Court says kids ministry not obligated to pay taxes

A ruling from an appellate court in Illinois has determined that a church-sponsored Chicago-area ministry offering after-school programs to children is not obligated to pay unemployment compensation taxes for its workers.

The decision from the Appellate Court of Illinois in the First Judicial District concerns the organization called By the Hand Clubs for Kids.

The Department of Employment Security, its director, and its board of review had claimed that the kids club, supported by but incorporated separately from Moody Church, had to pay up when a worker left her job and filed a claim for compensation.

A circuit court, however, reversed that ruling and now the appeals judges have affirmed the decision.

“The dispositive issue is whether By the Hand demonstrated to the board that it is an organization ‘operated primarily for religious purposes’ within the meaning of the exemption” in state law, the ruling said.

“It is undisputed that By the Hand meets the two other requirements for exemption in that it is ‘not an institution of higher education’ and that it is ‘operated, supervised, controlled or principally supported by a church,'” the ruling explained.

The program originally started in one location with a little more than a dozen kids, but now has five locations, two in churches and three in commercial buildings, each able to accommodate up to 300 children.

There is no charge to the children for the programs, and a recent annual budget was about $8 million, mostly from individual and institutional donors.

It is recognized by the Internal Revenue Service as a 501(c)3 organization.

The court listed all of the religious components of its programs: Staff are required to sign a faith statement, the church board oversees the ministry’s actions, every child gets a Bible upon enrollment, chapel services are held, the code of conduct is “A-OK for Jesus,” parents are informed the program “teaches Christian-based principles on a daily basis” and the workers are considered ministry members.

Its curriculum is Christian and field trips are to a Christ-centered urban youth ministry. It does provide help with secular subjects, but includes Bible teaching on a regular basis.

The state agency claimed that the ministry didn’t qualify for tax exemption “because it was not operating primarily for religious purposes.”

The appeals ruling noted the dispute over whether an afterschool program qualifies for a religious purposes exemption never had arisen before.

But the “most factually similar cases” reveal that By the Hand “is an exempt employer,” the ruling said.

Jeremiah Galus, of the Alliance Defending Freedom organization, said, “By The Hand’s afterschool ministry to needy schoolchildren is directly motivated by its Christian faith and convictions. For years, the Illinois government agency has insisted on taxing By The Hand, a religious non-profit ministry, because it is meeting many diverse, practical needs of children in its community.

“We’re thankful that the Illinois Appellate Court has rejected the state’s flawed arguments and recognized that By The Hand’s provision of free food, free medical care, and free education is an act of worship, a genuine exercise of faith. The state agency truly ‘erred by recharacterizing them as secular activities’ and we’re hopeful that the court’s important decision motivates other state governments to respect their faith-based allies and the important ways ministries serve under-resourced communities.”

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This article was originally published by the WND News Center.

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