LDS Church’s Alleged Tax Evasion: Did It Avoid Paying Millions in Taxes?

reports suggest the Church of Jesus Christ of Latter-day Saints may have avoided paying millions in taxes, potentially up to $90 million, by underreporting taxable income between 2003 and 2017. An self-reliant website, The Widow’s Mite Report, alleges that Ensign Peak Advisors, the church’s investment arm, used a complex strategy involving shell companies and publicly traded partnerships (PTPs) to defer and underreport income.

The report claims Ensign Peak increased income reporting from PTP investments starting in 2018, coinciding with increased public scrutiny. The church disputes these allegations, stating its tax returns are prepared by professionals and that it complies with the law.

These findings are based on an analysis of nonprofit tax filings (Form 990-T) and stock holdings disclosed to the U.S. Securities and Exchange Commission. The Widow’s Mite report,comprised of experts in finance,business,and law,urges clarity and for any discrepancies to be addressed.

What specific allegations were made by the whistleblower regarding the Church’s misuse of its non-profit status?

Understanding the Church’s Financial Structure

the Church of Jesus Christ of Latter-day Saints (LDS Church) possesses a complex financial structure, significantly contributing to ongoing scrutiny regarding its tax status. Unlike many non-profits, the LDS Church doesn’t publicly disclose detailed financial information. This lack of transparency fuels speculation and investigations into potential tax avoidance strategies. Key to understanding the situation is recognizing the Church operates through a network of legally separate entities, including:

The Church of Jesus Christ of Latter-day saints: The central governing body.

Temple Endowment Properties, Inc.: Holds title to many temple properties.

Real Estate Holdings: Numerous for-profit and non-profit entities managing real estate.

Investments: A significant investment portfolio managed by Ensign Peak Advisors.

This compartmentalization is a core element in discussions surrounding LDS Church finances and potential tax liabilities.

The Allegations of Tax Avoidance

Recent years have seen increased attention on the LDS Church’s financial practices, culminating in allegations of tax evasion. These claims center around several key areas:

Investment Profits: The Church’s investment arm, Ensign Peak Advisors, accumulated billions in assets. Critics allege that profits generated from these investments were not consistently reported as unrelated business income, potentially avoiding important tax payments.

For-Profit Entities: The use of for-profit entities to operate businesses, such as Deseret Ranch and beneficial Life Insurance, raises questions about whether profits were appropriately taxed. The argument is that these entities should be subject to the same tax rules as any other commercial operation.

Donated Windfall Profits: In 2018, the Church received a substantial stock donation from an anonymous donor. The subsequent sale of these stocks generated a significant profit. The IRS alleged that the Church treated this as a tax-free donation, despite the profit-generating nature of the transaction.

Charitable Contribution Deductions: Questions have been raised about the extent to which the Church claimed charitable contribution deductions, especially in relation to its investment activities.

IRS Whistleblower Case and Subsequent Settlement

A whistleblower case filed with the IRS in 2019 brought these allegations to the forefront. The whistleblower, a former investment advisor, claimed the Church had created shell companies and misused its non-profit status to avoid paying taxes.

The IRS investigation led to a proposed settlement in 2023,where the Church agreed to pay $4.5 million and disclose more financial information. While the Church maintains it acted lawfully,the settlement acknowledges some degree of impropriety. Key details of the settlement include:

1. Payment of $4.5 Million: This amount covers alleged unpaid taxes related to the 2018 stock donation.
2. Increased Transparency: The Church committed to providing more detailed financial reports to the IRS.
3. Compliance Review: The IRS will conduct a review of the Church’s compliance with tax laws over the next three years.

this settlement doesn’t definitively prove tax evasion, but it does highlight areas where the church’s financial practices were deemed questionable by the IRS.

The Church’s Defense and Justification

The LDS Church defends its financial practices, arguing that its assets are used for charitable purposes, including:

Temple Construction and Maintenance: A significant portion of funds is allocated to building and maintaining temples worldwide.

Missionary Work: Supporting a global network of missionaries requires substantial financial resources.

Welfare and Humanitarian Aid: The Church provides extensive welfare assistance to members in need and engages in humanitarian projects globally.

Education: Funding Brigham Young University and other educational institutions.

The Church asserts that its investment strategy is designed to maximize returns to support these charitable endeavors and that it has always complied with applicable tax laws. They also emphasize the importance of financial independence to maintain its autonomy and fulfill its religious mission. The Church states that the settlement was reached to avoid a protracted legal battle and does not