Taxing the United Order

February 28, 2012 | 24 comments
By

The United Order appears (for now, at least) to be a relic of the 19th century; since them, the mainstream Mormon church hasn’t attempted to institute any large-scale communal economic structure based on Acts 2.[fn1]

And, frankly, I don’t have any reason to think that it will in the 21st century; the Law of Consecration seems to be something different than economic communalism (though economic communalism fits within the Law of Consecration).

But I’ve been thinking recently about the consequences of introducing a United Order into modern American culture. And frankly, the tax consequences strike me as pretty interesting.[fn2]

For purposes of a hypothetical look at the tax consequences of a new United Order, of course, we have to define the United Order; there have actually been at least three iterations of United Orders, each with their own characteristics. Lucas and Woodward assert that the specific forms of these United Orders reflected the different economic situations in which they were formed; the Kirtland version reflected an agrarian economy, where the various Utah versions reflected an Industrial Revolution economy.[fn3]

What does that mean for my purposes? Basically, it means that, were the United Order to be established in our current information economy,[fn4] it would probably differ significantly from any historical United Order. I don’t have any idea what the modern version would look like so, instead, I’m going to look at the consequences of transporting the Kirtland United Order to 2012. Why Kirtland? Because (a) its basic contours are detailed in the D&C, (b) it’s the version I’m most familiar with off the top of my head, and (c) I’ve actually thought about the tax consequences attendant to it.

For these purposes, I’m assuming that the transplanted United Order looks something like this: (1) members contribute all of their property to the Church; (2) the Church provides members with property to meet their needs, (3) using this property, members work at their professions during the year, and (4) to the extent they have surplus at the end of the year, they contribute such surplus back to the Church. And repeat.

So what would the tax consequences be?

(1) Donation of property. Because I’m assuming the donation would be made to the Church, a 501(c)(3) organization, the member could deduct the fair market value of her donation from her income for the year. Except that the deduction would be limited; under current tax law, your charitable deduction for a year cannot exceed 50 percent of her adjusted gross income for the year.

That is, assume that you make just over $100,000, so that you have adjusted gross income of $100,000. Also assume that you have a house worth $200,000, a car worth $10,000, and other property worth $15,000. You donate this property, worth $225,000, to the Church in order to join the United Order. But you don’t get a $225,000 deduction; instead, you get a deduction for $50,000, and will owe taxes on your remaining $50,000 of income for the year.

(2) Income from your job. It’s taxable to the member. Even if we posited a more extreme version of the United Order, where all of a member’s earnings were paid directly to the Church by the employer, income earned by an individual is still taxable to that individual. The quintessential example of this rule is in the case of Fogarty v. U.S. Father Fogarty, a Jesuit priest, had taken the vows of chastity, poverty, and obedience. His religious superior told him to teach a religious studies class at UVA, which he did. His paycheck from the University was deposited into his Order’s bank account. The court held that, in spite of the fact that he gave it all to his order, that he was sincere in his beliefs, and that he took the teaching gig at the behest of his Order, the income was taxable to him.

(3) Assets received from the Church. The “stewardship” received from the Church would almost definitely constitute income to the member.[fn5] Taxing a member on her stewardship make sense, too: to the extent the member got a deduction (albeit potentially limited) when she donated assets to the Church, she should have a corresponding income inclusion when she receives assets from the Church. Otherwise, you create a really easy tax shelter: a person with $100,000 of income could donate $50,000 to a church or other 501(c)(3) organization, and then receive, say, $45,000[fn6] in non-taxable income back, and she would have cut her taxable income in half.

A couple final thoughts: first, I realize this is U.S.-centric. And it is necessarily the case—I don’t have sufficient knowledge of other countries’ tax systems to post anything substantive on them.

Also, this will never happen. Back in 1830s Ohio, there was no federal income tax; ours only dates back to 1913. Plus we have an entirely different economic model; any United Order would presumably take those (and other) considerations into account.

Still, it’s fun to think about.

[fn1] At least, I’m not aware of any such attempt. If I’m wrong about this assumption, I’d love to hear details.

[fn2] Of course, tax consequences often strike me as pretty interesting . . .

[fn3] See James W. Lucas & Warner P. Woodworth, Working Toward Zion 111 (1999) (“As early as the 1870s, Brigham Young and other Church leaders knew that establishing an industrialized united order in the desert could not be carried out by individual efforts as in Missouri and Ohio.”).

[fn4] Or however you want to classify our current economy.

[fn5] Similarly, I suspect that Church welfare assistance constitutes gross income to the recipients. I could be wrong; if it’s considered a gift, it isn’t taxable to the recipient. And Church welfare assistance may qualify as a gift (though off the top of my head, I kind of doubt it), but I’m pretty sure that a United Order stewardship wouldn’t.

[fn6] Why only $45,000 back? Because if it worked, this would be a tax shelter; when you buy a tax shelter, you have to pay the counterparty for its participation. In 2012, with income of $100,000, you’re paying taxes at a marginal rate of 25 percent (if you’re married filing jointly) or 28 percent (if you’re single. Your tax savings from converting $50,000 of taxable income to untaxable income would be $12,500 or $14,000 respectively; surely you could spare $5,000 to make the transaction happen.

24 Responses to Taxing the United Order

  1. John Roberts on February 28, 2012 at 8:17 am

    All members of the First Presidency, Quorum of the Twelve, and Quorums of the Seventy live the United Order.

    For members of the Quorums of Seventy, their assets are held in trust, and returned to them when they are released.

  2. James Olsen on February 28, 2012 at 8:23 am

    Sam, this is awesome.

  3. Jeff on February 28, 2012 at 9:00 am

    Indeed, the United Order, like other celestial laws, cannot be practiced under the hand of the current government. We must wait for the Lord to shake things up so that we can have these privileges again. The Lord will do it as soon as we qualify for it as a people.

    Are you working to be ready?

  4. Dan on February 28, 2012 at 9:52 am

    is it the Lord that’s going to shake things up or are right-wingers taking it upon themselves to create a theocracy here in America?

    furthermore, let’s say that we succeed and America becomes a theocracy under the church and/or Jesus coming back. What exactly will the privileges be of people in this country who do not believe in either our church or in Jesus? Will they be outcasts? How will their rights be maintained/preserved? There’s a reason why such utopian societies cannot last, and that it requires a homogenous society with little variation. where in the world are we going to find that, EVER?

  5. Sam Brunson on February 28, 2012 at 10:03 am

    John, interesting. I have a couple questions for you, though: first, what do you mean by “United Order”? I’m pretty sure that our GAs aren’t living a mid-to-late-19th century Utah version (either of the cooperative or Orderville version). Second, do you have a source for that? It’s really interesting, but it doesn’t completely ring accurate to me, especially with respect to members of any but the first couple Quorums of the Seventy; as I understand it, most of them continue at their jobs and life, and just add on the obligations of their new quorum.

    James, thanks. Your stuff is so interesting that I’m glad I can give you something to think about every now and then.

    Jeff, that certainly doesn’t follow from my post. Entering into a Kirtland-style United Order would be horrendously tax-inefficient, but that doesn’t mean that the government would make it impossible. I actually think that no iteration of the United Order that has existed in the past would work today, but purely because it wouldn’t mesh with the way contemporary society and economics work. (Query, of course, whether courts would enforce contracts that gave all of an individual’s assets to a UO, which, as I understand it, was one of the principal problems in the Kirtland days, but that’s the only potential government interference I can see). If I have time and remember, I’ll draft up a post on what I see as the significant impediments to past versions.

    Dan, as I understand it, the 19th century Church, which was considerably more millenialist than we are today, saw a place for those who did not belong to the Church, both in society and in government. I don’t know my Council of the 50 stuff very well, so someone else may correct me or back me up, but our past visions of a post-Millenial world certainly did include Others (as it were), and not, IIRC, as second-class citizens.

  6. AHLDuke on February 28, 2012 at 10:31 am

    I’ll be less gentle than Sam: I call BS on #1.

  7. Jeff on February 28, 2012 at 10:48 am

    The scriptures are clear on the matter. The United Order is canonized scripture of this Church and is described in detail in D&C.

    The scriptures indicate the kind of systems that will exist when this order comes into being to bootstrap a mass of believers into the foundation of the New Jerusalem. To Sam and Dan, if you want more details on the devolution of the extant system, I suggest you read the scriptures which cover this process.

    No one is talking about replacing the existing US government with a theocracy, and that’s not what the scriptures say will happen.

    As unfortunate as it may be to those whose primary desire is worldly conformance, the principles and mechanism of the United Order are still solid and will be solid forever. The United Order represents eternal principles emblazoned in the canon of the Lord’s true Church, and a complete modern incarnation will differ from the scriptural concept but little.

    Zion cannot be built except by the law of the celestial kingdom (D&C 105:5), and the Order of Enoch is such a law, designed explicitly to prepare the people for exaltation both spiritually and temporally. It is the righteous practice of the Order of Enoch that will sanctify our people and make them qualify for the title “Zion” and the receipt of the Master. It is the eventual failure to practice that order which will end the Millennium and bring about the final battle preceding judgment.

  8. Sam Brunson on February 28, 2012 at 10:58 am

    Jeff, what are you using as your source? D&C 42 describes the Kirtland United Order. But it doesn’t say that that particular form is necessary or eternal; in fact, under Brigham Young in Utah, the United Order looked significantly different.

  9. Jeff on February 28, 2012 at 11:35 am

    The United Order is defined in D&C 104.

    The United Orders in Utah were not considered complete implementations and the First Presidency at the time considered D&C 104 and other scriptural citations definitive. Here is just one reference, from John Taylor in 1878 (JT was President of the Twelve at this time and the First Presidency had not yet been reformed since President Young’s death):

    “…so far as this is concerned, we are in the United Order. Now, then, we have tried to introduce home manufactures, a combination of effort, not, as has been remarked, strictly according to the plan laid down in the Doctrine and Covenants; we have not got to that yet, we are not prepared for it, we are not educated to that standard yet; but we are aiming at it…”

    From http://en.wikisource.org/wiki/Journal_of_Discourses/Volume_20/The_Church_Partially_in_the_United_Order,_etc. , though there are at least several others like it from various other contemporaries from the time period when UOs were attempting to be established throughout Utah. They made certain accommodations as an introduction to the principle, but they did not understand themselves to be in full literal compliance at any time as the letter of D&C 104 was not fulfilled, though that was their ultimate goal.

    I remember one discourse, which I can’t find right now, where the speaker explicitly mentions the provision that any man in the Order can withdraw from the Treasury until he proves himself unworthy to do so (D&C 104:72-75) as one element of the full United Order that the Saints of the 1870s and 1880s would not tolerate. Their ignorance denied them some privileges, just as our ignorance denies us some privileges today.

    As to the comment policy, I am familiar with it and have been checking in on T&S for a very long time. Maybe I am just not in the condition to be discussing this right now because my tolerance for scriptural revisionism and demonstrated faithlessness in the prophecies of scripture among so-called believing Latter-day Saints has been worn past to its extremities this week. I don’t intend to appear condescending or hostile, I am just sick of pseudo-intellectual justification from supposed members for adapting and fitting the doctrine of the Church and the word of the Holy Scriptures with the fallen creeds of the apostate, abominable world. I have been fighting off the wolves in sheeps’ clothing all the day long in other communities I mod.

    I know that the bloggernacle as a general rule is dangerous ground to approach when I’m already agitated, but this article didn’t seem too likely to stir up trouble at first. Oh well.

  10. Curtis Pew on February 28, 2012 at 1:05 pm

    I’d often thought that tax laws would by a major obstacle to a revival of the United Order. (After, of course, being righteous enough to pull it off.) After reading this post I’m not sure they’re as much an obstacle as I thought. Thanks.

  11. Stephanie on February 28, 2012 at 3:44 pm

    If we really want to live the law of consecration, we wouldn’t need to wait for a scenario like this. Just skip steps 1 and 2 where you deed your property to the church and it grants you the use back and instead use your own “property” (physical property, skills, education) to 3. work your profession during the year, and 4. donate any surplus back to the church at the end of the year.

    I don’t really think that we will be commanded to live the United Order until we already live it in our personal lives without being commanded to.

  12. Jax on February 28, 2012 at 5:55 pm

    I don’t really think that we will be commanded to live the United Order until we already live it in our personal lives without being commanded to.

    I haven’t been to the temple as recently as I would have liked, but unless they have changed it significantly in the last few months I thought we were still commanded to live the Law of Consecration as explained in the scriptures… and such thoughts are repeated in Gen. Conf quite frequently in various talks and sometimes quite explicitly (see Elder Christofferson “Come Unto Zion” circa 2008) I’m obviously using the terms “Zion”, “United Order”, and “Law of Consecration” as faily interchangeable. I hope no one complains about my logic that it would require a United Order to keep the Law of Consecration fully, and that doing so would bring about the establishment of Zion.

  13. clark on February 28, 2012 at 10:21 pm

    How are various monasteries in the United States taxed? It seems to me that would be the model for any United Order. And there are lots of monasteries (Catholic, Buddhist and I suspect others)

  14. Sam Brunson on February 28, 2012 at 10:38 pm

    clark, I assume that monasteries are generally tax-exempt organizations. That is, they probably don’t pay taxes on their income and donations, except to the extent they’re engaged in a business (for example, if a monastery grew a garden and sold produce to grocery stores, they would likely be taxable on their income from the sale of produce).

    But my interest is more in the tax consequences to members. And I don’t know if novitiate monks give all of their assets to the Order when they join, but if they do, they’re subject to the same deduction restrictions I detailed above.

    On your broader point, though, I’m sure that, if the Church were to reinstate a United Order, it would be structured carefully to work in today’s society and under today’s laws.

  15. Lucy on February 28, 2012 at 10:51 pm

    While governments may tax our pocket books, the Celestial Law will tax our souls. Do we have to wait for the Lord to shake things up? What’s the fun in that?

  16. Eric Boysen on February 29, 2012 at 4:26 am

    If welfare assistance is taxable, why doesn’t the church issue 1099′s to recipients?

  17. Stephanie on February 29, 2012 at 2:17 pm

    Re 12 – I just don’t think we are going to be anywhere close to living under a United Order until more LDS actually live the law of consecration in our own lives.

  18. Jax on February 29, 2012 at 6:18 pm

    Stephanie,

    I don’t disagree with that sentiment at all!!! Just the wording that made it sound like we aren’t currently commanded to live it.

  19. Alison Moore Smith on March 1, 2012 at 1:27 am

    Dear Sam. I am an accountant. If you think talking about taxes is “fun” I think you need a Valium.

    P.S. Fair tax.

  20. KTB on March 1, 2012 at 4:13 pm

    Sam,

    Canada apparently has a tax provision for communal groups, Section 143 of the Tax Act according to the article below, that applies to those that live and work together and don’t own property in their own right.

    The Canadian tax authorities are currently challenging the tax filings of the leader of an FLDS break-off group, claiming that the FLDS group does not meet the requirements of the Tax Act:

    http://www.vancouversun.com/news/Winston+Blackmore+centre+Federal+Court+fight/6041966/story.html

  21. Stephen M (Ethesis) on March 1, 2012 at 8:33 pm

    Hmm, I would think that members would be employed by the non-profit entity which would lease them out, somewhat like a law firm provides associates.

  22. Sam Brunson on March 2, 2012 at 10:13 am

    Stephen,
    That would probably be a tough way to structure it; members would still be taxable on their income (just like law firm associates and employees of nonprofits), and such a structure would probably cause the nonprofit to be engaged in a trade or business, meaning it would be taxable on that income.

  23. Velikiye Kniaz on March 4, 2012 at 7:17 pm

    RE: #’s 4 & 5
    Dan,

    If memory serves me correctly, those who live to see the millenial reign of Christ will only be those who at His Second Coming, “..bowed their knee and confessed that Jesus is the Christ”. Thus non-believers will not be in attendance. However, there will be a great number of righteous non-L.D.S. people present. At the onset of the Millenium there will likely be as many denominations of Christianity as there now, as well as other religious faiths,just as long as their followers fulfilled the aforementioned proviso. All of these will continue to function within the context of Christ’s millenial government for perhaps a few hundred years. But by the time the Millenium is reaching its conclusion, all those then living on the earth will be member of the Church of Jesus Christ [of Latter-day Saints]. Since the “last days” will have come and been long gone by then, it is quite plausible that the Church will simply be called, “The Church of Jesus Christ”. By the by, it might take 1,000 years of living the Law of Consecration and Stewardship just to neutralize all of the greed and avarice which presently runs so rampant among the present inhabitants of this earth. Then again, those folks of that ilk will most probably not be there to see the dawn of the Millenium anyway! [That proviso again.]

    Finally, I’m not sure taxation will be part of the Millenial government functions either.

  24. jwharton on June 13, 2012 at 10:31 am

    Interesting discussion. I read most of the comments. There’s a significant missing piece here that is an essential component of consecration. It makes all the difference: It is our inheritance.

    When the United Order system is lived, we are not donating things to the church and then becoming peasants. We will actually be participating in a system of inheritance management that cures one of capitalism’s greatest flaws. The flaw is that under capitalism people use their surplus wealth to work for them so that they themselves can become idle. This often extends to getting other people to work for them so that they can become idle. Under Zion’s economic laws you yourself must labor and produce in order to acquire wealth. If you cease to labor then you must draw upon your own inheritance to do so.

    The most potent device people make use of to acquire gain without doing their own labor or production is usury. In principle, this applies to much more than just charging interest to loan someone money. It can also apply to things like MLM type organizations that get people working under you. It also applies to many rental situations too.

    Under Zion’s economic system, anything that is actually surplus is entrusted (not donated) to a common fund that is administered by the bishop of the local United Order. The bishop retains a tithe of your surplus to cover his expenses and the 90% portion is accounted into your personal inheritance. Thus, the common fund isn’t owned by the Bishop to do with as he pleases. The common fund is the cumulative inheritances of those participating that must be administered wisely and justly.

    So, when you think about it, instead of everyone using their surplus to try and acquire a continuation of gain despite their own idleness, it is consecrated such that it is made available to others in the form of loans in order to pass into someone’s stewardship. And, very importantly, there will not be any usury on the loans.

    Take a look at housing. Those who have a surplus home will consecrate it and have it credited to their inheritance. Someone who needs a home that doesn’t have enough in savings or in their inheritance to pay cash will get a usury-free loan and purchase it. They won’t be able to establish an inheritance until they have paid off the loan. Since there is no usury, they will be able to pay it off quickly. Nobody extorts rent as a landlord and no banks extort interest.

    In a nutshell, the whole point of Zion’s economic system is to arrange things so that all people put into their inheritance wealth they have acquired by the labor and industry of their own endeavors. It makes it so that your consumption directly diminishes your own inheritance. It puts a stop to all of the ways we enslave one another to extract immoral gain by various devices.

    Zion is all about promoting and advancing the cause of liberty!