According to a whistleblower complaint filed last November, the Church of Jesus Christ of Latter-day Saints (the Mormon church) may have defrauded U.S. taxpayers out of billions of dollars. Filed by David A. Nielsen, the lawsuit alleges the church has enriched itself, amassing a fortune of $100 billion from tax-exempt donations instead of using the funds for charitable purposes.
Nielsen was an investment manager for the church in Utah. The identity of IRS whistleblowers is usually kept confidential, but Nielsen apparently wanted to expose his employer; his twin brother sent a copy of the whistleblower lawsuit to The Washington Post.
The church has its own investment division, Ensign Peak Advisors, with offices close to the church’s headquarters in Salt Lake City. Nielsen learned about the alleged misconduct while working as a senior portfolio manager at Ensign.
Members of the church are expected to donate 10 percent of their income to it; this practice is known as ‘tithing.’ The church has about six million members in the U.S., from whom it reportedly collects about $7 billion in donations every year.
Because Ensign is associated with a nonprofit (the church), it is allowed to operate on a tax-exempt basis. According to Nielsen, Ensign has violated the requirements for tax exemption, by engaging in profit-seeking, rather than religious or educational activities. He believes the ‘nonprofit’ owes the federal government billions of dollars in taxes.
Under the IRS’s whistleblower program, Nielsen could receive an award of up to 30 percent of any unpaid taxes and penalties collected.
David A. Nielsen’s brother Lars said in a statement that, “Having seen tens of billions in contributions and scores more in investment returns come in, and having seen nothing except two unlawful distributions to for-profit concerns go out, [David] was dejected beyond words.”
In the past, church authorities have claimed that the organization pays taxes on “any income it derives from revenue-producing activities.” However, the value of Ensign’s portfolio allegedly grew from $12 billion in 1997 to nearly $100 billion in 2019. In 22 years, Ensign has never funded any activities related to charity, religion, or education, Nielsen claims. Yet it never paid taxes on its spectacular profits.
According to a former IRS official appointed by The Washington Post to analyze the whistleblower complaint, “a charity that simply amasses a war chest year after year and does not spend any money for charity purposes” does not meet the requirements for tax exemption. Under IRS rules, the charitable work of a nonprofit must be “commensurate in scope with its financial resources.”
Besides the funds controlled by Ensign, the church owns an estimated $35 billion worth of “temples and meeting houses around the world,” and [controls] numerous “commercial ventures worth many billions more,” according to a 2012 estimate by Reuters. Considering the Church of Jesus Christ of Latter-day Saints owns assets valued at above $135 billion, its self-reported annual spending of $40 million on charitable projects seems hardly “commensurate” with the nonprofit’s resources.
In 2018, a Mormon bishop said the church was “setting aside a portion of its revenues each year” to prepare for Judgment Day and the Second Coming of Christ. The U.S. government, however, may not have to wait until God sends his son to Earth to collect taxes owed by the church. If the whistleblower complaint succeeds, Mr. Nielsen could potentially receive an award surpassing a hundred million dollars. The largest award received by an IRS whistleblower to date amounted to $104 million.