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Five Reasons the Fraternal Tax Exemption Should Be Repealed

Now that I’ve got your attention, I need your help.  I will be in Washington, D.C., next week for a series of meetings with public policymakers, congressional staffers, think-tank representatives, and insurance industry leaders.  No doubt the value and validity of the fraternal tax exemption will come up in those conversations – probably more than once. 

When the Board hired me, they made it clear that the most important of the many priorities that come with the job of NFCA president and CEO is to defend the fraternal tax exemption at all costs.  And with the government’s fuel gauge well below “E,” you can bet that finding new sources of tax revenues is going to be a priority for lawmakers in 2011.  That means we’re going to have to be ready with “elevator speeches,” talking points, and honest-to-God facts about how and why the fraternal tax exemption benefits the taxpaying public, if we hope to preserve, protect, and foster the growth of the system.

I have a good idea of the messages and factual data that are most convincing when discussing fraternals with public policymakers.  But I need YOU to add some meat to those bones with solid examples of how your society delivers member benefits and community services that make its tax-exempt status a sound investment for the American people.  Here’s your chance to let your light shine.  Post your comments right here and I’ll use them in my meetings next week…

4 Responses

  1. Local LPSCU branches and districts help their communities in many ways throughout the year: food drive to support local soup kitchens and pantries; school supplies and clothing drives to help local shelters and domestic violence centers; collect toys for local “Toys For Tots” drive; collect, pack and mail “care packages” for U.S. Troops abroad; plus many, many more……

  2. Woodmen of the World/Assured Life Association’s National Fall Food Drive was introduced last year as our national member event, replacing our member trip to San Diego, California. 24 camps/lodges reported participating in a local food drive for the needy or planned their own member food drive; whether or not it was held in conjunction with our National Fall Food Drive. A total of 4,569 lbs of food was collected and provided to local food banks, pantries or programs. In addition, $8,700 in monetary donations were made. According to Feeding America, for every $1 donated to that organization helps provide 9 lbs of food and grocery products to men, women and children facing hunger in this country. Using this as a guideline, our camps/lodges provided an additional 78,300 lbs of food to the needy last year through their monetary donations, for a total of 82,869 lbs of food attributable to our national member food drive. We are promoting a national food drive again this year and anticipate increased participation among our members and camps/lodges.

  3. I am not sure what kind of statistics the NFCA has put together, but I would hope that we can get a dollar equivalent for all of the services that fraternals provide that alleviate the need for the government to provide the same. Some examples (just to name a few) would be 1) how much $ in scholarships are provided that help alleviate pressure from gov’t scholarship programs like Pell, Perkins, AC; 2) how much charitable donations (food, clothing) are provided that alleviate pressure from government subsidized/run food pantries, and food stamp programs); 3) how many volunteer hours (and the $ value of the same) are provided to clean up publicly used places (parks, playgrounds, etc.).
    Additionally, there is a super website that the IRS has regarding facts and figures of tax exempt organizations. Some of the more compelling arguments against revoking fraternals’ t.e. status (in addition to those above) are ones that I have never seen made. One example is that the largest portion of fraternals’ assets are investments (securities) versus many other t.e. organizations which have their primary assets as real estate (and other real property). The significance of this is that the more real estate you own/operate, the more you are draining city/state finances because you are utilizing many of their services for free (by not paying real estate taxes). Unlike hospitals, universities, etc. fraternals are very real estate “limited” (most lodges do not own real estate – most r.e. is limited to the national HQ’s) so, they are not draining resources but they are still providing huge community benefits– not to mention the fact that fraternals (especially conservative ones) often invest in things like government bonds.
    Additionally, fraternals are not receiving tax exempt contributions like hospitals, churches, universities, etc. their income comes from their business activities which are (with a few very limited exceptions) paid for with after tax dollars, so we are more self-supporting than charities who look to donors for funds).
    Additionally, fraternals have one of the lowest %s of UBIT of any category of tax exempt org’s. That is important because it shows that we are not engaging in many activities unrelated to our charitable missions (there is a good chart on the IRS site comparing the % of UBIT over the years).
    All of these factors can go a long way in making an effective cost/benefit analysis showing that revoking our status would far outweigh any immediate tax benefit.

  4. I KNEW you were out there! Thanks for the responses to date and keep those anecdotes and elevator speeches coming!

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