“Church” Wins Lottery and They Won’t Have to Pay Taxes On It

Of all the advantages of having a tax-exemption, I’ll admit this one never came to mind.

… a Michigan church is $70,000 richer courtesy of the Michigan Lottery. The Covenant Life Worship Center and its 25 members in Haslett, Mich. had one of the second-prize tickets in the Lucky 7s raffle held May 4.

… Michigan Lottery officials say the church will receive the full amount of the prize because it is a tax-exempt group.

Pastor Marilyn Parmelee tells the Lansing State Journal that the prize money will go toward the church building fund, setting up a missionary fund and supporting local community service projects.

I’m not a fan of where the money is going, but it’s their money, so whatever.

We can also laugh/gripe about how the church members decided to gamble and how that sounds hypocritical…

But forget all that for a moment.

I would like to know how they get out of paying taxes.

The tax-exempt building didn’t buy the lottery ticket. A bunch of people did. And people are not tax-exempt. So why are the individuals not paying taxes on their divided winnings? Even if the money is going to a church, why is it not all after-tax donations? Why are other winners not using this as an excuse? Did the money to buy the lottery ticket come from tithe income?

The whole idea has given Carl at Reasonable Dissent an idea…:

… I’ve come up with a scam. Here’s how it works: I go to a church official and tell him that I have $1 that I’d like to give to the church, to buy a lottery ticket. The stipulation is that of any winnings, I get 80% and the church gets 20%. Why would I, your committed atheist, want do donate to the church? Because it works out to the favor of both of us…

He explains more at his site.

(via Reasonable Dissent)

Elmer Keith

Yeah big travesty but frankly, if we can’t get our own movement in order we’re in even bigger trouble than religious organizations can cause us. I just read some terrible news on Beliefnet about the Center for Inquiry being torn apart by the throwing out of Paul Kurtz as head of the center. When I was a college student in a former life, many decades ago, Paul taught me the importance of questioning one’s religion and accepting nothing on faith. It’s safe to say that Paul Kurtz showed me the light. Let’s face it, there would have been no major secularist movement in this country if it hadn’t been for Kurtz. The least we could all do is write to the Center and voice our opinion. Without Paul Kurtz, the religious right wins.
Valdyr

He that gambleth his money away be a fool… unlesseth he hit it big on the Powerball. So sayeth the LORD.
Don

that’s weird who rendered that decision
Ben

There’s a problem with the hypothetical gambling atheist, in that if 80% is designated to go to a particular person, and not to the nonprofit organization that is the church, then that portion isn’t tax free. There’s not really any difference here than if I donated a large sum of money that came from my personal income, as far as I can tell. Of course, I don’t think churches should be tax exempt to begin with, but that’s another story.
Ben

In other words, it wouldn’t be in their interests, since they would be guilty of tax evasion. And of course, if you do it “under the table” they could always keep the money for themselves and you would have no recourse.
t3knomanser

The people bought the ticket and donated it to the organization of the church (not the “building” as you mention). The ticket was property of the church, it turned out to have a value of $70,000, but when they donated it, it had a much smaller value- the face value of the ticket.

The Gambling Atheist scenario works, but with one caveat: the Atheist would have to pay taxes on the 80%. Again, if a church hires a contractor to do repairs, the money the church uses to pay the contractor was collected tax free from the congregation, but the transaction with the contractor turns it into taxable income for the contractor. Taxes have to be paid.
Chakolate

This scheme wouldn’t work. If the ticket won, the church would keep all the money, feeling perfectly justified because it’s ‘for God’s work.’

‘Liars for Jesus’ would become ‘thieves for Jesus’. Same principle.
chutz

Just move up here to Canada, where all lottery winnings are totally tax free. The ticket itself is considered a voluntary tax, so taxing winnings would be the government double-dipping.

A bonus if you move to Quebec where the provincial government shuts down religious schools that don’t follow the standard science curriculum, which includes evolution.
Farks

If they (religions) paid taxes they would feel even more “entitlement” to cross the line between church and state.
TruFru

What?!? Some church members are hypocritical? I’m shocked! (In other news, the earth is not flat).

C’mon, are we pissed off because the church won something in the lottery and we didn’t? Anyway, any organization that’s tax exempt according to provision 501 (c) gets the same benefits as this church. A lot of atheist organizations are also 501(c)(3) non-profits (non-prophets, too!).
hoverfrog

The church is considered as a legal entity in it’s own right just as a business is. Why there is a distinction between business organisation and religious organisation is a strange one. I suppose you could argue that a church is a “not for profit” organisation so any income is put back into the organisation for maintenance rather than revenue. Any surplus is going to community projects.

What I think is wrong is that I think that they should have to demonstrate that they spend the money on charity rather than just filling their coffers. The assumption that churches do good should not be allowed but any that do good works should, of course, escape taxes. They are, in working for the community, taking the burden of social expenditure away from government. That should be encouraged. The fact that they are using the money for charity (even if you don’t agree or support the charity) should allow for tax exemption on its own.
Tony

A bonus if you move to Quebec where the provincial government shuts down religious schools that don’t follow the standard science curriculum, which includes evolution.

But then you would have to brave the French…
Shannon

Can anyone explain to me how you get to be a religion in the first place? There was a store front church in the city near me that was in the paper for not paying taxes and was about to be evicted. So what did they not do that they were supposed to? Can any person off the street start a religion and get tax exempt status or are there a lot of hoops to jump through?
vivian

Isn’t the lotto tax money suppose to go towards schools (at least in Ohio)? How christian of them.
Scott M.

The thing that gets me is when a person donates money to a church you expect it to go to things like the lights, heating, feeding the hungry, etc., and here it turns out they’re playing the lottery with the money.
Codswallop

The building is not tax exempt. Buildings don’t pay taxes. The organization that owns the building is tax exempt.

This is how the game is played. It’s not new, and we should not act all surprised. Stop whining, or find a new game.
Pseudonym

I think it’s weird that lottery winnings are taxed in the US. They’re not in most countries.

Having said that, let’s go over this again: Churches should play by the rules of any other non-profit organisation if they want the tax-exemption, and that includes opening the books.
MGT

As for not taxing religions, give it up people it’s settled law and it ain’t gonna change. If you’re not religious you’re going to have to pass on this perk. Get lucid.
Carl

As for not taxing religions, give it up people it’s settled law and it ain’t gonna change. If you’re not religious you’re going to have to pass on this perk. Get lucid.

I disagree with this sentiment entirely. If you don’t think something is right and you want to try to fix it, great. It’s just us trying to push for things we think need to change.
Ed

I agree with Carl. If it’s not right, try to fix it. Churches are using their tax-free money to influence the outcomes of national, state, and local elections and legislation. They should be paying taxes.
Rakeback

I do not think there is need for paying taxes by church because the money will be going for a good cause.
Irv

Actually under the current tax code, if someone “donates” to a church he/she may NOT add a condition (ie: ..that the money go towards a building fund, etc.). The only way that would be possible is if the church had previously set up a separate building fund and had it registered as its own 501(c)(3). If you were to give a check to the church and wrote in the memo section, “for church repairs” technically that cannot be considered a donation and is not tax exempt. So, a person may not approach a church with a condition: that 80% of the winnings come back to him, etc. Such a gift is NOT considered a donation for tax purposes. Now, a church MAY legally purchase a lottery ticket and keep all the winnings for the church IF it was previously VERY CLEARLY known that the ticket was the church’s property (ie: if there was a notice in the church bulletin BEFORE the ticket wins, and the lottery ticket that eventually wins were copied and distributed for the church members, or a church council, to see). If Joe Shmo wins and chooses to donate the winnings to the church, the winnings WOULD FIRST be taxed, then Mr. Scmo would be able to deduct whatever he donated from his taxable income.