A Taxing Situation!

The headlines this week read: "IRS might take church's tax-exempt status". The 2004 election was widely commented by the press to have been effected by the religious right. And the IRS took notice. Earlier this year, the IRS released the results of its Political Activity Compliance Initiative which investigated allegations of political campaign activity by 501(c)(3) organizations during the 2004 campaign season. The results: Out of 87 completed audits involving churches and charities from the 2004 election cycle, political intervention was substantiated in 71% of the cases. One of those involved All Saints Episcopal Church in Pasadena California.

Located across the street from Fuller Theological Seminary the bustling campus of All Saints Episcopal Church has approximately 3,500 congregants each week. The current controversy stems from a sermon delivered on October 31, 2004 just before the election. Entitled, "If Jesus debated Senator Kerry and President Bush" the speaker stated, "I do not intend to tell you how to vote... Good people of profound faith will be for either George Bush or John Kerry for reasons deeply rooted in their faith. I want you to hear me on this. Yet I want to say as clearly as I can how I see Jesus impacting your vote and mine... listen in as Kerry and Bush debate three hugely important issues this morning: ending war and violence, eliminating poverty, and holding tenaciously to hope." For complete text visit: http://www.allsaints-pas.org/all_saints_church.htm

So what could be wrong with that? Didn't the speaker do everything right? Well the church believes they did, however, the IRS disagrees. While I think it is reasonable to conclude the speaker was supporting Kerry over Bush, it would be the first time that one sermon resulted in the revocation of exemption. The remainder of the sermon went on to highlight the errors of President Bush in waging war, being anti-abortion and contributing to poverty. No criticism is leveled against Senator Kerry. The concluding phrase in three instances is a call to "vote all your values" and "Jesus places on your heart this question: Who is to be trusted as the world's chief peacemaker".

There is a war coming. This past Sunday the speaker challenged members of the congregation to see this as a fight for justice. Looking for feedback before responding to two summons from the IRS and a request for one of the pastors (rectors) to appear before the IRS, the speaker told those assembled "A courtroom would provide a venue in the halls of justice for us to make our argument. Our argument is that there is no objective basis for the IRS to have a reasonable belief that we have in deed participated in campaign interventiion. Furthermore we would argue that this entire case has been an intrusion, in fact an attack upon this Church's first amendment rights to the exercise of freedom of religion and freedom of speech." It appears the church is gearing up for a court battle which could significantly effect what churches can say from the pulpit.

What does this mean to me? First, the IRS has significantly increased the monitoring of campaign involvement by the local church. The issue dominates front and center at the top of the main IRS web page. The IRS has developed guidelines that the church should review http://www.irs.gov/newsroom/article/0,,id=154712,00.html.

Second, there are two guiding legal principles for the church to be aware of which include the tax code and case law. In regard to the code section 501(c)(3) says "no substantial part of the activities of [the organization] is carrying on propaganda, or otherwise attempting, to influence legislation.... and [it] does not participate in, or intervene in (including the publishing or distributing statements), any political campaign on behalf of (or in opposition to) any candidate for public office." The other is the case of Branch Ministries v. Rossotti, where the court removed the tax exempt status of a church for intervening in a presidential campaign writing: "The government has a compelling interest in maintaining the integrity of the tax system and in not subsidizing partisan political activity, and Section 501(c)(3) is the least restrictive means of accomplishing that purpose."

Third, we should remember that tax exemption is a privilege not a right and that we owe a duty to render unto Ceasar the things that are Ceasar's and unto God the things that are God's. Influencing our culture for Chirst is a high calling and some churches may want to abandon 501(c)(3) status to do so. Others may want to form a separate political advocacy group which can speak out very specifically on the moral issues of the day through the formation of a 501(c)(4). None of us should abandon our calling to speak to the difficult issues of the day but when it comes to specific legislation and specific candidates the church should carefully count the cost.

If you are a partnering church with Administer Justice you can find additional information in the churches only section of our web site under "politics letter". The September/October issue of Church Law & Tax Report by Christianity Today also does an excellent review of this issue.