Chapter 16

 The LDS church is finally being called to account

In an earlier chapter we mentioned some of the vast inefficiencies of how the church is currently operated. Obviously, the church leaders feel that they have an adequate income to support their preferred lifestyle, and there is no reason to disturb their peaceful lives by trying to extend the ideology and church operations any further. They have become extremely timid since they see no personal advantage to pushing back against any of the worldly pressures that they would have to counteract in order to expand the influence of the gospel. One might reasonably wonder whether the church leaders are total captives of the current secular society or not. Perhaps it is inconceivable that they could change their ways.

Recent developments and Mormon-leaks-style revelations have shaken things up a little bit and may become a major source of embarrassment for the church leaders. Their extreme self-interest and self-centeredness and timidness over many decades can be quantified by noticing that the church has about $124 billion in reserves which have never been used for any church purpose and most likely never will be used for any legitimate gospel purpose. This is a measurement of the unwillingness of the church leaders to find valid and valuable places to invest the charitable monies it receives from its church members, even when they have more money laid at their feet, "laid at the feet of the apostles," than they can reasonably spend in their current state of mind. It would be ridiculous to say that the world is perfect and has no need for any charitable Christian interventions, but obviously the church leaders haven't the slightest intention of defining what those charitable needs might be and then fulfilling them, beyond the approximately 0.5%, or less, of the money they receive in tithing which they then pass on to actual humanitarian purposes.

It should be clear by now that the LDS church is 100% a business, not a church. Or, rather, it is a business which promotes a religious-seeming franchise using borrowed concepts which have gradually been mixed together to accomplish the maximum income stream, and it attempts to maximize its income through every means available.  An oft-repeated observation is that

[B]usiness has no conscience... Capital is a coward.

See that and other similar observations at

https://www.barrypopik.com/index.php/new_york_city/entry/capital_is_a_coward

As we occasionally hear from those who comment on economic and market events, "when things can't go on, they don't."  That seems to be the lesson of this formal discovery that the LDS church has about $124 billion in reserves which it has refused for many years to spend on appropriate charitable projects.

The following Washington Post newspaper article is presented in full as an introduction to this problem of the church's vast reserves brought about by its absolute unwillingness to find social problems and fix them. There is much more detailed information available in the 74-page complaint made to the IRS by the whistleblower, but this will present the basic situation.

Mormon Church has misled members on $100 billion tax-exempt investment fund, whistleblower alleges

December 17, 2019  Washington PostOn my list

by Jon Swaine, Douglas MacMillan, and Michelle Boorstein

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 responsibility to care for members’ donations.

                “Claims being currently circulated are based on a narrow perspective and limited information,” said a statement attributed to the church’s First Presidency, its top governing body. “The Church complies with all applicable law governing our donations, investments, taxes, and reserves.”

                The complaint provides a window into the closely held finances of one of the nation’s most visible religious organizations, based in Salt Lake City. It details a church fortune far exceeding past estimates and encompassing stocks, bonds and cash.

                The complaint was filed by David A. Nielsen, a 41-year-old Mormon who worked until September as a senior portfolio manager at the church’s investment division, a company named Ensign Peak Advisors that is based near the church’s headquarters.

                Nonprofit organizations, including religious groups, are exempted in the United States from paying taxes on their income. Ensign is registered with authorities as a supporting organization and integrated auxiliary of the Mormon Church. This permits it to operate as a nonprofit and to make money largely free from U.S. taxes.

                The exemption requires that Ensign operate exclusively for religious, educational or other charitable purposes, a condition that Nielsen says the firm has not met.

                In a declaration signed under penalty of perjury, Nielsen urges the IRS to strip the nonprofit of its tax-exempt status and alleges that Ensign could owe billions in taxes. He is seeking a reward from the IRS, which offers whistleblowers a cut of unpaid taxes that it recovers.

                Nielsen did not respond to repeated phone calls and emails seeking comment.

                His twin brother, Lars P. Nielsen, provided a copy of the complaint to The Post, along with dozens of supporting documents. Lars Nielsen, a health-care consultant in Minnesota, said he prepared the complaint with his brother and helped him submit it to the IRS.

                Lars Nielsen said in a statement to The Post that his brother asked him to write an exposé on his former employer.

                “Having seen tens of billions in contributions and scores more in investment returns come in, and having seen nothing except two unlawful distributions to for-profit concerns go out, he was dejected beyond words, and so was I,” Lars Nielsen wrote.

                He said he was coming forward without his brother’s approval because he believed the information was too important to remain confidential. “I know that sometimes newspapers use anonymous sources,” he said. “But that is usually not best for a story.”

                In remarks last year, a high-ranking cleric in the church, Bishop Gérald Caussé, said it “pays taxes on any income it derives from revenue-producing activities that are regularly carried on and are not substantially related to its tax-exempt purposes.”

                The church typically collects about $7 billion each year in contributions from members, according to the complaint. Mormons, like members of some other faith groups, are asked to contribute 10 percent of their income to the church, a practice known as tithing.

                While about $6 billion of that income is used to cover annual operating costs, the remaining $1 billion or so is transferred to Ensign, which plows some into an investment portfolio to generate returns, according to the complaint.

                Based on internal accounting documents from February 2018, the complaint estimates the portfolio has grown in value from $12 billion in 1997, when Ensign was formed, to about $100 billion today.

                The church also owns real estate worth billions of dollars, according to the complaint, which focuses on surplus tithing money and says that the church may have additional holdings not managed by Ensign.

                While accumulating this wealth, Ensign has not directly funded any religious, educational or charitable activities in 22 years, the complaint said. No documents are provided to support this claim, which is attributed to information David Nielsen gleaned from working at the company.

                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.

                IRS rules dictate that a nonprofit organization must carry out charitable activity that is “commensurate in scope with its financial resources” to maintain its tax-exempt status. No threshold for this test is specified, and the agency instead considers examples case by case.

                In its statement Tuesday, the church said the “vast majority” of the funds it receives from donations are “used immediately to meet the needs of the growing Church,” including temples, education and missionary work.

                “Over many years, a portion is methodically safeguarded through wise financial management and the building of a prudent reserve for the future,” the statement said. “This is a sound doctrinal and financial principle taught by the Savior in the Parable of the Talents and lived by the Church and its members. All Church funds exist for no other reason than to support the Church’s divinely appointed mission.”

                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.

                While declining to discuss the extent of their holdings, church leaders have sought to explain the practice of continuing to collect tithes while accumulating financial reserves.

                In a speech in March 2018, Caussé linked the church’s financial strategy to the “prophecies about the last days.” Just as the church maintains grain silos and emergency warehouses, Caussé said, so it “also methodically follows the practice of setting aside a portion of its revenues each year to prepare for any possible future needs.”

                According to the complaint, Ensign’s president, Roger Clarke, has told others that the amassed funds would be used in the event of the second coming of Christ. Clarke did not respond to an email seeking comment.

                Nielsen’s complaint is sharply critical of church leaders for continuing to ask for tithes, even from members who are struggling financially, while the church sits on a fortune. “Would you pay tithing instead of water, electricity, or feeding your family if you knew that it would sit around by the billions until the Second Coming of Christ?” he wrote in a 74-page narrative that accompanied his complaint.

                He suggests church leaders favor continuing to collect tithes to avoid “losing control over their members’ behavior” by releasing them from their financial obligations. In June, the church raised the monthly charge paid by most families to cover the cost of their children serving as missionaries from $400 to $500 per month.

                Leaders have consistently tried to downplay speculation about the extent of the church’s wealth. Quoting a former church president during the speech last year, Caussé, said: “When all is said and done, the only real wealth of the church is in the faith of its people.”

                When interviewed by a German reporter in 2002 about suggestions that the church had amassed billions, then-President Gordon B. Hinckley said: “Yes, if you count all of our assets, yes, we are well-off. But those assets, you have to know this, are not money-producing. Those assets are money-consuming.”

                Unlike other nonprofits, religious organizations are not required to publicly report their income or assets.

                Nielsen’s estimate of Ensign’s assets places the Mormon investment organization among some of the country’s wealthiest companies and charities. Microsoft, Alphabet and Apple each hold between $100 billion and $136 billion in cash, according to the most recent company filings, while Harvard University has the country’s largest academic endowment at $40.9 billion. The Bill and Melinda Gates Foundation is the largest private philanthropic foundation in the world at $47.8 billion.

                In addition to criticizing the scale of wealth accumulated by the church, Nielsen’s complaint accuses church leaders of acting improperly on the rare occasions that funds have been paid out from the investment division.

                According to Nielsen, $2 billion from Ensign has been used over the past decade to bail out a church-run insurance company and a shopping mall in Salt Lake City that was a joint venture between the church and a major real estate company.

                Citing an internal presentation that he includes as an exhibit, Nielsen alleges that in 2009, Ensign spent funds on rescuing the insurance firm, Beneficial Life, which was suffering from its exposure to mortgage-backed securities amid the financial crisis.

                At the time, a church-owned newspaper reported that a different commercial church company, Deseret Management, had injected $594 million into Beneficial Life to make up its deficit. Mark Willes, Deseret Management’s president and chief executive, was reported to have said that no tithing money was used in the transaction.

                Yet the internal presentation supplied to the IRS by Nielsen refers to a $600 million “withdrawal” from Ensign to Beneficial Life in 2009, citing a page from an Ensign slide presentation entitled “Framework and Exposures” and dated March 2013. Nielsen said the funds were taken specifically from the Ensign account that receives surplus tithing. Nielsen said the transfer was not treated as a loan and was not recorded as an investment on Ensign’s balance sheet.

                Despite the bailout, Beneficial Life announced it would terminate 150 of its 214 Utah workers and stop writing new insurance policies.

                Neither Willes nor an official from Beneficial Life responded to messages seeking comment.

                Nielsen’s complaint further alleges that between 2009 and 2014, Ensign pumped $1.4 billion in several installments into the City Creek Center, a shopping mall in downtown Salt Lake City featuring a retractable roof. The mall, partly owned by the church, had also been hit by the financial crisis.

                Amid complaints from members about the church venturing into retail, church leaders have repeatedly made assurances over several years that no money from tithes would be spent on developing the mall, a joint venture with the Taubman real estate group.

                “I wish to give the entire church the assurance that tithing funds have not and will not be used to acquire this property. Nor will they be used in developing it for commercial purposes,” Hinckley said when plans for the mall were unveiled in 2003.

                On Monday, the church told The Post that through its involvement in the City Creek mall, it had “increased local economic activity during a financial downturn and attracted visitors and residents to Salt Lake City’s historic downtown.”

                A Taubman spokeswoman declined to comment.

                Hackney, the University of Pittsburgh tax law expert, said the payments would raise red flags if they were indeed made to for-profit entities that were separate from Ensign and not recorded as investments.

                While the church may argue Ensign contributes to a broader religious and charitable mission, as a separate corporate entity, it must show that “it furthers a charitable purpose exclusively on its own,” Hackney said.

                “Once that money comes in, it’s gotta go back out,” he said. “They have to come up with a justification based on the entity alone. Looking at the other organizations shouldn’t be a means of justifying hoarding.”

                IRS rules state that nonprofits “must not provide a substantial benefit to private interests” and that the earnings of registered religious organizations must not benefit “any private individual or shareholder” to avoid jeopardizing tax-exempt status.

                The Mormon Church’s wealth and investment acumen has been widely reported. A Time magazine cover story, “Mormons, Inc.,” published in 1997, estimated the church’s total assets at $30 billion or more. A 2012 Reuters article reported that the church owned “about $35 billion worth of temples and meeting houses around the world, and controls farms, ranches, shopping malls and other commercial ventures worth many billions more.”

                Nielsen’s complaint comes as many Mormons across the United States are engaged in discussions with their bishops, traditionally held in December, to “settle” their dues to the church. His estimate of $7 billion in annual revenue points to a relatively high rate of contributions from the 15 million members. By comparison, the Catholic church in the United States was reported in 2005 to receive $8 billion in annual tithes. There were 75 million Catholics in the U.S. in 2010, according to Pew Research Center.

                The complaint filed by Nielsen comprised a signed Form 211, the formal piece of IRS paperwork for reporting tax avoidance, a notarized cover letter to officials, plus the 74-page narrative document co-written with his brother in which he detailed his allegations at length.

                These documents were sent to the IRS whistleblower office in Ogden, Utah, together with a thumb drive containing digital versions of documents and emails that Nielsen collected during his time at Ensign, the complaint says. He also provided information on Ensign’s bank accounts and a list of employees whom officials should contact.

                Nielsen told Ensign in a resignation letter dated Aug. 29 that his employment had become unworkable after his wife and children left the Mormon Church and asked him to follow them, according to a copy of the letter provided by Lars Nielsen. David Nielsen offered to continue working until Oct. 4.

                Ensign’s human resources director told him in a reply that managers had decided it would be best to terminate his employment Sept. 3.

                “We appreciate your years of service and the contributions you have made for the church,” the letter concluded.

                The complaint describes an aggressive guarding of information by leaders at Ensign. Ensign employees “are trained to be especially sensitive” about data flowing outside the corporation, the complaint states. “Of course, all corporations need to guard their information, but the lengths that [Ensign] goes to borders on paranoia.”

                Only four senior Ensign executives are permitted to see the company’s full financial statements, according to the complaint, and investment staff members may access information only on the Ensign assets relating to their own area of work.

                Little has been publicly disclosed by Ensign, whose website address redirects readers to the church’s homepage.

                The company files abbreviated annual tax returns that report the taxes it paid on the small fraction of its investment activity that is taxable. The returns, which are publicly available, show that in some recent years, the company has reported losses of millions of dollars — a period in which, according to the complaint, a fuller accounting of its operations would have shown billions of dollars in profits.

                This limited type of tax return requires Ensign to disclose the total value of its holdings, which the complaint asserts, has for years run to tens of billions of dollars. On those returns, Ensign has sometimes stated that it held $1 million, other times “more than $1,000,000,” and it once left this section of the paperwork unfilled.

                During his 2002 interview with a German reporter, Hinckley was told that several major denominations in Germany published records of their finances. Why not the Mormons?

                “We simply think that information belongs to those who made the contribution, and not to the world,” said Hinckley, who died in 2008.

https://www.washingtonpost.com/investigations/mormon-church-has-misled-members-on-100-billion-tax-exempt-investment-fund-whistleblower-alleges/2019/12/16/e3619bd2-2004-11ea-86f3-3b5019d451db_story.html, accessed Dec. 18, 2019.  https://hosted-washpost.submissionplatform.com/sub/hosted/5df933e0825bc6503a766434

This recent Washington Post story shows some of the extreme effects of misinterpreting practical aspects of scriptural teachings. Here a church employee has declared himself a whistle blower, claiming that the LDS church has collected and is hoarding about $124 billion in tithing funds which it has not used for the charitable purposes for which it was contributed, most likely constituting a breach of fiduciary duty.

The excuse that the church was holding this massive amount in reserve to be used for contingencies at the Second Coming of Christ seems like an extremely weak and even laughable excuse for withholding that enormous amount of money from current member-intended charitable works. This excuse is especially weak since there is no way for us to know when that Second Coming might occur or whether our current society and its paper investment and ownership records and the underlying properties and processes would even survive such a potential uproar and calamity. It is more likely that all of those centrally collected paper resources would be lost. It would be much better to have those resources in the hands of the members, or to have used them for good purposes to prepare our society for something like the Second Coming.

The article itself quotes a church leader saying that the only real assets the church has is the faith of its members -- “When all is said and done, the only real wealth of the church is in the faith of its people” -- which seems to be an accurate statement, but the leaders have obviously not had the "faith" to put that philosophy into practice. The church members might indeed be considered a "walking charity bank" in the sense that these millions of individuals are the ones who ought to have these resources, since they actually have the power to preserve them through a crisis, who could then send some of those resources to the central church or to other places or projects based on the actual known needs.

A response

A lengthy bit of apologetics logic was quickly produced by a BYU professor. We might notice that as a direct or indirect employee of Brigham Young University, his professional position depends on the church being in existence and providing the money for his position. That puts him in the position of a more than slight conflict of interest. He does seem to know something useful about charitable organizations, but we must assume a heavy bias and a bit of non-objective blindness based on his station in and viewpoint on the world. We might notice that the church has put into reserve approximately one million times his annual salary, and he is happy to defend that long-term choice that clearly favors his personal financial future.

The $100 Billion ‘Mormon Church’ story: A Contextual Analysis

December 20, 2019 by AARON MILLER

In an age inundated with headlines, the American public has perhaps become accustomed to sighing and shaking their heads with reports of corruption. So, when the headlines pointed at the Church of Jesus Christ this week (“Mormon Church accused of stockpiling billions, avoiding paying taxes” or ”Mormon Church has misled members on $100 billion tax-exempt investment fund, whistleblower alleges”), the takeaway for many readers was likely clear-cut.  

                But, the story beyond the headline merits a closer look. As you may have read, a whistleblower alleged this week that the Church of Jesus Christ of Latter-day Saints’ investment arm, Ensign Peak Advisors, potentially violated tax law by building a $100 billion investment fund, with minimal or zero “charitable” distributions. The whistleblower’s report also alleges that the fund made two “illegal” distributions. 

                This article is an analysis of the allegations, the facts as I understand them, and the pressing questions many are asking regarding these and other issues related to Church finances. In my estimation, despite the allegations, the facts and applicable law suggest that the Church has not evaded taxes or done anything illegal or improper. 

                Many, however, will still wonder whether the Church should distribute more of its reserves to charitable causes, publish more financial information, or if such a large endowment should be taxed. There are many reasonable perspectives on these issues. Below I discuss the potential trade-offs, benefits, and costs associated with such decisions.

Are the Church’s reserve funds illegal or somehow evading taxes?

For tax purposes, as an integrated auxiliary, the investment arm of the Church, Ensign Peak Advisors, is under no obligation to make minimum distributions. The allegations appear to stem from the whistleblower’s misunderstanding of tax law. For unknown reasons, the whistleblower apparently didn’t hire an attorney or a tax expert to help write this report.

                One can only assume this is why so many of the conclusions in the whistleblower report diverge from the law. Not only does the whistleblower report misconstrue the definition of “charitable,” but it also applies something called the commensurate test (explained below) in a way never before applied by the IRS, and it fails to give enough evidence to demonstrate that two alleged investment disbursements were in fact improper.

                For starters, the federal tax code does not have a minimum disbursement requirement for what are called “public charities,” a category of 501(c)(3) tax-exempt organizations. Churches are public charities by default.

                There is a requirement that all 501(c)(3) entities carry out charitable activities that are “commensurate in scope with their resources.” This ostensibly means that a charity cannot merely accumulate assets and remain a charity. The law does not set a fixed threshold for this though, and the IRS instead takes it on a case-by-case basis, applying the commensurate test very rarely. But, even by the whistleblower’s own admission, each year the Church is in fact spending $6 Billion a year on its tax-exempt activities.

                There is an interesting wrinkle in this case, though, that the whistleblower’s claim relies on. Ensign Peak Advisors, the legal entity where the LDS Church holds these investments, is exempt as a separate 501(c)(3) Supporting Organization. (Notably, the whistleblower also disputes this status, but without directly addressing how Ensign fails to meet the legal definition. He instead focuses on the “spirit” of the status.) As a Supporting Organization, Ensign is an independent nonprofit. The whistleblower claims that this requires Ensign to pass the commensurate test all on its own – and not as part of the larger whole of the Church.

                But according to the IRS’s own definition, Ensign is also an “integrated auxiliary” managed by the Church, a legal treatment that combines their activities in certain ways. This is a critical detail that the whistleblower report only briefly mentions and seems to misunderstand.

                If the Church directly held these investments, it would likely pass any legal tests without concern. Does it make a legal difference if Ensign does the investing for the Church as an integrated auxiliary? This difference—a relatively narrow and technical one—has never been questioned by the IRS or a court, according to Sam Brunson, a Latter-day Saint and Loyola law professor who specializes in tax-exempt organizations.

                After looking at the facts and allegations involved, Peter J. Reilly, a non-Latter-day Saint CPA and tax specialist, observed in Forbes that “Ensign is not a private foundation. It is an integrated auxiliary of a church. And there is nothing in the tax law that prevents churches from accumulating wealth.” Reilly reached out to Paul Streckfus, another tax expert who runs a trusted publication focusing on tax-exempt organizations. He too concluded that the “matter does not merit IRS attention.”

Is saving $1 Billion a year for a “rainy day” fund wrong or abnormal?

What the whistleblower appears to be concerned about is the fact that the Church is investing $1 billion a year in an endowment fund and not distributing it or the interest earned. But, is building a reserve endowment illegal or wrong?

                Maintaining large financial reserves is actually a common and encouraged practice among nonprofits and governments. Two similarly large organizations show somewhat how the IRS might consider the case. Both The Bill and Melinda Gates Foundation and Harvard University operate with endowments of around $50 billion, roughly ten times their annual budget. The IRS has not considered either one to be in violation of the commensurate test.

                If the whistleblower numbers are correct, The Church of Jesus Christ is maintaining an endowment equal to about 16 times their annual budget, a ratio that is within typical practices for endowed 501(c)(3)s. Many private foundations annually distribute the minimum 5% of their total assets, making endowments equal to 20 times an annual budget very common. So, this practice of keeping a sizeable financial reserve is not likely to violate the commensurate test.

Why would the Church have a rainy-day fund?

Even if Ensign Peak were required to make distributions by law—and as mentioned above it appears that it is not—when the report says that Ensign Peak Advisors should be distributing its wealth for charitable causes, it appears to misunderstand what the law considers charitable.

                Under the federal tax code, any religious purpose is a charitable one by definition, including saving against the Second Coming of Jesus Christ. Though thinly sourced, this was a rationale the whistleblower claimed that Ensign Peak Advisors was using to justify the endowment. As noted by Forbes commenter Peter Reilly, the IRS likely wouldn’t question the legitimacy of this religious purpose.

                Of course, the Church likely has many other religious reasons to have an endowment fund and has publicly stated that it saves and makes prudent investments to uphold spiritual teachings. Such a fund might be built to prepare for heavy growth in third world countries (especially as membership is trending toward the global south and slowing in places like the United States). They might keep such a fund to help, as it often does, after natural disasters that could come with greater frequency due to climate change conditions. A source with first-hand knowledge says the Church thinks about such considerations.

                Obviously, rainy day funds are also typically built to prepare for possible future economic downturns. Recently, some state governments have been building sizable “rainy day” funds that together now total more than $70 Billion. Some have wondered if such funds are adequate in the event of another downturn, climate conditions, or other circumstances.

                There are even more reasons the Church may want to hold large reserves. Given that major party politicians, and others like the whistleblower, have stated with greater frequency that they would like to see the Church and other religions lose tax-exempt status, this is yet another reason why such institutions might want large reserves. The Church, having had its property confiscated in the 19th century in both Missouri and Utah, also has a historical rationale for building especially large reserves.

What about the two alleged distributions, those must be illegal, right?

The whistleblower alleges that Ensign Peak made large distributions to bail out a failing insurance company and to help fund City Creek Mall. First, there’s some question of whether Ensign Peak made the kind of payment to Beneficial Life Insurance that the whistleblower alleges. It’s more likely that they invested in Beneficial Life. 

                This is, in fact, the purpose of Ensign Peak, to make investments in various equity or other financial instruments which will, in turn, generate profit to support the Church’s efforts and mission. It’s not clear how such investments would be improper. As the Deseret News reported, the whistleblower alleges “that Ensign Peak delivered $600 million to Beneficial in 2009. Beneficial made full disclosure to the Utah Department of Insurance that Deseret Management Corp., its owner, provided $594 million to Beneficial during the 2008 financial crisis to strengthen its balance sheet. Those public filings are on file with the Utah Department of Insurance and the payment was reported in two articles published by the Deseret News at the time. Since 2009, Beneficial has paid dividends of almost a half-billion dollars back to Deseret Management Corp., according to public filings at the Utah Department of Insurance.”

            The reporting continues: “The second payment challenged by the Nielsens (the whistleblower and his brother) was made as part of the Church’s City Creek development in Utah’s capital city. The Nielsens alleged that Ensign Peak Advisors improperly sent $1.4 billion from 2010 to 2014 to the Church entity funding City Creek, Property Reserve Inc. The Church did invest in the housing and parking elements of City Creek. Taubman Centers, Inc., a nationally recognized shopping center developer, owns and operates the shopping center.”

                The whistleblower says the mall investment came from tithing funds, which contradicts what Church leaders said publicly, thus they claim the Church misled its members. However, even if initial tithing funds were used (and there’s no strong evidence available to claim that they were) there are good reasons that non-invested tithing funds might have been used as an intermediary step until invested assets could be liquidated at a prudent time. This claim, in other words, doesn’t engage in a very sophisticated analysis with regard to how reserve funds and returns might be managed in accordance with sound financial stewardship.

                Because investing assets is legal, the remaining issue is that a charity can only invest its assets as long as it doesn’t provide what the law calls an “excess benefit” to particular people in the process. There is no evidence available or provided by the whistleblower, that these investments did this.

                Last, an audit over any of these legal issues seems very unlikely. Congress requires the IRS to have a stronger case for auditing a church than for other nonprofits. This case doesn’t seem to satisfy that. The size of the endowment, relative to total activity involved, is common. The two “improper” disbursements can be easily justified as investment activities. Despite all 74 pages in the report, there’s just not enough there.

Are there other public policy concerns?

The technical, legal issues are not entirely the root of the controversy, though, even if the accusation is coming from a whistleblower. Not even the whistleblower limits the issues to tax law. The online version of his report is addressed not only to the IRS, but also Church leadership, members, Congress, and the general public of the United States.

                It is clearly intended to raise policy and ethical issues, not just legal ones.

                Other questions are:

1.         Should a church hold $100 billion that could otherwise be spent on helping those in need?

2.       Should a church have the freedom to avoid transparency into its finances?

3.       Should a church, especially a wealthy one, pay taxes like the rest of us?

Should a church hold $100 billion that could otherwise be spent on helping those in need?

To answer question one—and taking the whistleblower figures at face value—it’s worth asking how the Church got that much money. Reportedly, it did so by saving and investing about 14% of the annual tithing payments of its members. Turning $12 billion in 1997, plus adding $1 billion per year, would only require a 7–8% annual return to get to $100 billion by 2019. It is not an unlikely scenario. This strategy simply reflects an approach charities use to build an endowment—or what anyone should do to build their savings. 

                And here’s the paradox likely unknown to most people: giving money away effectively is generally much harder than earning it. The problem is that people assume that all giving is good giving when that is not remotely true.

                A recent study by my colleagues Curtis Child and Eva Witesman showed that in prosocial initiatives, people are prone to assume only good outcomes and not anticipate bad ones. This is despite the reality that unintended negative consequences and waste are a constant risk of philanthropic giving.  Cutting edge organizations like GiveWell and ImpactMatters are tackling this very issue.

                Distributing a huge amount like $100 billion in a way that has a reliable, positive impact would be very, very hard to do, and would require a kind of effort far beyond what people realize. The Gates Foundation in 2018 spent about $1 billion on operations to give away $3.7 billion. They are widely regarded as effective stewards of their assets and are having a commendable impact.

                This isn’t to say that the Church shouldn’t do more than it already does, but to do it well would probably require increasing expenses for its staff and operations by $1–2 billion per year, which by the whistleblower’s numbers would be a 30% budget increase.

                This is in spite of the already-existing Latter-Day Saint Charities arm that has spent $2 billion since 1984 on a wide range of projects including clean water, refugee assistance, and disaster relief. And, once again, by the whistleblower’s own estimates the Church is spending $6 billion on its total charitable, educational, and ecclesiastical efforts annually.

                Expanding its efforts and spending—humanitarian or otherwise—isn’t a change that could happen immediately, but would take years of cultivating expertise and relationships. It appears that over the past several decades that’s precisely what the Church has been steadily doing: increasing its capacity for non-denominational humanitarian giving (in addition to its own internal Church welfare and other philanthropic efforts).

                What the Washington Post article really tells us is that having a very large endowment is a relatively new phenomenon for The Church of Jesus Christ after over a century of financial strain. It undoubtedly has new lessons to learn in managing this opportunity. But immediately expecting a historically large and effective grantmaking engine is probably unreasonable.

Should a church have the freedom to avoid transparency into its finances and should it avoid “opening its books”?

            What about the Church providing more transparency into its finances? Criticisms over transparency have dogged the Church for decades, particularly over its fiscal resources. Keeping these figures private from the public is entirely legal, a privilege Congress offers to churches in the spirit of the First Amendment. Disclosing this information would be a voluntary step.

                There are of course reasons for Congress affording this privilege. Religions want the primary public focus to be its message, rather than its money. If people want to focus on money, that’s their prerogative, but churches, understandably, may like to keep the focus elsewhere. Of course, as human nature dictates, the more something is kept secret the more people and the press want to focus on it.

                There are also legal considerations. Many organizations believe that, if you’re known to have money, you might become subject to frivolous lawsuits or solicitations of bribes by bad foreign actors in order to operate overseas. There are even fears—not unfounded—that missionaries in foreign countries could be kidnapped for ransom if Church finances are detailed. Of course, now that this information has been leaked, many of these concerns can’t be put back into the bag, since the numbers and the scope of holdings are now understood to be large. But that doesn’t mean the Church would want to assist in publishing its holdings to exacerbate such risks or provide exact figures that could create a certain kind of exposure. 

                No matter these other considerations, it’s also the case that some simply don’t believe that it’s right for so much financial power to be shielded from public accountability. And many feel that transparency, when appropriately applied, is important and comes with many benefits, like the aforementioned factors of reducing fraud and engendering public trust. There are many American churches that voluntarily disclose annual financial reports to their parishioners. For reasons the Church indirectly explains, it chooses to keep its finances confidential. This is surely a trade-off they have repeatedly considered and will continue to weigh.

                Despite the lack of detail, there is other evidence over many years that the money is not being used nefariously or illegally, as alleged. Ask any Church employee or lay minister, and they can describe at length the culture of financial controls and of treating Church funds as sacred—only to be used with prudence and great care. It’s also fair to argue, as has often been said, that there are just too many CPAs and lawyers, internal and external, to let things get too far out of compliance.

                Related to this, and arguably the most revealing is the fact that those who control these assets are not getting wealthy from them. Part-time volunteer Church leaders are not paid. Full-time Church leaders are given an annual stipend that is frequently much less than what they were earning prior to their ministry. It’s speculated that some or many of the wealthier full-time leaders simply donate much or all of their money back to the Church. The lack of transparency, whatever its motivation, doesn’t appear to be driven by greed.

Is asking the poor to tithe morally wrong?

The whistleblower’s brother, who co-wrote and publicized the report, says that maintaining such a large endowment especially deceives the poor people who give tithing at great personal cost—the widow’s mite praised by Jesus Christ. Why should they give when their gift isn’t needed by the Church?

                First, the brother doesn’t acknowledge in the Washington Post article that the Church has one of the largest private welfare programs in the world, benefiting people in this exact situation. It’s very common that low-income people give what they can in tithing, but then receive through a local leader rent money or food assistance well in excess of the tithing paid.

                Tithing is a religious principle viewed as an act of faith and sacrifice to God. This is a principle with ancient, biblical roots. But there are also pragmatic benefits to tithe, even for those with little means. In his book, Who Really Cares, Arthur Brooks shares research showing that charitable giving, including religious giving, increases the health and happiness of the giver. One of the ways it does this is by inducing gratitude in the giver—a state of being that psychologists praise for its emotional and physical benefits. Giving even appears to increase future income, by an average of $4.35 for every dollar given. Brooks notes that these are gains resulting from charitable giving, not just correlated with them. How the donation is used does not seem to affect these outcomes for the giver.  

                In truth, the whistleblower’s claim—repeated in the Washington Post headline and by many others—that the Church misled its member donors is not well supported. While some Church members do wonder about the need to tithe, the vast majority of Latter-day Saints primarily tithe as a personal sacrifice to worship God and offer thanks for his blessings in their lives. It is unlikely that many of them feel misled because the primary purpose was fulfilled the moment they donated.

                One might hope that tithe payers would demand more transparency from their religious leaders if only to assure against fraud or waste. But Church members constantly see the results of their tithing in the form of new temples and chapels being built, budgets allocated for local congregations around the world, and large-scale disaster relief efforts in which they personally participate. Additionally, the Church is audited on a regular basis both internally and through external auditing firms. As far as many Latter-day Saints are concerned, the lack of fiscal transparency is overwhelmed by the rest of the evidence around them. 

                While some have expressed distress over the whistleblower revelations, many Church members have reacted to the Washington Post article with positive responses. Church leaders regularly encourage their members to follow prudent financial practices, avoiding debt and saving for the future. They see this endowment as the Church doing what it preaches.

Should wealth escape taxation because it’s owned by a church?

That’s a question that takes us to the United States Constitution itself. The Free Exercise Clause of the First Amendment guarantees freedom of religion from undue government burdens. And taxation is as fundamental a government burden as it gets. So, the question is whether a tax is truly justified.

                This is an argument we’ve had for decades—one that goes beyond the federal income tax because churches are also generally exempt from property and sales taxes in every state. Even aside from First Amendment issues, the idea of tax exemption is that exempt entities create more value for a community than what the government could do in their place. That seems to be true of churches, including the Church of Jesus Christ. Strong evidence by a wide range of scholars indicates that regularly attending church services (of any kind) leads to better health, a stronger community bond, and more donations of time and money, including to secular causes. 

What about just taxing the excess wealth of a church? If the money is just sitting around, why not have the government put it to better use?

The money, of course, is not just sitting around. It’s actually invested in lots of business and markets which in turn fuel the economy. Additionally, the idea that the money is ‘just sitting there’ challenges the very idea of an endowment (and personal savings for that matter), which is to have resources in reserve for growth or unexpected shortfalls.

                If a government system could reliably cover every shortfall and fund every growth opportunity in exchange for taxing away a surplus, there might be room for arguing to forbid endowments. But, given the current realities, there’s little suggestion that such a plan would work since the federal government is running a significant deficit, and it’s unlikely the government would bail out a church.

Why not tax huge endowments, where the nonprofits have more than they could ever need?

The federal government is currently testing the idea by taxing large university endowments.  While that tax does not apply to churches, public concern may lead to that outcome (First Amendment issues aside). How churches, including the Church of Jesus Christ, spend their money may be a factor in this discussion.

                But the issue here also invites comparing the billions of dollars controlled by the Church with the billions of dollars controlled by individual billionaires or elite private schools. There are interesting arguments that no person or group should control such wealth. But, surely there’s at least some difference between a large church—that’s funded by and accountable to its 16 million members worldwide—and Jeff Bezos or others. It’s not unreasonable to trust a church—dedicated to explicit charitable and ecclesiastical missions—more than a single billionaire focused on building a business or simply personal wealth.

                All of this said, just the idea of a $100 billion endowment held by a church will still offend some people. For some, it appears to contradict the humility and generosity that religion claims to foster. But considering all of the above, this may be a judgment made without full context. Moreover, such abundance is a relatively recent phenomenon for the Church, and time will tell how its leaders budget Church funds in the years ahead. They at least deserve the opportunity to prove themselves to be trustworthy stewards, as by many well-accepted measures they have been up to now. There are no scandals to date involving fraud or personal enrichment by Church leaders, just strong concerns about their frugality and transparency.

                In the meantime, Latter-day Saints can appreciate the impressive arc of a church that was once on the cusp of financial ruin, and now, thanks to faithful tithing and prudent management, appears to have all it needs and more to carry out what they believe is a divinely-appointed mission.

Aaron Miller

Aaron Miller teaches nonprofit management and ethics in the Romney Institute at BYU. He helps direct the Ballard Center for Social Impact and is the co-author of The Business Ethics Field Guide.

This professor may be an expert on business ethics, but that is of questionable value here. To begin with, we should not be using business ethics but gospel ethics, which it doesn't appear that he knows much about. Perhaps this commentator agrees with me that the LDS church is first and foremost a business operation, and only incidentally and indirectly a religious operation, an alias or alternative identity it uses only for its worldwide religious franchise operations.

My main point is that, whatever the relationship might be between the LDS church and the US government, the LDS church has contaminated the gospel in such a serious way that its decision to take tithing money from its members on pain of loss of salvation has caused approximately $124 trillion in total damage, making the $124 billion in ineffective and untouched reserves as small as a fly speck in comparison, 1/1000th the size of the damage done. Without this self-centered and highly damaging tithing requirement, to be paid always and only to the central offices, I believe the gospel would already have spread to hundreds of millions of people around the world, spreading even faster than did Christ's original church, and a huge amount of the vast damage done to societies by these greedy secular/atheist governments would have been avoided, and we would have moved a very noticeable distance towards a gospel society, otherwise known as Zion.

In other words, the LDS church has adopted nearly all the mechanisms of the secular governments, with all the problems that causes. Its "tithing" system is just another layer of taxes, hardly distinguishable from the church/secular taxes in Europe and other places. The church thus supports the basic proposition of the "divine right of kings" whereby any ruling body might claim the power to tax to an arbitrary agree anyone it claims to rule over, by "right of conquest," so to speak, meaning the citizens are really slaves to that extent. Where people around the world are always seeking the maximum amount of freedom, here we have the LDS church defending the right of self-appointed government bodies to extract as much as they dare from their populace, just as the LDS church is doing.

On the topic of the relationship between the LDS church and the US government, what we really have here is two organizations which are doing all in their power to exploit their overlapping constituency. They both use the same strategy and tactics to extract money from their constituents. That makes them both partners in crime and competitors. The LDS church has obviously done everything in its power to stay on the good side of the US government and of every other government in the world as a way to avoid conflict of any kind with those organizations. The church leaders realize that at the point where the church might attempt to advance the gospel in almost any way, however small, that will put it in direct competition with totalitarian-thinking secular governments everywhere. There may be room for businesses to operate alongside governments, but there is very little room for principled religions to operate alongside governments.

The competition for hearts and minds is ever-present. Even a greedy government will be kind to a religion which is totally submissive to that government. Even the most foolish governments realize that they cannot govern people who do not have good morals and ethics, even while the governments hate the religious organizations that might instill those good morals and good ethics in their citizens. If a church is willing to become part of the state religion, as the LDS church has done, then they can be more assured of kind treatment by the government, perhaps concerning its tax exemption as a charitable organization, even though that near-total submission to the government may mean that their gospel mission is all but obliterated.

The first principle of the gospel, in my view, is freedom, and all of these secular/atheist/humanist organizations are put in place for the very purpose of restricting the freedom of citizens to the largest extent possible. That means that there can be no reconciliation between the gospel and dictatorial governments. That leads to the situation in the United States where the church is given billions of dollars by its members, where those members hope that the church will take steps to further the gospel and freedom in the world, but the church refuses to do any of that, leaving it with large amounts of money it is fighting to avoid spending in any way that would improve the society of any nation, which would also cause these secular/atheist governments to push back against the LDS church and its leaders. The church leaders want to lead a perfectly pleasant and carefree life, which would end if they were to actually take up gospel causes. We ought to have some "Christian crusades" going on at many levels, but it would be difficult to find anything that meets that description today.

Explaining it all one more time

The current church has contaminated the gospel and made it a toxic poison to the rest of the world. We might compare this to a major E. coli contamination of hamburger meat. That toxin has very emphatically stopped the gospel from spreading. To understand the scale of that situation better, we need to consider the actions and budgets of the federal government.

The federal government uses about 70% of its budget for mandatory spending (Social Security, Medicare, Medicaid, and loan interest payments), with 30% going to discretionary spending which mostly goes for the actual government operations including the Defense Department. If we say that the mandatory spending (Social Security, Medicare, and Medicaid) is about $3 trillion a year, and this social arrangement has been going on for nearly 100 years, the federal government has taken about $300 trillion from the populace and used it for what would otherwise be charitable purposes, which I consider to be a nongovernmental religious function. That $300 trillion is the amount of money, that has been taken by the United States government and mostly wasted on pensions/medical care, etc., that should have been used for religious purposes instead of for Satan's anti-freedom purposes. Taking that money has contaminated the ideology and practices of the entire society. And that is the amount of damage the LDS church and its self-centered behavior has caused. If the $300 trillion measure seems too high, then it is certainly at least $124 trillion in value.

As part of this complex and corrupt arrangement, we have in Utah a corrupt "Sanhedrin" of Mormon high priests who are willing to act consistently in what they see as their strong self-interest of supporting the church as a powerful economic institution that benefits them, warping the civil and criminal law of Utah to constantly reinforce the power and influence of the corrupted economic church. This especially includes law firms, accounting firms, legislators, government employees, etc. This church-inspired and church-controlled mafia or "Sanhedrin" makes it very difficult to get objective justice in Utah.

https://www.thebalance.com/current-u-s-federal-government-spending-3305763

Follow the money

"Follow the money" is always good advice in untangling complex or secretive operations. This revelation about the church's obsession about keeping all the money it receives, without doing anything of a charitable nature that might seem to compete with any secular government, tells us an enormous amount about the way the church views gospel principles today. The church has in effect reinstituted the law of Moses which was a tribal-based system which rarely went beyond the "seed of Abraham." It was a nearly static religious body, with massive ties and duties to the central headquarters. The church which Christ set up on the Earth was a nontribal system, suitable for anyone to use anywhere, encouraging the maximum freedom and the maximum Christian responsibility and service. That is an extremely appealing concept and system, and what the church has adopted is just as unappealing as the old law of Moses. That explains why the church is going nowhere today, and never will, until it moves back to the operational concepts of Christ's original church.

The August 2019 fraud class action suit

Another major action which took place in 2019 is the filing of a major fraud class action suit against the LDS church entitled Gaddy vs COP (LDS). The plaintiff and her lawyer allege that the church has knowingly taught false information to children concerning the origin of the Book of Mormon, the life experiences of Joseph Smith, etc., much of which supposedly has now been shown to be historically incorrect. This fraud case will likely be harder to understand and harder to prove than the IRS complaint about the massive reserves of money which have been withheld from a church purpose. The church's claiming that this money is being held in reserve to be used at the second coming of Christ or that it is being held in reserve because of the fear that the church will come under new levels of persecution, similar to some of its experiences in the past, may seem semi-plausible at first. However, on further consideration, those seem like very thin and foolish excuses. At the second coming of Christ it is more likely that all of these paper assets will disappear overnight and the church will have nothing to show for it. I believe the church is in a "use it or lose it" situation where holding this money in reserve basically means throwing it away for fear of the consequences of trying to spend it properly. On the "future persecution" aspect, rather than being a defense, having all of that value in liquid assets concentrated in one place makes it a very tempting target, meaning that any serious persecution would likely mean that all of those assets would be taken by someone else. This is exactly what happened in Utah in the 1800s when the federal government took over all the church's assets. The only defense in that case was to have the assets so widely distributed in advance that there was very little to be confiscated at the central church level. Having the federal government take over the Salt Lake Temple was probably of little value except to provide a hostage. Except as a ransom, presumably there was very little value the federal government could extract from that immovable stonework.

An article, apparently written by someone who is quite familiar with the case, summarizes the current status of the case as of October 11, 2019. The article includes links to the original Complaint in the case, the Motion to Dismiss filed by the LDS church, and the plaintiff's attorney's Opposition to Motion to Dismiss. There is also a link to the results of a 2013 survey concerning LDS member faith crises. This material should provide a window into this case for those who want a better understanding. There are also many other related resources on the Internet concerning this case, many linked to the name of the plaintiff's lawyer, Kay Burningham.

Gaddy v COP (LDS Church) Opposition to LDS Motion to Dismiss

https://www.xmoresources.org/Gaddy-Opposition-to-Motion-to-Dismiss-Lawsuit-for-Fraud-Against-LDS-Church/?q=kbase&sid=X1570815831