Can A Television Network Be A Church? The IRS Says Yes
Flip on Daystar television at any hour of the day and you'll likely see the elements of modern televangelism: a stylish set, an emotional spiritual message and a phone number on the screen soliciting donations.
Based in a studio complex between Dallas and Fort Worth, Texas, and broadcasting to a potential audience of 2 billion people around the globe, Daystar calls itself the fastest growing Christian television network in the world.
The Internal Revenue Service considers Daystar something else: a church.
Televangelists have a choice when they deal with the IRS. Some, like Pat Robertson and Billy Graham, register as religious organizations. They're exempt from most taxes but still must file disclosure reports showing how they make and spend their money.
Daystar and dozens of others call themselves churches, which enjoy the greatest protection and privacy of all nonprofit organizations in America.
Churches avoid not only taxes, but any requirement to disclose their finances. And, as NPR has learned, for the past five years churches have avoided virtually any scrutiny whatsoever from the federal government's tax authority.
Today, television evangelists are larger, more numerous, more complex, richer, with bigger audiences than ever before and yet they are the least transparent of all nonprofits.
The top three religious broadcasters — Christian Broadcast Network, Trinity Broadcasting Network and Daystar Television — are worth more than a quarter of a billion dollars combined, according to available records.
With $233 million in assets1, Daystar is the largest religious TV network in America that calls itself a church. As such, there's no objective way for viewers — who annually give an average of $35 million to Daystar — to be certain how their money is spent.
But NPR found hundreds of pages of court records filed as part of a 2011 employee lawsuit in Texas that has since been dismissed. In them were six years of audited financial statements from Daystar, including balance sheets, income and expense records and detailed accounting of donations.
Those records offer a deep and unprecedented look at the inner workings of a modern religious empire, and they raise issues as basic as the definition of "church" and as grand as the role of government in religion.
They show generous donations and loans that Daystar made to friends, and records of charitable giving that looked different from what Daystar describes on the air.
The founder and CEO of Daystar is a dapper, often-tearful, 56-year-old Pentecostal minister from Georgia named Marcus Lamb. He's a spirited preacher and a tireless fundraiser. He declined numerous requests to speak to NPR. But in a four-page letter from Daniel Woodward, Daystar's director of marketing, the network defends its business practices and notes that all of them comply with IRS rules. As a nonprofit broadcaster, it is little different from NPR, Woodward says, but for its classification as a church under IRS guidelines.2
"Both networks are nonprofit entities that are tax exempt under Section 501(c)(3)," Woodward writes. "They both enjoy all of the same benefits and obligations, other than the fact that Daystar does not have to file a form 990, due to its church status, for which it is fully compliant under the law."
Daystar produces its own lineup of popular Christian talk shows and sells airtime to well-known evangelists such as T.D. Jakes and Joel Osteen. "It just speaks to me, and I feel like I'm being ministered to," says Jordan Riley, a Christian pop singer in Seattle who supports Daystar.
Despite its self-description as a church, Daystar does not resemble a church in any traditional sense.
"Church to me is when I'm gathered with other believers," Riley says. "I don't consider it an electronic church."
Several former employees also don't call Daystar a church.
"When the lights are on and the cameras are on, we're a ministry. When those lights are off, cameras are off, it doesn't feel like a ministry," says Lisa Anderson, former executive assistant to Marcus Lamb and his wife, Joni. "It is a business making money."
Daystar's former IT manager Bill Hornback agrees. "I mean, there's no Sunday sermon, no Wednesday night meeting. It's all business. It's not a church. It's a television broadcasting company, that's what they are," says Hornback.
In his letter, Daystar's marketing director points out that the IRS has recognized Daystar as a church from the network's inception. And he adds that Daystar regularly conducts marriages, funerals, baptisms and communions just like any other church. Yet former employees interviewed by NPR said they could not recall a single instance of this happening.
The IRS has a definition of a church, called the "14-point test." Among the criteria: regular services, Sunday school, ordained ministers and a regular congregation. But it rarely enforces the 14-point test anymore and, in fact, has never challenged Daystar's claim to be a church.
In a deposition filed with court records, Marcus Lamb defended Daystar's standing as a church, saying the network's viewers "are our congregation." 3
NPR asked Washington tax lawyer Marcus Owens, former director of the Exempt Organizations section at the IRS, if a television audience can constitute a congregation. Owens referred to a case when he was at the IRS in which that same issue came up.
"That argument did not fly," he says, "because of the absence of a congregation, a group in the room with the religious leader when the services occurred."
As part of America's commitment to religious freedom, anyone can start a church, start preaching and passing the collection plate. They are presumed to be a church by the IRS — no questions asked.
"For the most part, a church is a church if they say it's a church. And if it's a church, then it's tax-exempt," says Ron Wright, tax assessor-collector in Tarrant County, Texas, where Daystar is located.
Daystar's broadcast complex and corporate jet — together valued at $9.5 million — would be subject to property taxes in Texas if the ministry were a for-profit business. But it's exempt because of its status as a church.4
According to court records, Daystar's primary revenue comes from selling airtime to other religious programmers. Its secondary income is donations. The documents show that between 2005 and 2011, Daystar took in $208 million in tax-deductible contributions from viewers through on-air pitches.5
Daystar has built a public image as a generous giver to charitable causes. Indeed, the network has contributed millions of dollars to a trauma center and a home for Holocaust survivors in Israel, a hospital in Calcutta, and to ministries that support women in Moldova and children in Uganda.
Lamb trumpeted those donations in a 2009 sermon in Australia: "In the last five years, Daystar has written checks of donations to others, to ministries, to churches, to missions, to hurricane relief, to tsunami relief, to hospitals, etc., to the tune of $30 million cash!"
NPR analyzed six years of Daystar balance sheets. They show the network gave away $9.7 million dollars in direct grants to outside recipients. Not $30 million. That works out to charitable giving of about 5 percent of donor revenue.
"My concern is the disconnect between what Daystar asks that the money be used for and how they actually use it," says Daniel Borochoff, president of CharityWatch.org, a nonprofit charity evaluator based in Chicago. Borochoff estimates he's examined more than 100,000 nonprofits in his 25 years doing this kind of work. NPR sent him Daystar documents and asked him to assess the network's charitable giving.
"Daystar needs to tell people that only about 5 percent of their contributions are going toward hospitals, churches, needy individuals," he says.
In its letter, Daystar explains the discrepancy by saying the majority of viewer contributions actually pays for the costs of foreign satellite transmissions, which the network considers its "international mission work."
To see where the actual cash donations go, NPR examined six years of network giving and found that some of the money goes to family interests and ministry expenses.
According to court records, Daystar gave:
Other donations of tax-deductible viewer contributions include $60,000 to Israeli lawyers who helped Daystar get a cable television contract, according to the publisher of Teva Ha'Dvarim Magazine, who acted as an intermediary; $23,674 for a ministry trip to Asia; $60,000 in payments to "Daystar and Daystar Remotes"; and $30,000 to the First Baptist Church of Orlando at a time when the pastor was helping Daystar buy a local educational TV station, according to Daystar documents filed with the 193rd Judicial District Court in Dallas County.
Moreover, evangelists who bought airtime on Daystar or appeared as guests on the network received more than $500,000. Of that sum, $92,000 went to the Rev. T.L. Lowery and his foundation, on whose board of directors Lamb sits.
Daystar spent nondonation ministry income on expenses that included $572,154 in sponsorship and expenses for a Christian NASCAR driver named Blake Koch6; a $2.3 million loan to the Rev. Frank Harber, Lamb's former special assistant and golfing buddy, to start a church that defaulted on the loan7; and $97,320 spent at retail bookstores to buy up copies of Joni Lamb's autobiography, Surrender All, helping to drive it onto a best-sellers list.8 Daystar says the books were given away as premiums to donors.
None of this is illegal, and Daystar says in its letter that all of its charitable contributions go to groups or individuals that share its Christian mission.
"It would be a lot easier to sort all of this out if Daystar filed a public disclosure document with the IRS like the secular charities," says CharityWatch's Borochoff. "If you want to make a contribution to your father's care facility or your kids' university and that's out there and open for anybody to ask about, it brings a lot of accountability that wouldn't be there otherwise."
Daystar's response says it has always supported "like-minded ministries spreading the Gospel." Furthermore, "Donors are aware and appreciate our stewardship on their behalf."
Joyce Wade, who worked in the Prayer Department as one of her jobs during her eight years at Daystar before she quit, says she was "flabbergasted" after viewing the pages of contributions found in court documents.
"I'm almost floored by the amounts I saw," she says. "And still wondering why, why is it that those organizations ... can get this much money?"
By all accounts, Marcus Lamb is a brilliant businessman who has single-handedly built Daystar into a Christian media powerhouse.
Though Daystar is a quarter-billion-dollar enterprise, former employees say it's run like a family business. Court records from 2010 show the board of directors was composed entirely of Lamb family members and their lawyer — a structure the Evangelical Council for Financial Accountability considers bad governance.
Daystar counters that its books are audited by an outside accounting firm every year and its financials are available to donors.
At NPR's request, the Trinity Foundation, a watchdog group in Dallas that monitors Christian broadcasters, compiled a list of the nation's 30 leading evangelist broadcasters. Twenty-two of them are designated churches, meaning they don't have to report anything to anybody. Of those, two-thirds have churches, while a third of them — including Daystar — hold no regular services.
Eight of the top 30 evangelists have chosen not to call themselves churches. They are classified as religious nonprofits, which means they must disclose their finances for public inspection. One of them is Billy Graham's organization.
"I think the simplest reason is that Billy Graham Evangelistic Association is not a church; it's what you might call a para-church," says spokesman Mark DeMoss. He says Billy Graham, now 95, was an early proponent of rigorous financial openness in a field in which other ministers often preferred to protect their privacy. Graham's IRS Form 990 , for instance, shows directors' salaries, how much contractors are paid and which organizations received grants.
"For the Graham organization, the transparency has not been a challenge," DeMoss continues. "Other organizations have figured out that they could classify themselves as a church and avoid filing the form and therefore avoid disclosing some of this financial data."
But the truth is, Marcus Lamb doesn't have to worry about the IRS asking whether Daystar qualifies for church status or auditing its books.
Because of a quirk in rules by the IRS, the agency has effectively stopped auditing churches for the past five years.
"As of now, and in fact since 2009, the IRS has not to the best of my knowledge" audited a church, says Owens, the tax attorney and former IRS official. "In fact, I don't believe [it] can conduct an audit of a church,"
The Church Audit Procedures Act states that a high-ranking Treasury Department official must sign off if the IRS demands a church's records. But since a court ruling in 2009, the IRS has not changed the law to specify who that high-ranking official should be. And here's the catch: Until that happens, there's no one in the government to authorize a church audit.
NPR repeatedly asked for an explanation from the IRS about the hiatus in church audits, but it declined to comment.
The agency has said little about churches since a few high-profile cases made waves years ago. The IRS had been looking at churches thought to have endorsed political candidates. The audits found nothing, but the process angered church leaders and members of Congress.
Paul Streckfus, a tax attorney who edits the Exempt Organization Tax Journal, believes the IRS actually likes having an excuse for not bothering churches.
"Why the IRS doesn't like to audit churches?" Streckfus says. "The churches don't like it. They can scream and yell quite loudly and get Congress members' attention. And so the IRS not only doesn't like the churches to be mad at them, but doesn't like Congress to be mad at them."
It's reasonable to ask, then, what happens with television ministries that are classified as churches. They take in tens of millions of dollars in revenue, they're as big as some large corporations, yet many of them are answerable to no one outside of the organization.
"Some of us feel some of these televangelists have taken advantage of the fact that churches have little regulation by government and few reporting requirements," says Streckfus.
Even before church audits stopped, a congressional committee was concerned that televangelists were misbehaving. Seven years ago, the Senate Finance Committee started investigating six high-flying ministries. Two cooperated; four provided incomplete records or refused altogether, citing church privacy rules. Daystar was not among them.
The committee looked at Atlanta megachurch pastor Bishop Eddie Long, and noted that he made trips in a church-leased jet to Las Vegas and Caribbean resort islands, and had a Rolls Royce and a Bentley.
The investigation examined Georgia-based televangelist Creflo Dollar and his wife, Taffi, who also drove Rolls Royces and had numerous subsidiaries connected to their church.
The inquiry also looked at the $3.5 million Trump Tower condo and the Bentley convertible purchased by televangelists Paula and Randy White.
Investigators concluded that the lack of accountability among these six ministries was "troubling considering that churches can reach the size of large taxable corporations, control numerous ... subsidiaries, and bestow Wall Street-size benefits on their ministers." 9
"There was abuse. But I don't want to say because there was abuse by a handful of televangelists that that's spread among all the churches of America," says Sen. Charles Grassley, R-Iowa, who was the head of the Finance Committee when it launched the investigation. In an interview with NPR, he expressed dismay at the findings of his staff.
"Before the crucifixion, Jesus rode into Jerusalem on the back of an ass. And to see people traveling around in Bentleys seems to be a waste of the resources that could be used to help people in need and to win converts," Grassley says.
The Grassley committee devoted its longest, most detailed report to televangelist Kenneth Copeland and his Eagle Mountain International Church.
He's a 77-year-old Pentecostal evangelist from West Texas who's well-known for his folksy sermons and extensive personal property. His sprawling ministry complex north of Fort Worth, Texas, includes the church, ministry building and private airport — which are together valued at $12.3 million, according to records in the Tarrant Appraisal District.
The ministry owns two jets, both exempt from property taxes. Kenneth and Gloria Copeland's lakeside villa — valued at $6.3 million — is also tax-exempt because it's listed as a parsonage.10
Records at the Texas Secretary of State's office show 13 assumed names for Eagle Mountain International Church, including five music and book companies. Moreover, the state comptroller's office lists for-profit companies in real estate, fuel, fitness and cattle that are connected to the church or to the Copeland family. The ministry also pays taxes on the $5 million value of the natural gas deposits on its 1,290-acre property.
In its final report, the Grassley committee questioned whether "church status is being gamed to shield" certain activities from public scrutiny.
James Tito, executive director of Kenneth Copeland Ministries, says in an email to NPR that the ministry has more than 500,000 members and supports worthy causes in 120 countries. He says the church's 13 assumed business names are all related to its religious mission and are therefore nontaxable. And he says all of the church's for-profit companies file federal income tax returns as required by the IRS.
NPR asked Tarrant County Tax Assessor-Collector Ron White about the Copelands' tax-free chateau and private airport.
"You know, I'm Catholic," Wright says. "I don't know any priest who lives that lavishly. But government should not be determining if a minister is living too lavishly. It's not for the government to determine if someone really needs an airplane for their ministry. That's just not something government should be getting into."
The bottom line: A megaministry with millions of dollars in property and profitable side businesses enjoys the same tax benefits that a little country church does.
And that's just how it should be, says David Middlebrook, a noted church lawyer who represents Kenneth Copeland.
"The fact that someone is very successful at what they do and is beloved by millions of people, and it's not the Norman Rockwell painting of a small church in the woods, I don't think they should be penalized for that," Middlebrook says.
Kenneth Copeland Ministries fiercely defends its privacy.
In 2007, when the Senate Finance Committee investigated televangelists and requested Copeland's financial statements, the ministry declined to provide them.
In the same year, Tarrant County requested Copeland ministry salaries. Copeland declined to make them public, then sued the appraisal district, and won.
Shortly after that lawsuit, the state comptroller's office changed the law so that today no religious leader in Texas seeking a tax exemption has to report how much he or she makes.
"There is a long-held tradition in our country that church activities are private," Middlebrook continues, "and ultimately, the congregants ... have the ultimate veto power over the organization. It's the veto power of shutting their wallet and walking out the door."
NPR's Samantha Sunne contributed research to this report.
Editor's Note: The following footnotes were embedded in this story:
Copyright 2022 NPR. To see more, visit https://www.npr.org.