Religious liberty has been described by many as “the liberty that grounds all other liberties.” Beyond simply saying that the government cannot determine what religion its citizens practice, religious liberty says that the government is not sovereign over the conscience. We all stand before God individually, and every single one of us will give an individual account before him. Because of this, many Founders understood a “wall of separation” between the church and the state.
This term comes from a letter from Thomas Jefferson to the Danbury Baptist Association, and while it is distorted in our time to silence Christians and other religious groups from living out their faith in the public realm, the intention behind this was to protect the church from the government. The government cannot impose its will on the Church. However, a few years ago, this wall was broken in Kentucky when churches and other religious institutions were forced to become tax collectors for the government.
As many of you are hopefully aware, Kentucky churches have been burdened by a 2022 law change that greatly expanded the application of sales tax to services. HB 101, sponsored by Rep. James Tipton, was introduced to remedy this situation by providing a narrow carve-out to exempt religious institutions from Kentucky sales and use tax pursuant to KRS Chapter 139.
The extension of Kentucky’s sales tax, which went into effect in January of 2023, added services such as recreational activities to the sales tax base. Because of this, many churches are required to register with the state government to collect and remit the 6% Kentucky sales tax. Ministry activities such as Upward basketball, cheerleading, soccer, and flag football have been grouped into the recreational services language with no carve-out for church-led ministries.
The Upward sports ministries, which are led by many churches and denominations in Kentucky, are gospel-centered with an emphasis on Biblical devotions and scripture memorization and are clearly distinct from other children’s and youth sports leagues. The sales tax collection requirements place an undue burden and expense on churches to comply. Failure to comply can also lead to heavy penalties (from 20% to 50% of the tax) and excessive interest (up to 11% per year) on any tax due.
Many churches across Kentucky, including even small and medium sized congregations that are simply engaging in ministry, are facing thousands of dollars in unpaid sales tax bills, along with hundreds, or potentially even thousands, of dollars more owed in penalties and interest.
The language in HB 101 will provide relief to churches and free them to pursue ministry without the excessive tax requirements for many years. An exemption for religious institutions will have a negligible effect on the state’s annual $17 billion budget. It is commonplace that when a massive tax change occurs, such as HB 8 in 2022 that greatly expanded the sales tax on services, subsequent legislation is required to fix some unintended consequences caused by the original legislation. This situation is ripe for a simple fix.
As this article is being written, HB 101 is in limbo since House leadership has repeatedly chosen not to take action on HB 101. However, there is still hope that the Senate will include this language in the biennial revenue bill, which has yet to be finalized. Please contact your state senator and representatives to voice support for the inclusion of the language from HB 101, so religious institutions can stop being forced to be tax collectors for the government. No church should ever be penalized for simply engaging in Gospel ministry.
Op-Ed written by a concerned citizen and The Family Foundation.