We are called to be Bereans. We need to carefully check the words of the pastors and church leaders and not accept them on face value.That includes their reports on financial management. This can prove to be a problem for many people because complex accounting tactics can be difficult to decipher. When a pastor has a bevy of lawyers and accountant taking care of stuff, it can be even more difficult to see what is going on. It is relatively easy to say one thing and mean another in this game. Both can be true, depending on how you define terms.
Deb reminded me of a relevant story in Acts 5:1-4. Let me state this loud and clear. I find the outcome of this incident difficult and I have yet to reach a place of peace with it. Obviously, this was considered a big deal to the apostles and God. If anyone says that I believe that God is going to strike someone dead, I will personally smack them upside the head.
There are many young people at Driscoll's churches who have little experience with the complexities of legal accounting methods. Do not misunderstand me. I am not accusing Mark Driscoll of doing anything illegal with his money management. I don't know if he is or isn't. However, I am saying that there is much more to be discussed before giving him a pass of giving it "all" to the church.
Once again, we thank him for his kindness in allowing us to repost his excellent tutorial on how to figure out what might be going on.
Mark Driscoll and Mars Hill have been defending some of their actions relating to the deceptive marketing of the Real Marriage book by claiming that Driscoll had given much or all of the money he had made from the book to the church. Driscoll told a meeting of church leaders that he and his wife were “tithing 100 percent” of their earnings to the church.
Just like the #1 New York Times ranking, it’s a claim that’s accurate but untrue.
Yes, Mark Driscoll has given some of his book money to the church, but almost all of it is funneled back to him through a tax vehicle called a Charitable Remainder UniTrust (CRUT for short). If you endured with me through the inurement post, I think you can make it through this one, too. I’ll tell you what a CRUT is, what we know about Driscoll’s CRUT, then we’ll go through a timeline of Mark Driscoll’s multi-state corporate entities to show you what he is doing with his book money.
How CRUTs work
Perhaps the best way to explain a CRUT is to take each term separately.
Charitable. A donor selects a nonprofit charity as the ultimate beneficiary from what is considered a donation. CRUTs are a common mechanism for nonprofit organizations to manage donations from wealthy donors, so there’s nothing inherently dishonest or unethical about them. They were created by an act of Congress, so they are entirely legal and they help a lot of great organizations. If you’ve ever seen offers by charities to help you with estate planning and planned giving, a CRUT is one of the things they will offer to create for you. Driscoll’s CRUT, which was created in Colorado, is registered to the same address as Mars Hill Church, so we can assume that the church is the official charity for this CRUT.
Unitrust. We need to take the terms out of order for the next step to make sense. At least once a year, the CRUT must distribute a percentage of its assets to what is termed the “non-charitable beneficiary.” This is a person (or persons) that was living at the time that the CRUT was established, and is living at the time of the annual distribution. Most CRUTs designate the person establishing it as the non-charitable beneficiary, so it functions as an annuity or pension for the rest of that person’s life. The CRUT must pay between 5 percent and 50 percent of the value each year. The rate of distribution cannot vary once the CRUT has been created, hence the uni in the title.
For example, let’s say you establish a CRUT with $500,000 with a 10 percent annual distribution rate. At the end of the first year, you’d get a check for $50,000. Let’s say, though, that the CRUT had invested its assets well so that at the end of the second year its assets were worth $750,000. You’d get a check for $75,000 at the end of year two. On the other hand, the market may have done poorly, so you could get a check of $30,000 if the assets were valued at $300,000.
We don’t know who the Driscolls have designated as the non-charitable beneficiaries, though, given that he has said that he could retire and live off his book income, it is certainly one or more members of his family. In Elephant Room One, Driscoll, who was supposed to be moderating a discussion between David Platt and James MacDonald on wealth, seemed to argue with Platt about the need for parents to set aside wealth for their children to benefit them to “a thousand generations.” (Watch at around 8:50.) Driscoll also owns a Washington corporation called Lasting Legacy, which, based on its title, may be his vehicle for protecting his income for his children. There’s nothing wrong with that, but it does show that he is intentional about saving money from his endeavors for his family, and a CRUT is a perfect way to do that.
Remainder. Why do charities promote CRUTs if the money is paid to the donor? Because they eventually get value from it when one of two things happens. First, if the recipient of the annuity dies, whatever is left in the CRUT goes to the charity. Second, when payouts or market fluctuations deplete the value to 10 percent of the original donation, the payouts cease and the 10 percent goes to the charity. This is the remainder after either death or depletion. In our $500,000 example, the charity would know that it will eventually get at least $50,000, though it may get much more if the donor dies before the balance reaches that threshold.
One of the reasons donors use CRUTs is that they can protect large influxes of wealth from immediate taxation. So rather than having to pay taxes on $500,000, the donor would pay taxes on the $50,000 paid in the first year, though that payment will vary from year to year. One explanation of the system described the donor as “renting” the charity’s nonprofit status, with the rent being the eventual 10 percent remainder. (This is a simplified layman’s explanation. Don’t go out and start a CRUT based on what you read here. Consult a real expert first.)
What we know about the Driscoll CRUT
Thanks to research assistance by a helpful PP reader and the work of Wenatchee the Hatchet, we know a little bit about the income and ownership structure of Driscoll’s various personal corporate entities. To spare you some of the details for now, you can review the timeline of how these came to be a little later in this post.
For now, it is sufficient to understand that Driscoll’s Real Marriage book was published in early 2012, though he would have received his first income in the form of an advance from the publisher in 2011. The book is copyrighted to On Mission LLC, which is 75 percent owned by On Mission CRUT, and 25 percent owned by Living Legacy LLC.
For the 2012 tax year, On Mission CRUT reported income of $464,340. This is almost certainly from the Real Marriage advance. If we assume that Driscoll’s literary agent collects a standard 15 percent commission and that the advance was split 75/25 by On Mission LLC, the owner of the book (with OMCRUT getting 75 percent), we find that the probable advance for the book was around $720,000.
This is in line with my estimated royalty earnings of around $500,000 from just the New York Times listing alone. We know from the contract that Result Source coordinates with the publisher to ensure enough copies are printed for its initial mass purchases, so the publisher would have known that the NYT campaign was going to happen when it negotiated the advance with Driscoll’s literary agent. Welearned from NewSpring that it was Noble’s literary agent that suggested the Result Source campaign, and it’s likely that Noble and Driscoll share the same agent, cross promoting each other’s books, as they do. I think that Driscoll’s agent negotiated the advance with the publisher and promised that the church would contribute the money necessary for the RSI campaign, promote it in a sermon series, and create a national Real Marriage tour to promote it long after its January release. If the publisher was assured that all that would happen, a $720,000 advance to Driscoll would not have been a terribly risky bet.
On several occasions Driscoll has said that all or most of his book income goes to Mars Hill. For example, he said this in 2009:
Mars Hill gets half of all the royalties so the books that I publish, about 75% of the revenue goes to Mars Hill Church, not me. Not me. Because I’m worried about this issue, greed, shameful gain.
Though this statement predates the On Mission CRUT, the 75 percent figure perfectly matches OMCRUT’s 75 percent ownership share of Driscoll’s books. This is surprising, because the claim that most of the money is going back to the church doesn’t match his more-recent claim that his book income is sufficient for him and has family to live off. Simply giving half of it away probably wouldn’t give him enough income to live off comfortably, nor would it provide for his children and grandchildren.
Just before the Real Marriage book was released, he told Mars Hill leaders that “Grace and I are tithing 100 percent of any proceeds we receive from that pre-sale campaign back to Mars Hill Church.” At the time, it seemed strange that he would refer to a 100 percent donation as a tithe, especially because a tithe means just ten percent.
Now that you understand how his CRUT works, those statements make more sense. In a sense, everything that goes into the CRUT is donated to Mars Hill. Once money enters the CRUT, Mars Hill is guaranteed a payout, though it doesn’t know when. That minimum payout, as you know now, is 10 percent — a tithe. By using the CRUT, Driscoll can say that he donated 100 percent to the church, though it does truly constitute a tithe, because 10 percent is all that Mars Hill may eventually get.
By putting his book money into a CRUT, Driscoll can reassure us that the church is getting the lion’s share of his earnings, though the church can’t actually touch his gift until the CRUT has paid most of the money to the Driscoll family, assuming, as we hope, they live long enough for that to happen.
The lesson is that next time you hear a celebrity pastor claim that he’s giving his earnings back to the church, you need to ask, “How, and when?”
Timeline of Driscoll Inc.
Here’s the timeline of what we can establish through public records of how all of these entities work:
On or before Jan 28, 2011 The On Mission Charitable Remainder Unitrust is established with Driscoll as the trustee.
Jan 28, 2011 On Mission LLC is created in the state of Colorado to “manage book royalties, printing and publishing.” Driscoll contributes $125 of $500 and OMCRUT contributes $375, giving us the 25/75 ownership split.
Sept 30, 2011 OMCRU Investments LLC is filed with Colorado Secretary of State, and is set up to manage property and investments. The manager is Mark Driscoll, and OMCRUT owns all of the initial $500 in capital.
Oct 10, 2011 This is the first evidence of the Real Marriage campaign. This is significant for its proximity to the Sept 30 activity, and suggests that these entities were being created in anticipation of having to manage the large income from the book.
Oct 13, 2011 The Result Source contract is signed.
Late November, 2011 Driscoll describes the Real Marriage campaign to his church leaders and expects them to help him push the book.
End of 2011 On Mission CRUT reports income of $464,340 for the 2011-12 tax year.
Jan 3, 2012 Real Marriage is released.
April 17, 2012 Lasting Legacy LLC is registered in the State of Washington with Mark Driscoll as the governing person.
Dec 6, 2012 OMCRU Investments LLC is registered in the State of Washington with OMCRUT as the governing person.
Dec 6, 2012 On Mission LLC registered with the State of Washington with OMCRU Investments and Lasting Legacy as governing persons.
Feb 21, 2014 On Mission CRUT is noted as having income of $4,643.