but a show of respect would be nice.

  2. Sorry, Ryan! I have exactly no respect for a church that hides its activities from its own members and preaches that it has no paid ministry when members have only recently learned that General Authorities are generously compensated. I can't respect a church that collects tax-free tithes and distributes almost none of it to the needy but, instead, to building a shiny mall.

    If that's what you respect, you can stop trying to shame me right now!

    1. Anonymous…Members only recently learned that General Authorities are generously compensated? I have been a member for 27 yrs and I was told as an investigator that although the church has a late ministry that the president and other leaders such as apostles who leave lucrative careers to serve in full-time positions are given a living stipend plus that there are also a few paid adminstrative positions within the church. This has never been a secret. Also, your statement re distributing almost none of it's tithing to the needy is disingenuous. As both a recipient of church welfare from the bishops storehouse when a struggling single mother and on the other end as a Relief Society President assisting my Branch President in distributing funds and food, I know that tithing is spent wisely and judiciously. The Church of Jesus Christ of Latter-day Saints spends billions of dollars every year on humanitarian efforts globally. Millions of lives have been saved and improved temporally as well as spiritually. What more would you ask? The way this has been reported is twisted and inaccurate so as to put the church in as negative a light as possible. I am grateful for the first presidency's quick response and effort at more transparency. Had they been slow to respond I am sure the talking point would have been that they were hiding something nefarious. All in all, this is much to do about nothing.

  3. This is a black swan event for the church. My family and I are formalizing our exit once and for all. This is too far. It's a pack of lies held up by wolves in grandfatherly clothing. I don't need to serve this multi-billion dollar corporation anymore, especially when all I get in return is lies.
    And Sam Brunson is a Mormon. Why on earth would I listen to his opinion on taxes? He's got a clear conflict of interest. Ridiculous that any right thinking person would point to him as an authority on this matter, no matter whatever other credentials he may have. His voice does not count in this matter.

  4. Sorry, Black Swan Anon, it's so hard to tell in terse anonymous comments if someone is serious or not. If you are serious, may I ask you to reconsider, please?

    If the reasoned views of a respected authority on tax law can be immediately dismissed solely because he's a member of the Church, then one might presume that any Mormon voice on any contested area about the Church must likewise be dismissed in your worldview. I hope not, but that's how it sounds. If that's the case, then I wonder how you lasted a single day as member of the Church?

    If someone rejects every LDS voice when contested by a non-LDS critic, then how could one ever accept Joseph Smith's testimony, the testimony of the Book of Mormon witnesses, the teachings of the prophets and bishops and missionaries, or any of the many contested teachings of the Church? Everything is mightily though often unfairly or improperly disputed.

    If by some chance you are not completely serious about being a member now considering leaving over the unverified and rather questionable reports from one man and his strident anti-Mormon brother — sorry, but that sometimes may be the case here with anonymous comments — then I'd still be interested in your response to another question. According to the whistleblower, the Church has been saving about 14% of its income for years, a level that many financial advisors would recommend as a reasonable goal for individuals and organizations that want to have a future in times of trouble. What percentage of savings do you see as the dividing line between being prudent and being evil? Is, say, 12.5% a year the dividing line between light and darkness? Is any amount saved and invested for the future a deal breaker for sincere, honest members? Would you actually prefer something like overspending by, say 5% a year (savings rate of -5%) so that the Church was quickly moving into a financial abyss but, in your view, spiritual bliss?

  5. This certainly is a painful story, as presented, but more cautious views suggest that some obvious homework was not done before the parties involved went public and began stirring what may be serious misunderstanding. I suggest you read Aaron Miller's article at Public Square (cited in the update to my post above) responding to the factual issues that seem to have been handled poorly in the reports from the whistleblower and his allies. Also keep in mind that the funds being saved are not for enriching leaders of the Church, but for sustaining the Church and its work, including its charitable work, in future days of trouble. One can wish for more transparency with the numbers, but there's no evidence that anything corrupt has been going on.

    Is this really a black swan event? If bad publicity from an irresponsible report defines a black swan event, our black swan moments seem to have come every month or so for many years.

  6. I sincerely doubt there's tax fraud involved here. That sort of blatant financial chicanery has not been the Church's style since Kirtland days.

    But there's something far, far more troubling. I was curious to see what this big pile of lucre amounted to per saint, so I took $100,000,000,000 and divided it by 15,000,000, and the answer was….


    Why does God's Own Church have the Investment Portfolio of the Devil?

    — OK

  7. I am still trying to figure out what Jeff finds painful about the story. This is just another example of a "whistleblower" using the whistleblower cover to violate nondisclosure agreements. The blower's 10% bounty for recovering tax funds will most likely total $0. The only interesting part of the story is that the blower had greater light and knowledge of Jesus's accounts then Boyd K Packer.

    I am also trying to figure out why Jeff thinks more transparency should follow. Jeff has always maintain that the first presidency's vault has never been used to suppress, and as we know, according to Jeff, if years later we find out what is in the first presidency's vault, then no suppression occurs. Why the need for greater transparency?

    But let's quickly move on to another topic.

  8. I really don't understand what the big deal is. This fund that the Church has started a couple of years (if memory serves me well) before President Hinckley advised members to set aside excess funds for times of "famine" as did Joseph in Egypt. This conference talk was about a year or so before the internet bubble burst. President Hinckley mentioned that we wasn't trying to foretell anything but only to be wise that in times of plenty one should set aside for when times will not be so plentiful.

    After 20+ years of investing, there is a fund of 32 billion (or 100 billion but 32 seems to be closer to the mark according to multiple accounts). Would we not expect our Church to be frugal just as we are counseled to be frugal?


  9. Exactly Steve! If it is no big deal, why was it hidden, even from Boyd K?

    The $32B number came from $12B in 1998 plus $1B excessive for 20 years. In simple spreadsheet with 8% return (reasonable at 100% invested in total market with dividends re-invested and all funds untouched) the total amount would be $111B.

    A 3% dividend on that amount is now enough to fund 50% of the annual recurring $6B in operating expenses, excessive operating expenses considering most is due to extremely underutilized real estate, real estate that can sit empty 5 days out of 7. So why are missions expenses going up to $500 in July? Let's assume $0.5B of the $6B opex is subsidized flagship education. 60,000 students at BYU Provo, Ricks, Hawaii etc, who pay only $5k/year of a $15k/year education, why not keep missions subsidized?

    One way the 60th percentile Utah household income could save for a rainy day is to pay tithing on their after tax income. At 75k, 7.5% FICA, income, and sales tax easily drops %15 to >64K. 10% of that difference would be $1000 for a rainy day. Heaven knows a family with at least four children paying a mortgage/utilities, car payment, food, and clothes etc has nothing left over from $4800 / month.

  10. Stop shooting the messenger, you blind hypocrites! You're completely missing the point.
    The TRUTH is that the church leadership has been caught in a web of lies that will not be untangled with a simple self righteous press release. They claim there's no paid clergy: FALSE. They've claimed, over the pulpit in conference no less, that it's not a wealthy church: FALSE. Nelson told Africans just this year to forego necessities in order to pay tithing. This is simply unconscionable and completely un-Christlike. It doesn't take a scholar to understand the cynical behavior on display.
    There are a couple of things here that are important to remember: 1. this is only one of the many holding companies the church utilizes. 2. 100,000,000 dollars! Does the enormity of that amount have any bearing on any of you? There's absolutely no reason at all for this church to ever collect a single cent of tithing ever again. It's abominable.
    I hope this is just the first prick in the dam that's about to burst. This festering evil needs to be rooted out, and the only thing that will do it is sunlight. There's no way this is Jesus Christ's church. Search your heart. This is not the way He would lead.

  11. In case you missed it, the Owner of the biggest stash of precious metals on earth and the Owner of the greatest real estate portfolio ever seen (including large tracts of prime real estate all over this planet and countless others) didn't stop a poor widow from quietly paying her tithing when her money truly was not needed. He even held her up as an example. There's something strange about the principle of tithing that isn't about how much money God gets, but how much faith and commitment His children develop. God could tell us to all just party and do our own thing because He's got the whole cosmos as collateral for anything He needs, but in fact He wants us to sacrifice, to be frugal, to pay tithing, and to put Him first — and, as a matter of sound financial planning, when possible, to save diligently rather than go into debt. That the Church is also follow such wise counsel should be no shocker.

    There is no need for the Church to disclose details of its finances, but I won't be surprised if there is more disclosure in the future and, a needed, perhaps a change in how the invested funds are held so there isn't even a remotely possible basis for complaint for a whistleblower. If the investment funds were all just kept under the Church's name instead of using a 3rd party organization, the tax fraud complaint would be immediately recognizable as unfounded. It is still probably unfounded, as some experts note.

  12. That widow was not paying tithing, though. Don't manipulate a story you clearly don't understand to serve your wicked purpose.
    Your second paragraph is utter nonsense. There's clearly a need, as has been proven this year. And the only expert who has come forward is, as stated earlier, a Mormon.


    Yes, Jeff is manipulating the widow's mite story. The story is actual inline with your commentary Anon. For example, when the LDS church discovered devout LDS mothers in impoverished areas were, without exaggeration, taking food away from their children to give it to missionaries, the LDS Church implemented a program to pay better off member households in those areas to feed the missionaries two daily meals.

    But Anon, you also are getting way too excite about this. The US Federal government should probably follow the LDS Church's example. Until the second coming, all that money belongs to the government, the government merely allows the Church to have it, for now. If the government keeps running massive deficits, it may be forced to confiscate more of that money.

    "There is no need for the Church to disclose details of its finances" Notice how Jeff did not say what the need was to not disclose. Most Western countries have decided it is not only ethical to publicly disclose, but now a legal requirement. Oh the morality of those modern liberals.

  14. 42 And there came a certain poor widow, and she threw in two mites, which make a farthing.
    43 And he called unto him his disciples, and saith unto them, Verily I say unto you, That this poor widow hath cast more in, than all they which have cast into the treasury:
    44 For all they did cast in of their abundance; but she of her want did cast in all that she had, even all her living.

    Clearly not tithing. Stop twisting scripture to suit your narrative, Jeff.

  15. I’ve always thought the story of the widow’s mite nicely summarizes the justification for what we now call progressive taxation.

    — OK

  16. Anon 6:57 – I am curious, why do you want a source? It is a primary source as I lived it. The first year of my mission we rotated dinners at member households. The second year we switch to paying a member. True story, when the program started, one area I rotated into hired a devout Jehovah Witness neighbor to be the cook. She was the cook for four of us and the mission offices chose to interview her to get an honest assessment if the money was enough, which of course it was not, so they raised the amount for the whole mission. Do you want a source for that part of the story also?

  17. When and where was this, Anon @4:59?
    Quit being so defensive. Holy cow.
    You do realize that your personal anecdote is not at all indicative of the general behaviour of the leadership of your church, right? Right? Please tell me you understand the difference between your anecdotes and actual data.

  18. Why does everyone have to answer your questions, but you do not have to answer questions of others? You are so prosecutorial. Take a chill pill pal.

    Yes, I never claimed it was indicative. If you were not so busy attacking everyone, you would realize I actually agree with you, the LDS Church is not charitable. I am also not going to be so absurd to say the leadership is the devil either.

    Another anecdote is small temples. When overseas devout members starting asking area authorities which of the children should be sealed to them because they could not afford for the whole family to travel. IF the local members had been true converts they should have been able to build the traditional large temples local, but alas the conversion numbers were fake. Overall the small temples have been a surprise money marker. They are affordable to build and the it increased local tithing revenue, because the local members have to demonstrate they are full tithe payers to attend.

  19. "billions of dollars every year" That is the item in question. Billions? Local welfare usually comes from fast offerings and not tithing. How do Mormons save for a rainy day when the LDS Church keeps telling them to give generously? Instead of depending on the charity of its members, why don't use tithing money for charity.

  20. The LDS church does not have a lay ministry. Its upper echelon is made up of millionaires. This is not what Jesus taught. This is not how Jesus lived. I'm still surprised with how many Mormons have fallen in line with this disgusting set of revelations so quickly. Though I am glad to see so many joining me in leaving. Your empire is doomed.
    Still waiting for Jeff to weigh in on twisting the words of Jesus to fit his callous church's needs.

  21. Anon 9:34 – Right, and it is not just the LDS, but half of Christianity. It is called Prosperity Protestantism or Calvinism and the fruits of it are undeniable. The wealth and capacity of the protestant half of Europe to solve societal problems is undeniably superior to the non-protestant Europe. A tight or strict interpretation of Jesus's teachings leads to poverty and caused the dark ages.

  22. Anon, 10:33 PM, December 27, 2019: "The TRUTH is that the church leadership has been caught in a web of lies that will not be untangled with a simple self righteous press release."

    What "web of lies" is that?

    Anon, 10:33 PM, December 27, 2019: "They claim there's no paid clergy: FALSE."

    You're right. It's false that they claim that.

    What they actually claim is that the local leaders are unpaid. This is true.

    Anon, 10:33 PM, December 27, 2019: "They've claimed, over the pulpit in conference no less, that it's not a wealthy church"

    Source, please?

  23. Anon, 9:34 PM, January 01, 2020: "The LDS church does not have a lay ministry."

    That will come as a surprise to my bishop, who is a "lay minister" by any non-bigoted definition.

    Anon, 9:34 PM, January 01, 2020: "Its upper echelon is made up of millionaires."

    Exclusively of millionaires?

    Given the way house prices are these days, being a millionaire in middle age isn't a very big deal any more. But apart from that, the real story is that the "upper echelon" is made up almost entirely of people who chose other careers, worked in those careers while also giving many hours of unpaid service to the Church over many years of their lives, and who were then asked to give up their careers in order to serve full time in the Church.

    Were you unaware of that fact, or did you prefer not to address it?

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