The Washington Post recently had an article entitled “Mormon Church has misled members on $100 billion tax-exempt investment fund, whistleblower alleges

The Washington Post article notes:

A former investment manager alleges in a whistleblower complaint to the Internal Revenue Service that the Church of Jesus Christ of Latter-day Saints has amassed about $100 billion in accounts intended for charitable purposes, according to a copy of the complaint obtained by The Washington Post.

The confidential document, received by the IRS on Nov. 21, accuses church leaders of misleading members — and possibly breaching federal tax rules — by stockpiling their surplus donations instead of using them for charitable works. It also accuses church leaders of using the tax-exempt donations to prop up a pair of businesses.

The church did not respond to detailed questions from The Post about the complaint and said in a statement Monday that it does not discuss specific financial transactions. On Tuesday, after the first version of this story was published, the church said it takes seriously its responsiblity to care for members’ donations.

….

Philip Hackney, a former IRS official who teaches tax law at the University of Pittsburgh, said the complaint raised a “legitimate concern” about whether the church’s investment arm deserved its tax-exempt status.

“If you have a charity that simply amasses a war chest year after year and does not spend any money for charity purposes, that does not meet the requirements of tax law,” Hackney said in an interview. Hackney, who served in the IRS chief counsel’s office, has been retained by The Post to analyze the whistleblower documents.

Details of the church’s expenditures on charitable work are not publicly available, but in a lecture at the University of Oxford in 2016, a senior elder said the church had spent about $40 million a year over the past 30 years on welfare, humanitarian aid and other international projects. He did not mention Ensign. The church said in a report last year that its charitable arm had spent $2.2 billion in assistance since 1985, but did not provide a breakdown on spending.

 

In Newsweek, one of the whistleblowers wrote about his motivations for disclosing the fund.  Mormons, Here’s Why I published the revelation about the LDS Church’s $100 billion stockpile. 

A few points to think about:

  1. This fund of over $100 billion would be the largest charitable fund in the world with the Bill & Melinda Gates Foundation being only $46.8 Billion and Harvard University Endowments at $40.9 Billion.  It says something about the sad state of transparency that people did not know about this $100 Billion charity.
  2. This raises important issues around transparency.  In Canada, all charities need to file their T3010, whether religious or not but my understanding is that in the US religious charities do not need to file the Form 990 – they can do so voluntarily because they believe in the value of transparency and some do.
  3. Apparently the Mormon church takes in about $7 billion per year and spends about $6 billion per year.  The extra $1 billion is apparently contributed to the $100 Billion fund.
  4. It is important if you have reserves and you are also fundraising that you disclose that information to donors so that they can make an informed decision. In Canada, the CRA in its Fundraising Guidance specifically states the importance of having a reserve policy if you have a reserve and are also fundraising.  Having a reserve policy that explains why one has a reserve and how much that reserve should be is vitally important.
  5. If it is only wealthy people contributing to this fund there would be a concern about tax writeoffs and the funds not being used for charitable activities. However, the Mormon church’s encouragement of tithing means that even those who are poor are encouraged to contribute 10% of their income to the church.  There are some who are concerned that encouraging poor people to tithe creates some additional hardship on the poor person and their family.  It may also result in those poor people needing to access greater social services and government resources which shifts the burden further to other taxpayers.
  6. If you are a religious organization you might find an ATIP copy of CRA’s draft guidance on religion interesting and helpful.
  7. It is interesting that a couple of weeks before this article came out there was another article by Jana Riess that questioned the amount of transparency from the Mormon church entitled “I just paid my Mormon tithing. Why don’t I feel better about it?” She notes that the Mormon church has not provided financial disclosure since 1959 – yes that is 60 years ago!
  8. This story provides an opportunity for all charities, even those with less than $100 billion in reserves!, to think about how they can improve their transparency and disclosure to donors and other stakeholders.