LDS FAQ: The Church and Its Money
It has become quite popular among critics, both in and out of the Church, to criticize the financial aspects of The Church of Jesus Christ of Latter-day Saints (improperly called the "Mormon Church"). There are also legitimate questions that people can ask in light of various stories on the Church. Here I offer my views. This is part of the LDSFAQ (Mormon Answers) suite by Jeff Lindsay. My writings reflect my personal understanding and are not officially approved by the Church. Just about the only entity that pays any official attention to this work is my own Planet Lindsay, LLC, which holds all copyrights and reserves all privileges.
A lot of critics have been charging that The Church of Jesus Christ of Latter-day Saints is just a big business, a financial empire, and a man-made organization focused on money and wealth. Is there any truth to the claims? Don't bank on it--that's my 2 cents, anyway.
Yes, the Church gets a lot of tithing money donated by its members who live the ancient law of tithing. Yes, the Church owns a number of businesses, lands, and other financial entities that generate income. But the real issue is why? Why does the Church have investments? Why does it need and use income of any kind? Why does it even need money?
To understand the Church, you must understand the motives that drive it and its people to do what they do. The motives at the core of the Church, which affect what it does at the local, regional, national, and global level, from top to bottom, are not about personal gain. They are not about glory and power, comfort and ease, or living exorbitant lifestyles.
The focus and primary goals that motivate actions and decisions are not desires for individual gain, but the desire to bless the world. The goal of the Church, from its leaders to its local units, is about doing good and bringing the blessings of the Gospel to the world. You may disagree with the our definition of good, which includes spreading values, principles, and practices that we believe make people happier, healthier, with stronger, more successful families. But from our perspective, better individual lives and stronger families are the goal, and it is achieved through the work and success of the Church on a global scale. This requires churches, printed materials, temples, organizational structures, charitable resources, websites, broadcasts, and a host of resources that involve use of financial resources. Leaders aren't getting huge bonuses and vast wealth for their service in the Church, though there are adequate living stipends for the top full-time leaders of the Church. But getting a better car or bigger apartment is not the goal.
The beneficiaries of the Church's success, ultimately, are the members of the Church and the peoples of the earth that we seek to bless. Most don't want what we have to offer, but that doesn't stop us from wanting to share. Indeed, we have an obligation to take the Gospel to every nation and tongue, and to do many other things to advance the cause of what we call Zion. Part of the work of Zion involves humanitarian service and direct charity. Part of it involves promoting strong education through Church-operated universities, LDS institutes, and other church education tools. Part of it involves publishing the scriptures of the Church in numerous languages. Part of it involves building temples and churches around the world. All these things involve the need to be wise with our financial resources, to prepare for the future, and to avoid debt when possible.
Frankly. in a world increasingly rocked and threatened by the profligate spending of nations and politicians and by the inability of individuals to control their own finances, the world might do well to look at the wise financial management of The Church of Jesus Christ of Latter-day Saints with appreciation and a design to learn and emulate, not despise and condemn. The financial success of the Church is rooted in old-fashioned, biblical principles that have been abandoned by this age. We have a few things we'd like to teach the world, and provident living is one of them. That's not just a cute statement: it's a serious mission of the Church. We even have a website dedicated to helping the world, both members and non-members, live more providently and enjoy the blessings that can come with frugality, budgeting, and careful preparation for the future. Learn how you and your family can become more self-reliant and better prepared by visiting ProvidentLiving.org.
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In 2019, a whistleblower complained to the IRS about the Church's alleged 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.
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.
Shortly after this story brike, a carefully researched perspective was shared by Aaron Miller at Public Square. 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):
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.
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 activities.
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 whole 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 Forbes 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."
Also consider the perspective of Daniel Peterson in his "LDS, Inc." series at Sic et Non (see especially "LDS, Inc., Part 17"). Peterson 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) 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.
Hordes of critics are wringing their hands, often gleefully, about the uncharitable "hoarding" of the Church, based on "shocking" claims that the Church has been saving some of the money that members donate to it.
"Hoarding" is one of those emotion-laden terms often used to win an argument without the need for logic and evidence. That word is sometimes used to advantage when politicians, mobs, or other criminals want to take something that somebody has diligently saved. If you save a portion of your income that someone else wants, be ready to be accused of hoarding cash. If you've saved food and other supplies for a time of need, be ready to be denounded as a "hoarder" when someone else wants it.
"Hoarding" was the key term used for a remarkable episode of looting in the 1930s when President Franklin D. Roosevelt discovered that the President somehow had power, much to the shock of the Founding Fathers on the other side of the veil, I suppose, to take away the gold that citizens had earned and saved. He declared that those vile citizens were "hoarding" gold and thus would be required to sell it to the government at the low price of $20.67 an ounce, after which the official price was $35. See Wikipedia's article on Executive Order 6102. They were not only deprived of the right to hold and pass on to prosperity their own legally acquired property, but were forced to sell it in effect at nearly a 50% discount to its value. "Hoarding" gold became a crime with a 5-10 year prison sentence. It was a dark day for property rights, especially in a land where the Constitution, still routinely ignored these days, specifically declares gold and silver to be legal currency (Article 1, Section 10). For further background on hoarding and the Great Depression, see "The Virtue of Hoarding" by George Ford Smith, 2009. (To be fair to both parties, note that FDR's predecessor, Herbert Hoover, had also denounced savers holding their money at home in 1932 as "hoarders," even "traitorous" hoarders, who were hurting the economy by not putting their money into dangerously fragile US banks.)
Shameful as hoarding may be, I hope our anti-hoarding critics will have the wisdom to do a little hoarding in their own lives. May they hoard a little cash, some food, some clothing, some drinking water, some flashlights and batteries, and some sustainable ink-jet paper to be prepared for trouble ahead, whether it's a blizzard, a power outage, economic collapse, or violent retribution from nations who don't think that one lone Very Powerful Man in the US has the legal right to arbitrarily kill their political or military leaders (and anyone standing nearby) at will anywhere in the world without any kind of trial if those leaders have done or are said to have done very bad things. (e.g., terrorism, killing people with drones or other means, bombing or invading foreign countries, and perhaps even hoarding for all we know). There are many reasons individuals should recognize that there might be trouble in the future. Smart folks prepare now -- or "hoard," if you insist.
In 2019 a whistleblower claimed that the Church has been saving about 1 dollar of every 7 received, and investing it rather than spending it, resulting in billions of dollars accumulated without spending them right away. With successful investments over many years, the savings have apparently accumulated into a sizable stash that can support the Church's charitable work in the future even if grave economic trouble again strikes us and the Church. But since that stash is not being spent rapidly now to keep the Church as close to insolvency as possible, many on social media complain that we are "hoarding" and should be ashamed (frankly, our most vocal critics would certainly prefer that we spent $10 for every $7 received, ensuring eventual economic disaster). Think of all the good that money could do if it were handed over to, say, random people on the street or to our critics and the whistleblower (who hopes to get 10% of some huge amount).
Giving out lots of money in ways that don't line the pockets of drug dealers, warlords, corrupt politicians, gangsters, scams, and the like is not as simple as it sounds. Major charities can easily spend 30% of their income on finding appropriate places to spend and in managing the spending. It's hard work and requires lots of professionals. I can only imagine the outrage if the Church started adding hundreds of millions in overhead to do find ways to more rapidly spend down its surplus.
For an organization that had all of its assets seized a little over a century ago, was having severe financial challenges in the late 1950s, has had its assets seized in recent years for a while in Ghana (thanks to agitations from some thoughtful anti-Mormons), faces constant threats of costly lawsuits, and faces greatly increased costs as it expands in poor nations that will require significant investments, one of the most prudent things the Church can do in this time of relative prosperity is to prepare for the future by setting aside a small amount of its income to sustain its ongoing charitable mission. Spending it all now and then being one lawsuit or one recession away from disaster would be foolhardy.
The Church should be held up as an example of frugality, of prudent investment, and financial responsibility. A critical issue is that the money saved and the funds donated are not being used to enrich its leaders or buy them mansions to live in. Those funds are used frugally, yet at the same time, the Church is able to be generous in aiding the poor and in helping the needy in many lands. The criticism from those who think they know better is misguided.
As for the shaming of those who encourage the poor to give voluntarily to a charity that doesn't really need their money, how would you have reacted when Christ, the true Owner of the treasures of the earth and beyond, looked on passively, even approvingly, and utterly failed to prevent a poor widow from casting in her last bit of cash into the donations box (or "hoarding" box) at the Temple in Jerusalem? What would you have shouted in response when He dared to hold her up as an example of faithfulness? The Creator of the Cosmos did not need her money. The hoarders at the Jewish Temple and its charitable branches did not need her money. How dare Christ allow her to make such a huge sacrifice and encourage others in poverty to do the same?! But many Latter-day Saints know the answer. The prime purpose of the principle of sacrifice and tithe paying is not about giving God or the Church more money to "hoard," but about changing our lives and priorities to more fully follow the Savior. It's not about taking money from us, but giving us a chance to better follow Him and, indeed, to gladly take even more from Him.
In their criticism of the Church's teachings on tithing and the experiences shared by so many members, some critics mock the idea that a community, family, or individual might be better off in some way by giving charitably to the Church, in spite of the frequent experience of those who tithe faithfully that they don't miss the money and feel blessed and helped, even if it is only by learning how to be frugal and spend less. While they mock the idea that voluntary sacrifice might bring benefits, I note that many of our critics tend to wholeheartedly endorse compulsory sacrifice, i.e., raising taxes on others, as the way to economic prosperity. If voluntary giving does not help, why is compulsory sacrifice so magically beneficial? Greatly increased compulsory extraction of wealth from those capable of creating it and putting into the hands of politicians so they can redistribute it their way is touted as the miraculous but ever-failing panacea to poverty and social ills. Yet it's nonsense to think that there could be any benefit to voluntarily giving to a charitable organization that helps people strengthen their lives, families, and communities? As always, I guess I'm missing something.
Daniel Peterson has given us some wise guidance on these issues in his series, "LDS, Inc." See, for example, his recent "LDS, Inc., Part 21." For a solid overview of the non-scandal with some wise legal and financial observations, see Aaron Miller's "The $100 Billion 'Mormon Church' story: A Contextual Analysis."
No, it's a large religious organization with significant material needs: there are buildings to be built and maintained for worship, books and manuals to be printed and distributed worldwide, missions to operate, broadcasts to deliver, and so forth. (It even occasionally needs lawyers in this litigious era.) All of these require the use of tangible assets. They require money and properties. To ensure that the Church can continue operating even when there are downturns in the economy, it is important to convert a portion of Church income into investments that can be used in the future. To not save and not seek return on savings through investment would be utter foolishness and a violation of basic principles of financial responsibility. (For further perspectives, see the following question.)
The Church is a charitable and a religious organization. It exists to bless the lives of the world and to bring people to Christ. But this can't be done for free, without tangible assets and genuine expenses.
"After all, it's a religious organization, so why does it own stocks, bonds, and investment properties? Why does it own anything at all?" These are fair and rather popular questions, but reflect a misunderstanding of organizations in the modern world. A modern organization cannot grow and survive in this world without funds, and to have stability, one must protect against the vagaries of economic winds. The standard practice for organizations, non-profits and otherwise, is to have financial resources that can be tapped when needed.
Here's comment made on Mormanity by an anonymous LDS poster that explains:
Those who complain about the church owning profit-making investments don't know what they're talking about.
Every large non-profit has to have reserves or some kind of endowment, from which it can generate income, or in extreme necessity, sell off to generate cash. If it were not so, then the church would have to expand/contract its programs on a regular basis depending on fluctuations in donations.
The church would never want to be in a position where it had to close chapels, or stop building chapels for new wards just because tithing was down due to the economy.
The church, like all churches and other non-profits, has core essential programs that it wants to continue, in spite of fluctuations in donations that come as a result of fluctuations in the economy.
You can maintain programs (missionary, temple building/maintenance, church welfare, genealogy, chapel building/maintenance, BYU, seminary, institute) by having a solid stable reserve that produces income. Some organizations, such as schools, may call it an "endowment."
You can put that reserve in many things, but in essence all of them are investments. They could be in money-market funds, bank savings accounts, stocks, bonds, commercial property, buildings, home mortgages, or even owning businesses outright.
There is no moral difference between owning stocks and in owning a business outright, since that is owning 100% of the stock. The critics would not be so vocal (or maybe they would) if the church put it's entire reserves in the stock market.
The principle of having _reserves_ (especially in income-producing assets) is an *essential* financial behavior of large non-profit organizations that depend on voluntary donations by individuals, be they religious or otherwise.
It is standard and customary practice that is in accordance with the best financial management. It would be foolish and against "best practices" for the LDS church to do otherwise.
The Church has issued a statement on its financial independence. I encourage you to read it to understand the nature of the Church and the need for wise financial management.
It's a commandment from the Lord, taught in both the Old and New Testaments and in modern scripture. It's a means for the financial management of the Church but also for the blessing of the lives of those who live this principle. It's completely voluntary and confidential. People can attend Church and participate in many ways without paying tithing, and tithing status is confidential. (But to get a recommend to attend the temple, one must be a tithe-payer, and some callings in the Church may require that people be able to attend the temple.) Those who pay, though, generally experience that it's not really a sacrifice and brings significant blessings as we learn to discipline our finances and use them generously for the good of others. Give it a try!
Being a member of the Church can be a negative when it comes to vying for popular appeal, as we've seen in the Mitt Romney political campaign, yet it is true that there are a surprising number of Church members in the ranks of business and political leaders. Why is that? I'm not completely sure. Political and business success really has very little to do with religious belief. Success in these fields is generally more driven by more superficial factors such as looks. OK, yes, I'll admit, members of the Church tend to be fairly good looking, but that's not necessarily a problem with the religion. :)
It may be a cultural thing. Members from an early age learn to give talks in Church and thus may become fairly good public speakers. Serving on missions can help them be less shy and more willing to reach out to people. These skills can help them have the confidence and desire to serve that can fuel desires to lead in government or business. That's just my theory for now. If you have a better theory, let me know, but it's not because of some grand conspiracy.
To prevent urban blight in downtown Salt Lake and to create a more vibrant economy in the region where the Church has its headquarters, the Church has given back to the community by assisting in the development of a vibrant and beautiful economic district called the City Creek Mall. Critics have seized upon this good faith effort as a rallying point against the alleged economic greed of the Church, but they are rather unfair and unwise in the criticism, in my opinion. There are fair questions to ask and issues that are complex and challenging, so there are plenty of opportunities for complaints and attacks if that's what you want to do. But for those seeking to understand, I suggest reading what really is behind this cooperative effort. See City Creek Mall (FAIRBlog) and Mormon Finances and the City Creek Center (FAIRMormon.org), and see my own Checking Out City Creek Mall: What Was All That Fuss About?
Fair question. You cannot understand the Church and its actions if you don't appreciate that throughout the Church, the focus and primary goals that motivate actions and decisions are not desires for individual gain, but the desire to bless the world. The goal of the Church, from its leaders to its local units, is not about individual gain, but global good. Happier, better individual lives and stronger families are key goals achieved through the work and success of the Church on a global scale. This requires churches, printed materials, temples, organizational structures, charitable resources, websites, and a host of resources that involve interactions with the tangible world, including financial resources. Leaders aren't getting huge bonuses and vast wealth for their service in the Church, though there are adequate living stipends for the top full-time leaders of the Church. But getting a better car or bigger apartment is not the goal.
The beneficiaries of Mormon success, ultimately, are the members of the Church and the peoples of the earth that we seek to bless. Most don't want what we have to offer, but that doesn't stop us from wanting to share. Who benefits? I hope you do, or soon will.
To answer this question more fully for you, I'll need just a couple of quick answers from you--should only take a minute. First, I'll need your bank account information (bank account number, current balance, plus your name and social security number). What is your current salary? How much state and federal tax did you pay last year? If could email me a copy of your tax return statements for the past 5 years, that would be really helpful. How many credit cards do you own and what is the balance on each of them and the largest expense in the last years for each of them? Also, how much did you spend last year in these categories: alcohol, tobacco, firearms, video games, morally questionable entertainment, entertainment of all kinds, and personal hygiene supplies? By sharing and verifying these simple financial facts with me, I'll be able to better answer your question in a more helpful way. There is nothing to worry about--I will not use that information for any improper purpose other than posting in on the Internet for others to validate.
Surprisingly, some people are unwilling to share those financial details. They want their financial details shrouded in secrecy. In fact, it turns out that most individuals and private organizations seem rather guarded with their financial details. The excuses they offer for wanting secrecy vary, but include things such as
Fortunately, the Church is more enlightened than that. "Go away" is not the response, but "come and learn"--but not from our confidential financial records. We have much more interesting and appropriate records for you to study. Why not begin with your own free copy of the Book of Mormon?