Document Type

Article

Publication Date

2016

Abstract

Nineteenth-century American religious movements challenged many aspects of American society. Although their challenges to mainstream America's vision of sex and marriage remain the best-known aspects of many of these groups, their challenges to traditional American economics are just as important. Eschewing individual ownership of property, many of these new Christian movements followed the New Testament model of a body of believers that held all property in common.

In the early twentieth century, these religious communal groups had to contend with something new: an income tax. Communalism did not fit into the individualistic economic system envisioned b-y the drafters of the income tax. So Congress designed a special tax regime, now codified in section 501(d) of the Internal Revenue Code, which exempts religious communal holding companies from tax, while imputing the holding companies' income to the members of the group. Section 501 (d) provides communitarian groups with flexibility to reflect their unusual economics.

There exist, however, a number of problems with the design and implementation of section 501(d). This Article will survey the three principal problems. The first is scope: under current law, only religious communitarian groups can elect to use the section 501(d) regime. Second is uncertainty and vagueness in the statute. Third is I.RS. overreach in the enforcement, applying doctrines (such as the public policy doctrine) that do not apply to section 501(d). In this Article, I discuss why and how to remedy these problems, while not opening section 501(d) to abusive tax avoidance.

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