IRSThere were no churches among the religious organizations apparently targeted for heightened scrutiny by the IRS. Want to know why? Because a quirk in the law currently bars the IRS from investigating houses of worship for political activity that would warrant removal of their tax exempt status.

Back in 1954, your classic 501 (c) 3 non-profits (including houses of worship) were prohibited by Congress from engaging in political activity on pain of having to pay taxes. Thirty years later, out of a desire to protect the constitutional rights of churches amidst a revival of faith-based politicking, Congress passed the Church Audit Procedures Act (CAPA). Among other things, CAPA required that an audit of a church had to be approved at the level of IRS regional commissioner or higher before the agency could contact the church. 

Then in 1998, Congress reorganized the IRS, replacing regions with divisions based on the constituency served. Regional commissioners were done away with, and responsibility for approving church audits was given to the director of examinations in the Division of Exempt Organizations. In 2009, a federal judge in Minnesota barred an audit approved by the  director of examinations on the grounds that this violated CAPA. And so far as is known, there hasn’t been a church audit since.

That hasn’t stopped an increasing number of conservative pastors from participating in Pulpit Freedom Sunday, an election-year event that began in 2008. The pastors publicly endorse candidates as a way of protesting the 1954 law. Although cracking down on them would hardly require a special audit, the IRS, recognizing PFS for the protest it is, has wisely declined to lift tax exemptions.

CAPA’s audit rule doesn’t apply to faith-based organizations other than houses of worship — which explains the huffing and puffing of the likes of Franklin Graham (Billy Graham Evangelistic Association, Samaritan’s Purse) and Bill Donohue (Catholic League). Like it or not, these are 501 (c) 3′s that happen to be barred from engaging in politics. And they have strayed close enough to the line to have earned IRS scrutiny.

8 Comments

  1. I can hear Bill Donohue now regarding the Catholic League. I’m not only president; I’m the only member, but it pays well (give him a little attention Mr. Taxman!). Are there any bishops that admit to supporting this man? I’d love to see a list.

  2. I have looked into incorporating a small house church parish I pastored many years ago. The literature sent by the IRS stated in no uncertain terms: “Churches are automatically tax exempt.” The only advantage a 501(c)(3) grants is to give a tax deduction to donators. There is basically nothing substantive to gain from investigating churches.

  3. “I can hear Bill Donohue now regarding the Catholic League. I’m not only president; I’m the only member, but it pays well (give him a little attention Mr. Taxman!).”

    From Wikipedia (check the citations if you don’t believe the article):

    “The New York Times reported that the group had 11,000 total members when Donohue took over the Catholic League in 1993. This grew to 233,333 paid members in 1999, a figure which the League allegedly multiplies by 1.5 to account for non-paying members in the households of paying members, resulting in a League estimate of 350,000 members. This 1999 estimate is the last statement about overall membership numbers that the League has made. The League’s 2003 statement about membership claimed 15,000 members in Nassau and Suffolk counties of New York alone.”

    Maybe you should check for facts next time, before making a fool of yourself.

  4. “Like it or not, these are 501 (c) 3′s that happen to be barred from engaging in politics.”

    Maybe you should do the same as drwho13, Dr. Silk. These organizations are barred from endorsing candidates, not from engaging in public discourse on policy issues, which is exactly what they’ve done.

  5. Mark Silk

    Fr. Seraphim,
    It’s not that the government has nothing to gain (materially) from investigating churches. It’s that we have decided that we don’t want to subsidize churches (and other non-profits) by exempting them from taxes if they engage in partisan political activity. Precisely because non-profits of all sorts depend so heavily on donors giving money with a tax write-off that they are so reluctant to give up their tax-exempt status.

    Palamas,
    There’s a gray area between simple endorsement of candidates and engaging in public discourse on policy issues. Here’s the IRS’ description of its rule (http://1.usa.gov/18joPKk): “Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.” The organizations we’re speaking of here have gotten pretty close to the line when it comes to such indirect intervention.

  6. Palamas,

    What I wrote was intended to be Satire (you missed it!).

    “Satire is a genre of literature, and sometimes graphic and performing arts, in which vices, follies, abuses, and shortcomings are held up to ridicule, ideally with the intent of shaming individuals, and society itself, into improvement” (also from Wikipedia).

    The fools are the members of that organization. I wonder what percentage of Catholic League members are also members of the NRA, same thinking process for sure. What do you think?

  7. The argument for church tax exemptions has been that churches provide help to people that would otherwise have to be paid for, usually by taxes, or those asking for help, who often cannot afford to pay. Increasingly, it seems that churches are hindering and not helping people, by interfering with their Constitutional rights and trying to tell them what to do. While churches sometimes hide their interference behind a rhetoric of concern and love (“We love gays, but we think they’re defective and not able to get married.”), help I define as something people ask for and hindrance as something imposed on them.

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