Spring 2008, Vol. 11, No. 1

Quick Links:
Articles in this issue

Table of Contents

From the Editor:

Sally Gets Religion

God and Mammon on the Web

Off with their Head Scarves

Playing Godless

Letter to the Editor



IRS: Bipartisan Tool
by Marc Stern

For several election cycles, substantial media attention has been devoted to compliance—or lack thereof—by conservative churches and para-church groups with the ban on tax-exempt organizations endorsing or opposing candidates. This time around, the spotlight has broadened to illuminate the politically left-of-center.

Most of the initial attention focused on Presidential candidate Senator Barack Obama’s appearance at the United Church of Christ’s 2007 convention, and the resulting IRS investigation (which in May came to a determination that there had been no violation).

But there were also important stories about the Democratic candidates’ pursuit of endorsements by black pastors, including coverage of what appeared to be endorsements of Senator Obama and attacks on his opponent, Hillary Clinton, by clergy at Obama’s home church, Chicago’s now famous Trinity United Church of Christ.

Whether the focus is right- or left-leaning houses of worship, the issue of politicking by such exempt organizations has now become a legitimate news story, and not—as was the case not so long ago—just a tax compliance issue of concern mostly to not-for-profit organizations themselves.

Public scrutiny of the activity of tax-exempt organizations has resulted in enhanced IRS attention to the issue, which in turn has created yet more news coverage. Much of the coverage has been well-informed, although (as is to be expected of the daily press) sometimes too tightly focused on an immediate charge or counter-charge.

Nevertheless, the amount of misinformation created not by journalists but by “experts” and affected church officials is striking. This suggests the need for reporters to check on confident assertions by interested parties, and to compare claims about legal ambiguities or uncertainty to the IRS’s own readily available pronouncements on what constitutes intervention in a campaign.*

A tax-exempt not-for-profit organization enjoys two privileges. The less important one is that its does not have to pay taxes on its income. The more important is that gifts to the organization are deductible from the gross income of the donor.

Organizations exempt under these provisions are known as Section 501(c)(3) organizations, after the provision of the Internal Revenue Code that exempts the organizations’ own income from income taxes. (A different section, Internal Revenue Code 26 U.S.C. § 170, allows the donor deduction.)

These privileges come with certain restrictions, two of which are relevant here. The first is that no substantial part of the exempt organization’s work may involve lobbying for legislation; the second, that the organization is absolutely prohibited from endorsing or opposing candidates for elected public office.

The prescribed penalty is loss of tax exemption. The ban applies only to the institution and to its officials when speaking for the organization. It has no impact at all on those officials speaking in a private capacity. And it applies to all tax-exempt groups, not just religious ones.

The lobbying provision is long-standing and dates at least to the 1930s. (An early case denied an exemption to Planned Parenthood.) The ban on political intervention is newer, dating to 1954, and is the product of a floor amendment introduced by Lyndon Johnson, who was then a U.S. senator from Texas.

At the time, Johnson offered no explanation for his amendment, but recent scholarship suggests that he was interested in silencing two militant tax-exempt anti-communist groups that had aided his opponent in his senatorial race that year. Religious organizations were included simply because the amendment applied to all exempt organizations.

Requiring churches and, for that matter, other exempt organizations, to choose between endorsing or opposing candidates and being tax exempt is not, under well-settled law, unconstitutional. Two federal appeals courts have said so explicitly, in 1972 and in 2000. Both decisions upheld revocation of tax exemptions for churches that had openly endorsed a candidate, either on church-owned radio or by taking out an ad in a newspaper.

But people who should know better are often quoted in the press as suggesting otherwise. Thus, in a May 12 article on a planned protest of the IRS rules, the Wall Street Journal’s Suzanne Sataline quotes Rev. Steve Riggle (of Houston, Texas) as saying, “As a pastor, a private citizen, I can speak for myself. The IRS cannot quench my voice.”

These claims are bombast, not law as it is or is likely to be. While this article was in preparation, the IRS (doubtfully) found that Rev. Wiley Drake, a Southern Baptist pastor from California, had not violated the rules by endorsing Mike Huckabee for President on church stationery, because his letter was supposedly personal, not official.

Leaving aside the fact that the IRS does not tell private citizens what they can say, the Supreme Court held in Jimmy Swaggert Ministries (1990) that the federal tax exemption for churches is a matter of grace, not right. So while the Journal quoted Professor Lloyd Mayer of the Notre Dame Law School as saying that the rules “burden” religion, the Court has repeatedly held that a failure to subsidize speech does not burden speech under either the speech, religion, or due process clauses of the Constitution.

The government is thus free to deny subsidies (i.e., tax exemptions) to organizations that engage in whatever activities it may choose, provided it does not engage in viewpoint discrimination, for example by selectively exempting only secular or only religious groups, or only liberal or conservative ones. The slogan “the power to tax is the power to destroy” (i.e., the power to tax churches is the power to destroy them) was once an important constitutional principle, but it no longer has legal bite.

Once upon a time as well, the intricacies of 501(c)(3) law were of concern mostly to the general counsels of not-for-profit organizations. The law was not—and is not—particularly difficult to grasp for lawyers, although there are, of course close questions.

When does a clergyperson or other organizational official speak for the church (organization) and when for him—or herself? When does a statement on an issue also amount to a statement about a candidate? How may an organization relate to a public official who is also a candidate?

The more difficult issue for lawyers used to be the huge gap between what the IRS said the law demanded and how this was enforced.

Lawyers seeking to have their clients comply with the law were often met with the response: “But X (our competition and/or ideological opponent) did just what you said we cannot do. The IRS did nothing. You’re just being too cautious. We are going to do what X did.”

And so long as the IRS did little to enforce the restrictions, there was little danger in violating them. But with stepped-up enforcement over the past decade and increased public scrutiny of all charities, willful or ignorant disregard of the law has become risky.

How did compliance with 501(c)(3) come to be a public issue?

 For one thing, there has been a substantial increase in the public salience of religion in American politics and government since the election of Ronald Reagan in 1980. Overt appeals for political support, in both campaigns and governing, have become far more common than previously.

With presidential and other candidates seeking votes in houses of worship—a process churches sometimes abetted with thinly disguised endorsements in the form of “voter guides”—it was natural enough that their opponents would seek to deny them that advantage. One way of doing so was to challenge the tax-exempt status of churches that were (or were perceived to be) aiding an opponent’s campaign.

Then, in 1996, Americans United for Separation of Church and State (AU) began a formal campaign to file complaints with the IRS. According to a list maintained by AU, it has to date filed over 80 of them. Most seem to involve Republicans, but there are a good number of alleged Democratic violators as well. 

The AU campaign, called Operation Fair Play, has had several results. First, given the absence of vigorous, independent, and evenhanded IRS enforcement of the no-endorsement rules and AU’s notoriously antagonistic stance toward the religious right, the campaign was regarded (though not accurately) as targeting only conservative groups. That perceived tilt necessarily colored perceptions of the enforcement process, creating the impression that 501(c)(3) enforcement was aimed mostly at muzzling evangelical pastors.

AU’s campaign thus prompted Rep. Walter Jones, a North Carolina Republican, to introduce legislation to exempt religious institutions from the general ban endorsing candidates. Although, after generating heated public debate, the bill failed, it might well have been found unconstitutional for favoring religious over secular speech on political topics.

The number of complaints the IRS was receiving led to the impression on the part of church officials that they faced for the first time a real risk of losing their tax exemptions if they did not comply with the rules—which they claimed not to understand.

In response to charges that the rules were vague and not well known, the IRS directed an educational outreach program at the non-profit community (and especially at its religious sector) to explain what was forbidden and what was permitted.

In response to claims that it was not enforcing the law, the agency created a special unit to review complaints of 501(c)(3) violations, and sought to ensure uniform, swift, non-partisan, and public enforcement of the non-endorsement rules. Its first effort in 2004 led to the interesting finding that religious and secular tax-exempt organizations have, proportionately, been equally guilty of breaking the rules.

Why did the IRS for so long ignore fairly widespread violations of the restraints on partisan political activity?

Because the agency is chronically under-funded, it made perfect sense for it to focus its enforcement efforts on cases more likely to produce actual revenue. Moreover, enforcing the non-endorsement provision inevitably exposed the agency to charges of partisanship, given that it will always be functioning under a presidential administration that is, by definition, partisan. (Of course, leaving the field to ideological groups like AU created a different partisanship problem.)

Finally—and apparently unknown to the press—the 1984 federal Church Audit Act imposes special procedural requirements on the IRS when it audits religious institutions. The extra burden of auditing a church might well have discouraged already overburdened officials from pursuing violations of the rules.

An interesting development this year is the media’s focus on the political activity of black churches, probably due to the fact that the Democratic contenders fought hard for the votes of African Americans. Not that open politicking in black churches is a new phenomenon.

For decades, these churches (along with the NAACP) represented the bulk of civil society in the African-American community. They thus served as a magnet for politicians, and especially Democratic ones, as Seanna Adcox reported from South Carolina for AP on December 26 and Meredith Heagney, Joe Hallet and Jack Tory did for the Columbia Dispatch a month later. (The latter article mistakenly claimed that only one church has ever lost its exemption for violating the no-endorsement rule; at least two have.)

A friend who is a long-time aide to Democratic legislators tells me he cut his eye teeth in politics 30 years ago on Sundays accompanying a (white) candidate from black church to black church. That the press so long gave black church political involvement a pass is doubtless due to a number of factors, not least a tacit acceptance of the importance of the black church in the black community—a point underlined by the insistence of some pastors, as Heagney, Hallet and Tory reported, that they have to endorse candidates because it is essential for the guidance of their communities.

No reporter stopped to ask if this was uniquely true of African American churches or a commentary about all clergy and therefore equally applicable to other faith traditions. In any event, black churches have begun to get equal scrutiny as white churches in a possible sign of progress on America’s march to racial equality.

Barack Obama’s speech to the annual convention of his denomination (the United Church of Christ) in June of 2007 led to an IRS investigation of the denomination’s continued entitlement to exemption. The invitation to speak had been extended when Obama had not announced his presidential candidacy. After he did, church officials subsequently insisted, they told him that his address could not be campaign-related, and that no representative of the campaign could appear with him inside the convention hall.

In fact, most of Obama’s speech was not relevant to the campaign, although there were two remarks that were part of his standard campaign oratory. Outside the hall, Obama campaign volunteers manned a campaign desk. Jeffrey Lord, a conservative “dissident” in the largely liberal UCC church, reported in the September 7 American Spectator that despite these precautions someone filed an anonymous complaint about the appearance.

Responding to the complaint, the IRS sent a letter asking the denomination to explain whether the appearance by Senator Obama constituted an endorsement, especially since only he and not any of his rivals had been invited. (IRS publications make clear that had the church invited all candidates, there likely would have been no problem.)

At first glance, the IRS decision to initiate an investigation was puzzling. It recognizes that not-for-profit organizations can invite an office-holder to speak even when he or she is a candidate, so long as the purpose of the invitation, and the topic of the address, is not the election, and as long as the official is not introduced as a candidate. Obama’s speech—about what his religious faith meant to him as a public official—was not, taken as a whole, overtly political.

Melissa Rogers, a church-state expert who finds time to blog at, spelled out in a characteristically detached and analytically detailed post the reasons why the UCC appears not to have violated the law. Rogers also emphasized what almost all the journalists missed: The IRS had not found a violation but was merely investigating whether one had occurred. In any event, in May the IRS agreed with Rogers that the UCC had not breached its duty to remain non-partisan.

To be sure, investigations can be a burden, and they can be used as a means of punishing political enemies. The 1972 Christian Echoes case, in which a para-church organization noted for its strident anti-communism lost its tax exemption for opposing “liberal” candidates, was reportedly undertaken by the Kennedy-Johnson administration to punish a hard-line critic.

The UCC inquiry set off a firestorm of press coverage, comprising descriptions of the UCC (which in several articles, including a lengthy one in the New York Observer by Alvin Chang March 26, was depicted as being pleased with all the publicity); the IRS investigation itself; and commentary by experts on the meaning of it all.

Susan Brooks Thistlewaite, President of the Chicago Theological Seminary, in a contribution to the Washington Post’s online religion section, On Faith, rose in righteous indignation at the very idea of such an investigation. Her column is notable for its sublime ignorance of IRS principles and procedure.

Thistlewaite complained that the IRS letter was sent nine months after the speech (and thus further into the campaign). Not only is this well within the relevant statute of limitations (three years), but also the not unusual delay no doubt reflects the extra church-protective burden imposed by the Church Audit Act.

She complained, too, that the IRS did not contact the church when deciding whether to investigate. Such contact might itself be illegal under the Church Audit Act, and in any event is not legally required.

She also displayed her ignorance of the law by asking how it could be that the UCC was investigated but not churches that invited both Clinton and Obama to speak. The answer is obvious. Inviting both candidates cannot be mistaken for an endorsement of either one; inviting one only might be.

Thistlewaite concluded by contending that “there is true irony in the IRS investigating the UCC for presentation of a speech that may go down in history as one of the most profound articulations of how we as Americans live into transcendent meaning….” But, of course, the IRS is not entitled to overlook a denominational endorsement of a candidate on the grounds that he gave a good speech.

If there is any irony here, it lies in Thistlewaite’s claim that “the UCC is standing up for individual freedom, especially the right to religious expression, free of government persecution.” It would also be interesting to know what she thinks of the IRS investigating a complaint filed by, among others, several UCC pastors (after a meeting held at a UCC church) against two evangelical ministers, their churches, and two para-church groups, the Center for Moral Clarity and the Ohio Restoration Project, for “endorsing” conservative Republican gubernatorial candidate Kenneth Blackwell. The complaint, and what gave rise to it, are described by Mike Harden and Joe Hallett in an excellent article in the January 16, 2006 Columbia Dispatch.

Harden and Hallett rely heavily for their understanding of the case on Marcus Owens, the former head of the Exempt Organizations Section of the IRS who helped file the complaint against the pro-Blackwell groups. There is no question about Owens’ expertise.

What Harden and Hallett didn’t say is that Owens appeared to be working with Americans United, whose antagonism towards the religious right is well known.

A good paper on the non-endorsement issue written by Owens appears on the AU website. Was it written at AU’s request? According to another AU website posting, Owens also filed a complaint with the IRS charging the Missouri Catholic Conference with opposing candidates supporting stem cell research.

There is nothing wrong with experts being advocates, or advocates being experts. (I’m an advocate who is sometimes treated as an expert.) The reader ought to be told, however, that the expert is not merely a detached observer.

The bottom line?

The IRS is in a no-win situation. It is obligated to enforce a law often ignored by secular as well as religious not-for-profits. Strict enforcement is both beyond the agency’s capacity and would be controversial beyond any conceivable return to the agency. Less than strict enforcement opens the agency up to charges (fair or not) of partisanship and selective enforcement.

Perhaps the agency is hoping that its widely publicized increased enforcement will lead to greater self-policing by not-for-profits. Whatever the case, the dire predictions by some of incipient theocracy and by others of religious persecution seem out of all proportion to reality.

*IRS Revenue Ruling 2007-31, available at http;//


Hit Counter