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Churches are tax-exempt, and Indianapolis has a lot of them

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Indianapolis has a lot of churches. They don’t pay property taxes, don’t pay income taxes — but they do find ways to meet the spiritual and many times material needs of the communities they serve.

A 2015 analysis by PropertyShark found Indianapolis has more churches and other religious sites than any other city in the country, with one for every 289 people. There are nearly 2,900 churches and religious sites in total, according to the study.

The First Amendment to the U.S. Constitution says Congress is not allowed to establish a religion or prohibit people from practicing their own religion — separation of church and state, in other words.

It’s the foundational reason for why churches don’t pay property and income taxes. Government and religion shouldn’t become tangled, the Constitution’s writers declared, and taxes are one of the sure ways to remember government is there.

Strictly considering dollars and cents, tax-exempt churches lead to a considerable amount of lost tax revenue for communities, which could be especially impactful in lower-income neighborhoods.

Using property tax data and value assessments from the Marion County Assessor’s Office, the Recorder sampled 20 churches — mostly in Center Township — to get a sense of how much money that might be.

The results: Those 20 churches would have owed an estimated $576,538 for tax year 2018. That comes to an average of almost $29,000. Property tax rates vary within Marion County and change over the years, but the numbers become staggering when considering what that means for churches that have been around for decades.

Jeffrey Johnson Sr., senior pastor at Eastern Star Church, can’t say if the trade-off is fair, “but I do know we’re doing an awful lot of good work in a community that this city and the state is benefiting from,” he said.

Eastern Star has invested more than $10 million in the Arlington Woods neighborhood for housing, education, food security and other support over the last three years, Johnson said, which dwarfs the amount of money the church would have paid in taxes over that time.

Eastern Star has the ROCK Initiative, which began four years ago and includes a credit union, grocery store, financial education and legal clinic. The initiative is based at the Sunset at Arlington Woods building, which also has apartments.

The church also renovates houses and builds new houses to sell at more affordable prices. There are currently six renovations and seven new builds, Johnson said.

“We don’t believe God put us here by accident,” he said.

Churches aren’t alone in being exempted from some taxes, of course, because it applies to other nonprofits. Churches are exempt from filing financial information with the Internal Revenue Service, though, including a form that tracks spending. Other 501(c)(3) organizations and charities have to provide that information.

Even the Freedom From Religion Foundation, which says its purpose is to promote the separation of church and state, doesn’t have much to say about churches being tax-exempt because it’s a well-established tenant of church-state separation.

It spends much more time bringing attention to the fact that churches don’t have to file financial information with the IRS. The group recently announced it will continue challenging the rule in court.  

The Black church is one of the bedrock institutions for Black Americans. It’s a place to organize, a place to get help paying rent, a place to find food. And that’s all on top of providing spiritual and emotional support.

“When we find our communities are in need of basic living assistance, the church steps in,” said Janae Pitts-Murdock, interim pastor at Light of the World Christian Church.

Light of the World doesn’t have the same financial resources as Eastern Star — few churches do — but Pitts-Murdock said churches have a way of getting creative with what they have in order to serve their communities. Especially when considering low-income communities, residents may be more willing to turn to the church rather than a local government or agencies they feel have left them behind.

“They trust that the church is not gonna use their need against them,” Pitts-Murdock said. “Sometimes, in strictly social service agencies, people are just another number and they’re just another face.”

Contact staff writer Tyler Fenwick at 317-762-7853. Follow him on Twitter @Ty_Fenwick.

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