Nome Notion: Alaska City Proposes End To Church Sales Tax Exemption

The measure, proposed by officials in Nome as a response to a projected budget shortfall, would also apply to all non-profits within city limits. It could raise $300,000 per year for the city.

An Alaskan city may strip local houses of worship of their sales tax exemptions. The measure, proposed by officials in Nome as a response to a projected budget shortfall, would also apply to all non-profits within city limits. It could raise $300,000 per year for the city.

KNOM Radio Mission reports that if passed, the measure could be temporary.

“You get rid of the sales tax exemption, most of the time these other exemptions aren’t given – we’re a very nice city [to do] it,” said council member Matt Culley. “When we sit down at budget time, [with] the numbers to look at, if we want to donate that [money back to nonprofits], the money can go all back in…but we have control over it now, as opposed to it going whatever direction that we have it going now.”

According to KNOM, council members are also considering additional measures to increase revenue; they’re now debating proposals to levy property taxes on aircraft, and collect sales taxes on local retail inventories. They’ve announced there will be public hearings on each proposal. None, however, are as likely to elicit debate as the one affecting churches.

If the measure passes, Nome would likely be the first city in the country to remove any tax exemptions from its churches. So far, the proposal hasn’t encountered much, if any, backlash from residents. That could change once public hearings commence.  

It’s important to remember here that we’re talking about revocation of a sales tax exemption, not imposing a general tax on all houses of worship. Is that legal? Most likely yes – as long as the city plays fair and subjects all 501 (c)(3) non-profit groups to the same rules.

Despite what some Religious Right groups claim, nothing in the U.S. Constitution mandates that houses of worship be tax exempt. The issue simply is not addressed. It is true that tax exemption for religious entities has existed for a long time. Pagan temples in ancient Rome were exempted from taxes, a practice that was extended to churches during the Christianization of the empire during the Fourth and Fifth centuries. The practice has taken root and has not been seriously challenged since then.

In the Nome case, officials are not proposing that houses of worship alone be singled out. In fact, the measure guarantees that they would be subject to the same tax rules governing every other non-profit organization in town.

Will this trend spread? It’s hard to say. A lot of communities are strapped for cash these days, but Nome is really feeling the pinch. It’s a city of just under 4,000 located by the Bering Sea that has fallen on hard times. There’s little industry, and the town is now best known for being the end point of the famous Iditarod Trail Sled Dog Race. Town officials say it makes sense to consider ending sales tax exemptions for nonprofits in a bid to bring their budget into the black.

But there is a possible downside: Remember, the same rules must be applied to all non-profits in town. Thus, any tax that is imposed on a house of worship must also be applied to educational institutions, non-profit day care centers, social service agencies, some elder-care facilities and many other groups. People who support proposals like Nome’s must weigh the financial benefit of lifting these tax exemptions against the potential burden to secular charities.

The Nome City Council will take a final vote on the matter Nov. 24. Whatever they decide, their proposal has provided an educational look at the burden church tax exemptions may pose for communities. The situation bears watching.