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Investigation exposes a tax-free money pipeline from the LDS Church in Canada to BYU

iStock — Cardston temple, Alberta, Canada, June 9, 2016
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Cardston Alberta temple of The Church of Jesus Christ of Latter-day Saints

A probe into the finances of The Church of Jesus Christ of Latter-day Saints reveals just how much money the church has moved out of Canada tax-free to Brigham Young University. The revelations came to light in an investigation by the Canadian Broadcasting Corporation’s “The Fifth Estate”.

“We started looking into the records and we found that since 2007, more than $1 billion CAD had been sent from the Canadian church to BYU,” said co-host and investigative journalist Mark Kelley.

They discovered a so-called pipeline of money, and it all started with a tip from a church member in Alberta. That tipster is an accountant who was looking into the books of a different church. He noticed typical charitable giving to places like local food banks and homeless shelters. Out of curiosity, he checked on his own church and that’s when he made a discovery.

“The Canadian Church was sending … about 70% of its tithing money, almost $100 million in that year alone, to BYU and he was shocked,” said Kelley.

What the church was doing is “perfectly legal,” Kelley pointed out, but it does prompt a lot of questions about the purpose and intent of tithing. The same questions have also stirred tax avoidance concerns about the church in Australia.

This interview has been edited for length and clarity.

Pamela McCall: How does Canadian law allow the church to move this money?

Mark Kelley: First of all, you get a tax benefit when you make a donation to the church. So that's tax deductible on one hand. And then what that church is listed as a charity does with that money is it has to give it to another qualified donee. That's the technical term for it. So, the Canadian church couldn't send money to its American parent. That would be against income tax law here, but it could give to an American university. In this case, as long as Canadian students are attending and it's a certified university, as BYU is, then it's legal for the church to be able to transfer that money to BYU.

PM: What percentage of BYU’s students are Canadian?

MK: Well, as you know, there are three campuses. Approximately 85,000 students in total, and there are about 1,400 that are Canadian. That's 1.6% of the student body would be Canadian. So, it's a massive, massive benefit for a relatively small group of Canadian students.

PM: How much money is the Canadian government losing out in tax revenue on that billion dollars sent to BYU over 15 years?

MK: We did the calculation with tax experts. It's a little tricky, but our best estimate was that the federal treasury would be losing as much as $280 million, which is a staggering figure by Canadian standards. 

PM: While this is legal in Canada, there are questions from Australia about the tax-exempt status of the church. What concerns have you uncovered there?

MK: Well, in Australia they have a different setup in terms of donations that are made to a church. So, for example, as I mentioned in Canada, when you donate money to your church, that is tax deductible. That's not the case in Australia. You'd only get a tax break if that money were given to a charity. So giving it to the church did not give you a tax break. But if the church then gave that money to a licensed charity, you would get a tax break.

So, what we saw there was really fascinating, because there was a small amount of money that the church in Australia would give to charities, but when that tax law changed, that there would be a tax break once you donate to charities, suddenly the floodgates opened and now then tens of millions of dollars — in some cases $100 million a year — would then be given by the church to charities. Now, yes, this is benefiting charities. There's no two ways about it, and that's the bottom line. And that's good for those charities, and it's a good way to spend that money. But it also enabled the members of the Mormon church in Australia to get a tax break. Other churches aren't doing this in Australia, so this is what attracted the attention of an investigative reporter that we were teaming up with as we started to look into The Mormons' Books.

PM: So, is there an official investigation in Australia?

MK: Andrew Leigh, who was the opposition critic demanding an investigation, is currently the minister in charge of charities in Australia. So we managed to get an interview with him and said, well, while you were in opposition you said there should be an investigation. Now you're in power. You're the minister who oversees this. Is there an investigation underway right now by the Australian Tax Office? He said because of privacy reasons he cannot confirm if there is or is not. So he was tight lipped about that.

However, he did say in our interview that no charity and no church should be even giving the appearance of tax avoidance because that will undermine people's confidence in tax law in that country. So, he wouldn't let on whether there was or wasn't, but he was certainly giving strong signals that what he saw there, he felt, was giving a bad message to other people in Australia that there was some tax avoidance underway here.

PM: Can you explain the idea behind the rainy day funds? 

MK: It all comes down to what is that tithing money supposed to do? What is the intent of these donations that are being given to the church? And if you ask members of the church, as we did, they said, well, we always thought that this is money that was supposed to go and help the poor and the needy and help alleviate global suffering. And to be fair, the church just last year alone says it gave some $900 million for humanitarian aid around the world. But when you compare that to the overall — and we don't know just exactly how much money that the church has amassed in wealth, we know it's believed to be somewhere north of $100 billion. The idea is, why isn't that money being used for the needy? And the church's response is, well, it's a rainy day fund. And what critics are saying is the rainy day is here now. What are we waiting for?

PM: If the church is playing by the rules, what responsibility do the governments have to close these tax loopholes?

MK: Well, this is a question that we put to the Canada Revenue Agency, which oversees the tax laws, because there's no two ways about it, and I want to be crystal clear that what the church is doing is perfectly legal. But what we wanted to know was, does this really violate the spirit of the law. By giving money and getting a tax break from the federal government, the intention is that that money will benefit Canadians. So as I mentioned before, technically what they're doing is legal. Sure. Because it's benefiting a small group of Canadians, but it's an outsized amount of money when you're looking at a billion dollars that's benefited so few Canadians. 

PM: Is this an issue of legality or morality? Whose business is it to regulate morality?

MK: Well, and that's certainly the pushback that we've got from members of the church who say what you're doing right now is you're just attacking a small religion. You're trying to score political points off our backs, because what we're doing with our money is perfectly legal. And if we as the church want to give this to the university owned by the church in the United States, there's nothing wrong with that. And that's a fair point.

But when you look at what this costs the Canadian treasury, that's where the questions start coming in. If this was just a pure cash transfer from the Canadian church to their American university, that would be one thing. But this is where this sort of church and state get intermingled by virtue of the fact that there were such generous tax breaks for those donations. Yes, it's perfectly legal, but that does enter into the morality. And as I mentioned before, the spirit of the law was this what it was really intended to do? So that's what critics in the U.S. have pointed out, saying what they're doing is just a backdoor way of sending this money to Utah by giving it to Brigham Young. In that way, the church in the United States doesn't have to give that money to Brigham Young.

PM: Where do you see this headed in terms of change in Canadian and Australian tax laws?

MK: I think one of the big questions that was raised in our investigation, both in Canada and in the U.S., is the question of transparency. That the information that has been coming out has been coming out by virtue of investigations by journalists, and that the church really hasn't been open and transparent with its own books. As long as it continues to benefit from government tax breaks, really, what critics are saying is there should be an onus on the church to be more transparent.

PM: Will transparency ultimately lead to closing those tax loops?

MK: I think it's a fair question, but I just don't know. There's no two ways about it that certainly here in Canada, once you start asking questions about a church, there's a discomfort around that. I think there's always from any government a reluctance to start, you know, perceived as meddling in the affairs of a church. So, I would be surprised if anyone wanted to take this issue on to say that there's got to be widespread change. But certainly, there have been many, many calls for the government to do exactly that.

Pamela is KUER's All Things Considered Host.
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