Based upon court rulings on how tax exemptions for charitable corporations work, we cannot conclude that churches and religious organizations automatically deserve their exemptions. Even if one believes that their religion and their church provide a necessary public service, it does not follow that all religions and all churches necessarily provide a public service which merits support through tax exemptions.
If a church or other religious group wanted to receive tax exemptions because of the charitable work they do, should they be required to make a case for that rather than benefit from the presumption that religion equals charity? Perhaps, but it seems unlikely that such an change in perception and resulting change in the tax code is likely to ever occur.
There are some who have argued, however, that the above conception of how tax exemptions work is mistaken. According to this alternative view, the granting of a tax exemption to charitable groups, including churches, is simply a recognition that they are operated without a profit motive and that, at the end of the year, they have no net income which can be taxed. Because of this, inquiring as to whether the group benefits the public or is in accordance with public policy is simply misplaced.
It is exactly this view which seems to be mistaken, however. The mere fact that charitable organizations have no net income to tax is insufficient reason to accord them tax exemptions after all, many companies fail to make a profit and they dont receive tax exemptions. If there is no income to tax, then there is no tax to pay. Going through the process of being tax exemption would be pointless if that were all that were involved.
The fact that charitable organizations do not seek a profit certainly creates a difference between them and other private companies which do seek a profit but may not succeed, but is that a difference which merits tax-exempt status? When an organization becomes tax-exempt, other taxpayers are placed at a disadvantage in order to make up for the lost revenue; but why do that simply because an organization isnt seeking a profit?
There doesnt seem to be anything about a failure to seek a profit which inherently merits exemption from taxes, and there doesnt seem to be anything about a failure to seek profit which would make taxpayers want to put themselves at a relative disadvantage. If this alternative conception of tax exemptions were correct, there wouldnt appear to be any point to tax exemptions at all. It is, then, a self-defeating perspective.
It makes much more sense to see tax exemptions as a way to encourage organizations which work for the public benefit rather than personal profit and a means by which taxpayers put themselves at a relative tax disadvantage in exchange for the benefits the organizations provide. What this means, however, is that it is possible for the government to deny tax exemptions to those groups which are not benefitting the public and/or which are working against a compelling public policy and that may include churches or other religious organizations. Tax exemptions are not a right, they are a privilege which the government bestows based upon the nature of what a group is doing.