Render Unto Caesar…

IRS Commissioner Tells Tax-Exempt Churches: Thou Shalt Not Electioneer

Internal Revenue Service Com­mis­sioner Mark W. Everson is well aware that some churches and other non-profits are abusing their tax-exempt status by intervening in partisan elections – and he has vowed to put a stop to it.

In remarks delivered before the City Club of Cleveland Feb. 24, Everson unveiled an ambitious new plan of enforcement in advance of the November elections designed to keep all tax-exempt groups in compliance with the law. Everson said he is confident the goal can be achieved without stepping on the free-speech rights of religious leaders.

“Freedom of speech and religious liberty are essential elements of our democracy,” Everson said. “But the Supreme Court has in essence held that tax exemption is a privilege, not a right, stating, ‘Congress has not violated [an organization’s] First Amendment rights by declining to subsidize its First Amendment activities.’

“The rule against intervention by charities and churches in political campaigns has been entrenched in the law for over a half-century,” he continued. “Con­gress enacted the law. The courts upheld it. Our job at the IRS is to educate the public and charities about the law and to enforce it in a fair and evenhanded manner.”

According to Everson, nothing short of public confidence in churches is at stake.

“Are we going to let these political activities spread to our charities and churches?” Everson asked. “Now is the time to act, before it is too late.”

The IRS head concluded, “Clearly political intervention by charities and churches is an area where the IRS must tread carefully. There are few bright lines for evaluating political intervention; our work requires a careful balancing of all the facts and circumstances. But I am convinced that we must act. We can’t afford to have our charitable and religious institutions undermined by politics.”

Everson’s speech included a review of specific steps taken by the IRS during the 2004 elections to crack down on unlawful forms of politicking by churches and other non-profits that hold the 501(c)(3) designation. It also listed new steps the agency will implement this year.

“While the vast majority of charities, including churches, do not engage in politicking, to address what we saw as increasing political intervention in the 2004 cycle, the IRS adopted a two-pronged approach,” Everson explained. “First, we expanded our educational efforts to remind section 501(c)(3) organizations – charities and churches – about the prohibition on political activities and the consequences of violating it. 

“We spread this message every way we could: by press releases, speeches, workshops, IRS Nationwide Tax Forums, and even in a letter to seven national political parties,” he continued. “Second, we created a dedicated enforcement program. Under this initiative, we moved quickly on specific, credible allegations of wrongdoing. We did all this in a balanced and even-handed manner. We examined org­an­i­zations that appeared to be violating the rules against political intervention. We wanted to stop improper activity during – not after – the election cycle.”

Two days before the Cleveland speech, the IRS issued a major report detailing the problem and outlining its plan to curb abuses. Observers say the report is a strong signal that the tax agency has adopted a “zero tolerance” policy toward pulpit-based electioneering.

Staffers at Americans United say it’s especially interesting that Everson chose an Ohio venue to unveil the IRS crackdown. That state is home to an aggressive effort by a group of conservative pastors who, under the guise of a tax-exempt entity called the Ohio Restoration Project, are trying to build a church-based political machine with the goal of electing Secretary of State Kenneth Blackwell as governor.

The pro-Blackwell effort, spearheaded by the Rev. Russell Johnson and the Rev. Rod Parsley, is so over the top that in January more than 30 Ohio religious leaders wrote to the IRS and requested an investigation. (See “Buckeye Backlash,” March 2006 Church & State.)

Last month, the Associated Press reported that Blackwell has met with religious leaders far more often than the IRS complaint alleged.

Noted the AP, “While the complaint looked at nine publicly reported events sponsored by the pastors, a review of Blackwell’s daily schedule found 19 other meetings or other contact with the pastors, including flights on a church-owned plane, meetings in Blackwell’s office and attendance at church services.”

The news service went on to report that Blackwell “had contact with pastors Russell Johnson and Rod Parsley or their churches 28 times from January 2004 through March of this year.... That’s more than a third of the total number of events with a religious theme listed on Black­well’s schedule and represents the largest number of contacts with specific pastors.”

These pro-Blackwell activities, Ameri­cans United and other critics complain, are clearly problematic in light of the IRS Code. All non-profit groups holding 501(c)(3) status are barred from involvement in political campaigns. Houses of worship fall under this category, as do various other entities legally classified as “charities,” among them trade associations, many advocacy groups, social clubs and scientific organizations.

The IRS is now warning all of these bodies, houses of worship included, that they must refrain from intrusion into partisan campaigns. It’s a warning that must be heeded, says AU.

“Although charities are precluded from intervening in political campaigns, the IRS has seen a growth in the number and variety of allegations of such behavior by section 501(c)(3) organizations during election cycles,” read the executive summary of the Feb. 22 IRS re­port on the matter.

Noted the tax agency, “If left unaddressed, the potential for charities, including churches, being used as arms of political campaigns and parties will erode the public’s confidence in these institutions.”

The IRS action stands as a strong re­buke to claims by Reli­gious Right leaders that churches have a constitutional right to engage in pulpit-based politicking. The tax agency’s 26-page “Fi­nal Report” on the matter leaves no doubt where the agency stands: Intervention in partisan pol­i­ticking by tax-exempt 501 (c)(3) groups is unlawful and will not be tolerated.

At the same time it issued the report, the IRS made public a 10-page plan to educate non-profits about the tax code and new steps to enforce it when necessary.

Americans United welcomed the new report.

“This report proves that the IRS intends to fully enforce the law barring houses of worship from intervening in political campaigns,” said Barry W. Lynn, executive director of Americans United. “Pastors tempted to follow the Religious Right’s siren song into partisan activity need to sit up and take notice.

“Churches have no business becoming cogs in a candidate’s political ma­chine,” continued Lynn, who is a Uni­ted Church of Christ minister. “It damages the integrity of the church, and it violates federal tax law. This report indicates that the IRS takes allegations of violations seriously.”

As part of its initiative, the IRS examined activities by 132 non-profits during the 2004 election cycle. It notes that “fewer than half” of the entities examined were churches. The IRS concluded that in many of the cases, significant violations of the law had occurred.

The IRS reported that 22 of the cases were closed after review with no penalties or warnings assessed. Twenty-eight cases are still being examined, but of the remaining 82, the tax agency determined that 58 had engaged in prohibited activity. Three cases were so serious that the IRS has recommended revocation of the non-profits’ tax exemption. The other 55 received written warnings, and in one case, an excise tax was imposed. (Ac­cording to the report, the three cases of revocation were not churches.)

The report does not go into detail regarding allegations against churches and other non-profits, nor does it name names. Still, the document is powerful evidence that the tax agency took its task of enforcing the law seriously in 2004.

The Executive Summary notes that the IRS examined various allegations of partisan politicking by non-profits. Al­leged campaign intervention ran the gamut, and was summarized by the IRS in a succinct manner:

• Charities, including churches, distributing diverse printed materials that encouraged their members to vote for a preferred candidate (24 alleged; 9 determined),

• Religious leaders using the pulpit to endorse or oppose a particular candidate (19 alleged; 12 determined),

• Charities, including churches, criticizing or supporting a candidate on their website or through links to another website (15 alleged; 7 determined),

• Charities, including churches, disseminating improper voter guides or candidate ratings (14 alleged; 4 determined),

• Charities, including churches, placing signs on their property that show they support a particular candidate (12 alleged; 9 determined),

• Charities, including churches, giving improperly preferential treatment to certain candidates by permitting them to speak at functions (11 alleged; 9 determined), and

• Charities, including churches, making cash contributions to a candidate’s political campaign (7 alleged; 5 determined).”

Since 1996, Americans United has overseen “Project Fair Play,” an effort to educate religious leaders about federal tax law governing politicking. As part of that effort, AU reports egregious violations of the law to the IRS. The organization filed complaints against 11 houses of worship and other religious non-profits in 2004. Since the IRS report does not give details about the cases it examined, it’s impossible to know if any of the AU-reported incidents are among those examined. The odds are good, however, that many were.

“This report should lay to rest Religious Right claims that houses of worship have a right to engage in partisan politicking,” said Lynn. “They don’t, and any that ignore the law and do so anyway could face severe sanctions.”

Over the years, some Religious Right leaders have implied that the IRS does not enforce the “no-politicking” rule against houses of worship or that its enforcement is lax. A portion of the Internal Revenue Code, Section 7611, does state that the IRS may investigate the tax affairs of a house of worship only if the director of the exempt organizations division has a “reasonable belief” it is necessary.

As the report proves, the tax agency does not hesitate to employ this procedure when necessary. All the church-related inquiries detailed in the report were conducted under the Section 7611 procedures – a strong indication that the language is not being interpreted as a shield that protects churches from IRS inquiries.

With the 2006 election season in full swing, the IRS has vowed to do a better job of helping non-profits understand the mandates of the law. The tax agency has outlined several specific points to help it meet that goal. They include: distributing expanded educational material based on findings from the 2004 election cycle and making it widely available, starting the project earlier in the election year, publicizing the project in advance so there is no surprise to organizations and beefing up the IRS team that handles this issue to assure prompt handling of cases.

The first of these new IRS publications has already been released. Saddled with the bureaucratic title “Fact Sheet FS-2006-17,” the publication goes into great detail to explain what non-profits can and cannot do in the political arena and includes hypothetical examples that reflect the real-life issues many religious leaders must face. (See the publication here: www.irs.gov/newsroom/article/0,,id=154712,00.html.)

Despite these IRS efforts, opponents of church-based politicking know they will have to remain vigilant this year. Too many religious leaders seem determined to walk close to the edge.

In Pennsylvania, a new group called the Pennsylvania Pastors Network has been formed. Although organizers insist the group’s main goals are opposing legal abortion and same-sex marriage, the organization also seems interested in providing support for U.S. Sen. Rick Santorum, a Republican locked in a tight re-election campaign. (See “Santorum’s Amen Corner,” page 8.)

Some political leaders continue to mislead churches as well. In February, Republican Party officials in North Caro­lina requested copies of church directories from throughout the state, an action that clearly jeopardizes church tax exemption.

Chris Mears, the state GOP’s political director, made the request in a Feb. 15 memo titled “The pew and the ballot box” that was e-mailed to Republicans throughout North Carolina.

In the memo, Mears reported that the “Republican National Committee has completed a study on grass-roots activity that reveals that people who regularly attend church usually vote Republican when they vote” and added, “I am requesting that you collect as many church directories as you can and send them to me in an effort to fully register, educate and energize North Carolina’s congregations to vote in the 2006 elections.”

Mears apparently did not care that the project might place a church’s tax ex­emp­tion in jeopardy. Church donation of a directory could be considered an in-kind contribution, identical for tax purposes to a cash donation.

Efforts to build church-based political machines are also under way in Texas, Washington state, Kansas and other states.

In Kansas, the drive is spearheaded by two pastors, Joe Wright and Terry Fox, who are profiled in Religious Right leader James Dobson’s Citizen magazine this month.

Wright and Fox mobilized around the issue of same-sex marriage and insist that their efforts are not partisan. But their hard-ball politicking over the issue had repercussions at the ballot box. As the Focus on the Family publication pointed out, “More than 40 liberal and moderate candidates lost their races to conservatives in the November elections” in 2004.

The two now plan to travel to other states to train other pastors.

“Their goal,” Citizen reported, “is to identify at least two key pastors in each one who can mobilize hundreds of churches.”

Critics of pulpit-based politicking find this trend troubling. Too often, they say, alleged “issue advocacy” becomes an excuse to intervene in an election.

While Americans United welcomed the IRS crackdown, leaders of the Religious Right were less than pleased. Steve Crampton, chief counsel with the American Family Association’s Center for Law and Policy, told Agape Press, “I’d say they have essentially thrown down the gauntlet and have now challenged, openly, those of us who dare to speak to matters of politics to either put up or shut up, as it were.”

The Becket Fund for Religious Liber­ty, a conservative Roman Catholic legal group, was so upset by the IRS report that it offered to defend any house of worship that runs afoul of the IRS standard for free.

But one scholar who has studied the issue says the IRS has made the right call. In an opinion column that was distributed nationally by Religion New Service March 3, Melissa Rogers, a visiting professor of religion and public policy at Wake Forest University Divinity School in North Carolina, said houses of worship should consider themselves warned.

“Given the current climate, the IRS is right to increase its educational and enforcement efforts,” Rogers wrote. “More­over, Congress made the right call when it instituted the electioneering ban. It’s a sensible quid pro quo for this tax-exempt status, and it has the salutary effect of helping to ensure that churches and charities aren’t converted into campaign precincts.”

Continued Rogers, “Religious organizations and individuals should do the right thing, too, both for legal and non-legal reasons. People of faith should resist every attempt to drag houses of worship into partisan politics, whether those attempts come from outside or inside the congregation. Contrary to recent suggestions by the North Carolina Republican National Com­mittee, which has asked individuals to forward their church directories, churches aren’t part of any political ‘base.’ They are houses of prayer for all peoples. Heaven help us if we forget that.”  

(To read the full IRS report and related materials, go here: www.irs.gov/pub/irs-tege/final_paci_report.pdf. An Adobe reader is required.)

Lynn said Americans United will ramp up Project Fair Play this election year.                 “The vast majority of houses of worship are willing to play by the rules,” Lynn said. “Those that refuse have been put on notice by the IRS that pulpit politicking will not be tolerated. It is time for everyone to simply obey the law.”