Texas TV Mega-Ministry Qualifies As A Church Under IRS Regulations

If the treatment of a major television ministry is any indication, the Internal Revenue Service has become extremely lax in policing tax-exempt groups claiming to be churches.

A recent report by National Public Radio (NPR) told the puzzling story of Daystar, an evangelistic network based in Bedford, Texas. The network, which is run by Marcus and Joni Lamb, is “dedicated to spreading the Gospel 24 hours a day, seven days a week” to its potential audience of two billion worldwide.

Daystar says it is the fastest-growing Christian TV ministry on the planet, and NPR found that it had assets of $233 million as of June 30, 2011. Despite the fact that its entire operation consists of broadcasting, it is considered a church for tax purposes.

Similar evangelistic operations don’t claim to be churches. TV ministries run by Pat Robertson and Billy Graham’s family are classified as tax-exempt ministries with 501(c)(3) status.

The primary difference is that Daystar, as a church, does not have to file an annual detailed financial statement called a Form 990. The form offers donors basic financial information, such an organization’s budget and salaries of its top officials. Since Daystar doesn’t file a 990, it’s virtually impossible to know how much money Daystar brings in or how that money is spent.

Daystar, which makes money selling air time to other evangelists, has been aided in this lack of transparency by the federal tax code, which makes it very easy to start a house of worship. Almost anyone can declare his or her organization to be a church without much questioning from the IRS.

As NPR explained, the IRS has long had a “14-point test” to determine whether or not an organization is a legitimate church, but it’s rarely used these days for unknown reasons.

The 14-point test lists basic requirements for churches, such as offering regular services, holding religious instruction classes, being led by ordained ministers and having a congregation. During legal proceedings a few years back, Marcus Lamb said Daystar’s “congregation” is its television audience. But Marcus Owens, a prominent Washington, D.C., tax attorney who once headed the IRS’s exempt organizations division, said that argument has been rejected by the IRS in at least one previous case.

“That argument did not fly,” Owens told NPR, “because of the absence of a congregation, a group in the room with the religious leader when the services occurred.”

The consequence of Daystar being a church is that its expenditures are not monitored by the IRS. This raises questions because it appears that some of its spending, though legal, is not in keeping with its charitable mission.

NPR was able to get some financial information about Daystar. It found that the organization gave $433,000 to Oral Roberts University, primarily while the Lambs’ three children were studying there. Daystar also donated $53,683 to Lake Country Christian School, which the Lamb children attended, and gave $296,091 to the church the Lamb family attends.

An additional $32,200 went to the Christian marriage counseling organization that the Lambs claim saved their marriage. Daystar gave $24,026 to Lee University in Cleveland, Tenn., which Marcus Lamb attended, and $21,879 to a nursing home where his father lived until his death. The televangelists gave $60,000 to Israeli lawyers who helped Daystar get a cable television contract and $572,154 for the sponsorship of Christian NASCAR driver Blake Koch.

Americans United said the IRS should do a better job of monitoring some so-called “churches.”

“There is no fundamental difference between Daystar and a handful of other televangelists, except Daystar is a church and the others are not,” said AU Assistant Communications Director Simon Brown in a “Wall of Separation” blog post. “The IRS made a mistake letting Daystar be classified as a church, and it needs to take a hard look at Daystar’s operation immediately. It seems unlikely that this ministry could withstand even basic scru­tiny because it simply is not a church under the IRS’ own definition.”

In other news regarding IRS enforcement of tax-exempt organizations:

• The IRS announced in March that two religious non-profits lost their exemptions because they were not performing a charitable mission. One group was using over 80 percent of its revenue for rent, insurance and utilities on an unusable warehouse. The other group, which was formed to help struggling synagogues, was mainly offering consulting services and Middle East travel tours, the revenue from which benefited the two owners of the organization.