Among Billy Graham’s many legacies is leading ministries to greater financial transparency. Now two major organizations led by the evangelist’s eldest son are ditching the most common way nonprofits disclose their finances.
This fall, the Billy Graham Evangelistic Association (BGEA) confirmed that the Internal Revenue Service (IRS) had approved the ministry’s request to reclassify its decades-old tax status from a traditional nonprofit to an “association of churches.” A similar request by sister organization Samaritan’s Purse remained pending.
The change means that the BGEA will no longer need to file Form 990, the primary way that nonprofits convey their financial accountability to both donors and the US government. This in turn means that Franklin Graham, president and CEO of both the BGEA and Samaritan’s Purse, will no longer be required to make public his $1 million dual salaries—a point of some controversy in recent years.
The IRS has a 14-point test for defining church, asking whether there are “established places of worship,” “regular congregations,” and “regular religious services.” The BGEA is not claiming it is a church, but rather an “association of churches.” The ministry says it “has been operating as an association of churches for years, as virtually everything we do is done in cooperation with individual local churches.” Spokesman Mark DeMoss told CT that “association of churches” is “an IRS classification, not BGEA’s.”
Christian ministries are increasingly worried about the impact that lengthy Form 990 disclosures can have on their First Amendment rights [see “Sorry 666: Churches Fear 990 More,” CT July/August 2014]. Meanwhile, the recent case history has given churches broader latitude in employment and other matters.
Parachurch ministries are saying, “ ‘We consider ourselves part of the Christian church, and we shouldn’t be treated differently than the individual church down the street,’ ” said Eric Rassbach, deputy general counsel for the Becket Fund for Religious Liberty.
“It’s a trend, and I see it growing,” said Frank Sommerville, a tax-law attorney who advises churches. “Mostly it’s about religious freedom, and preserving that freedom.”
“Since courts, and in some cases the public, perceive that a church has more right to enforce its beliefs on employees than a religious organization does, [parachurch ministries] are looking at the situation and saying, ‘We want the protection of that church status,’ ” he said. “And the only government entity that will issue a letter giving them that church status is the IRS.”
For example, InterVarsity Christian Fellowship has told its 1,300 staffers on 667 college campuses that, beginning November 11, they would face “involuntary termination” for supporting same-sex marriage or disagreeing with the ministry’s other theological stances on sexuality. It’s the kind of position that might trigger governmental action over discrimination, threatening a nonprofit’s tax-exempt status.
Spokesperson Gordon Govier said InterVarsity leaders began talking about requesting an IRS reclassification last year. But the recent presidency transition from Alec Hill to Tom Lin put those discussions on hold.
There are potential downsides for parachurch ministries to reclassify as churches, and the biggest one has to do with fundraising. Some private foundations that would eagerly give money to a charity with religious roots may think twice about giving to a church.
Another drawback could be a ministry’s reach. “It could limit where an [NGO] is allowed to work overseas,” Rassbach said. “In some places, ‘We’re a charity’ versus ‘We are a church’ means a lot.”
It’s also possible that a rush to “church” status could raise an eyebrow at IRS headquarters or Congress. For example, the fact that 22 of America’s 30 largest television ministries are registered as “churches” drew congressional and media scrutiny in 2014.
“If it’s perceived that reclassification is being abused,” Sommerville said, “we could see additional restrictions coming down on granting the status.”
“It is not infrequent that we see religious organizations transition to church or religious order status,” said Dan Busby, president of the Evangelical Council for Financial Accountability. “Transitions of this nature are totally legitimate under the tax law.”
But Rusty Leonard, founder and CEO of Stewardship Partners, called it an “unusual circumstance” and “not a good thing” for donors. “It’s sad because the BGEA has a reputation for complete transparency,” he said. “One has to wonder if it’s not an issue of Franklin Graham’s compensation.
“But in the BGEA’s defense, they’re in the political eye,” he continued. “So to the extent they can protect themselves better from people going after them, there will be less information available.”
Daniel Borochoff, president of CharityWatch, said the absence of a Form 990 for organizations that do reclassify opens them up to “accusations of misspending, or problems with their finances.” Charities should look at Form 990 “as protection for themselves,” he said. “They’re in a stronger position to defend themselves if they’re accused of financial misdeeds.”
In the 1950s, one event solidified Billy Graham’s dedication to financial transparency, according to Grant Wacker, author of America’s Pastor: Billy Graham and the Shaping of a Nation.
In Graham’s early crusades, he accepted “love offerings” made by the throngs who came to hear him speak. But in 1950, an Atlanta newspaper ran two front-page photos that changed Graham’s mind. One photo depicted “three or four gunny sacks stuffed with greenbacks,” said Wacker. Next to it was a photo of Graham wearing a big smile.
“The implication was that Graham was gloating because he’d just gleaned so much money from the crusade,” said Wacker. “It wasn’t true, but it appeared that way.” It was the beginning of what Wacker called “Billy Graham’s long-running effort to avoid the appearance of evil, as well as evil.” By 1952, Graham required every ministry salary to be regularized and public.
The elder Graham was the first to formalize salary transparency, Wacker said. “I don’t know of any other evangelistic organization that preceded his.”
The BGEA says a main reason it requested the reclassification was that filing the 990 “had become increasingly onerous.” DeMoss told CT that it typically took two BGEA employees working full-time nearly half the year to complete the form. Plus, the ministry had to pay outside auditors and accountants.
“Yes, it’s burdensome to be ethical and transparent, but that’s the price you pay to have high ethical standards and transparency,” said Borochoff. “It’s worth it. The 990 is the main public disclosure form.”
DeMoss says the BGEA “will continue to publish Franklin Graham’s salary” in its annual public consolidated financial statement. “The  is not the only vehicle for financial transparency.”
Tim Townsend is a reporter based in Washington, DC, and author of Mission at Nuremberg: An American Army Chaplain and the Trial of the Nazis.
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