The IRS, Churches, & Politics

About the posting yesterday on a recent IRS ruling:

Our friend James Altena sent me a long but helpful memo about the background, the law, and the IRS, which will be of interest to many readers. His take on things:

As an IRS employee and reader of Touchstone and Mere Comments, I believe that I can speak to the issue of the recent IRS ruling regarding the Niemoller Foundation with some knowledge, and in so doing I wish to clarify several commonly confused points.  For the record, however, I do so purely in a personal capacity.  Nothing I say here may be taken in any way as a statement on behalf of the IRS, or as being made by me in an official capacity as an IRS employee.  I speak  here strictly in a personal capacity.

First, we need to move beyond typically sensational media headlines. The "new" IRS ruling is "new" in the sense of being a particular new ruling regarding previously established legal standards.  It is not, insofar as I can tell, a new ruling in the sense of establishing a novel legal standard where none existed before.  It is certainly not "new" in that it does not overturn any previous legal standard.

Second, we need to clarify what the existing legal standards are.  The following explanation is not intended either to defend or criticize the existing standards.  Rather, it seeks to explain those, so that if people disagree with them, at least they are disagreeing with what is actually the case, and not with media generated fictions.

Churches, like other non-profit organizations, fall under Sections 501(a) and 501(c)(3) of the Internal Revenue Code for tax purposes. Those provisions grant tax-exempt status to organizations meeting certain criteria as charitable concerns.  In exchange for that privileged tax status, the organizations must meet certain standards of political non-partisanship.  This is precisely to insure that the government does not abuse this status, with a given administration granting tax exempt status solely to those organizations that are its minions.  All such organizations must meet the same criteria for disclosure of officers, income, expenditures, etc., to insure their genuineness and public transparency.

Obviously, abuses can occur one way or another, with attempts to intimidate or favor a given church or para-church organization.  Thus, there are established procedures for investigation and resolution of complaints and alleged violations.  As happened in the current instance, an investigation must be initiated as a result of a complaint by a private citizen or group; the government cannot go on fishing expeditions on its own initiative.  (This is distinct from criminal investigations -- e.g., money laundering -- which the government may of course initiate upon uncovering evidence from e.g. an internal audit.)

The last time I saw statistics on the subject, allegations lodged against churches for supposedly violating their tax-exempt status were split about 50/50 between ones that could clearly be considered "liberal" or "conservative."  Consequently, claims made on both ends of the theological spectrum of concerted government "persecution" or "harassment" -- usually through inflammatory fund-raising letters and hired PR agents -- should be treated with caution.

In addition, only a small fraction of initial complaints ever result in a full-scale IRS investigation.  As IRS Commissioner Donald Alexander's famous confrontation with Nixon showed, the IRS is well aware of the desire of politicians, organizations, and private persons alike to try to pervert it into an instrument of harassment.  (I work in the Collections division, and have regularly dealt with calls from a man or woman who mistakenly thinks that he or she can "sic" the IRS like a legal Rottweiler on an ex-spouse.)   Such efforts are quite transparent and dead on arrival.  And even actual investigations seldom have results beyond a warning letter.  Fines are very seldom imposed, and only one single church -- Branch Ministries of Binghamton, NY -- has ever lost its 501(a) or 501(c)(3) status as a result of an investigation.  Here is a link to the decision, Branch Ministries v. Rossotti (which opens with citations of relevant IRS code sections):

http://1stam.umn.edu/archive/fedctapp/branch-ministries.txt

Next, the standards for political impartiality, and strictures on what churches and other non-profit organizations can say or do in the political arena, are far narrower than many people suppose.  Roughly, the basic rule is: an organization may freely endorse any stand on any issue.  What it may not do (whether explicitly or by clear implication) is endorse, or contribute money to support or oppose, a particular candidate or party by name.

So, for example, the Roman Catholic Church is absolutely free under its 501(a) or 501(c)(3) status to have bishops send out pastoral letters to be read from parish pulpits, advising the faithful that "life" issues such as abortion, euthanasia, ESCR, etc. are of paramount importance, and that RCs should vote in accordance with the teachings of the Church.  What the RCC may not do is send out letters saying "a faithful RC must vote for [or against] McCain [or Obama]" , or, similarly "a faithful RC must vote for the Republican (or Democratic) Party." Likewise, the NCC can send out letters telling its members to vote on the basis of a "peace and justice" agenda to end immediately the war in Iraq, defend abortion, support gay marriage, etc.; but it too cannot tell its members to vote for Candidate A or Party X.

These restrictions are somewhat (not completely) similar to those regulating political activity by government employees under the Hatch Act.  Government employees may, on their own time as private citizens, vote and work for partisan political campaigns.  What they cannot do is use the government workplace, government resources, or their government positions for any partisan political activity (specific candidate or party).  Likewise, clergy and members of churches may vote and work for partisan political campaigns.  What they cannot do is use the workplaces or resources of their non-profit organizations, or their official positions within those, for any partisan political activity (specific candidate or party).  (For a general list of permitted and prohibited activities under the Hatch Act, see):

http://www.osc.gov/ha_fed.htm

The noteworthy thing in the current case is that, so far as I can tell, the new IRS ruling was simply that the kind of political advocacy in which the Niemoller Foundation engaged concerned endorsements of and activities on behalf of positions on particular issues, and not of particular candidates or parties.  In short, it represented no change of legal standard whatsoever, but merely a particular application of the previously existing legal standard.  Naturally, the Niemoller Foundation will trumpet the favorable ruling.  But don't be too quick to take in the PR hype, even from a group which one has a natural sympathy.

A final issue that needs to be addressed is the charge, frequently raised on both sides of the theological spectrum, that the existing standard constitutes "censorship."  I frankly find this at best uninformed and at worst disingenuous.  There is no law that forbids a church or para-church group from endorsing a particular candidate or party.  That would be censorship.  What the law as currently applied says is that if a church or para-church group does so, it loses entitlement to tax-exempt status.  In other words, one can only claim this standard constitutes "censorship" if one claims that a church has some absolute, natural law right to tax-exempt status as an inalienable entitlement.  That would be, to say the least, an exceedingly curious claim for a natural law advocate, or for conservatives who oppose the entire modern political and cultural ethos of "entitlement."

In other words, what we confront  here is actually the same issue that has arisen regarding  the "faith-based" initiatives programs launched under the George W. Bush administration and facing substantial revision under the Obama administration -- the potential entanglement resulting whenever a church accepts money in any form from the government.   As many conservatives have pointed out, it is specious special pleading for a church to accept the government dole, and then argue that it ought to be exempt from any accompanying government regulation.  (In secular terms, a version of that argument was already fought out, and lost, by Hillsdale and Grove City Colleges.  I happen to think that particular verdict was wrong, but it is now settled law.)

Tax exempt status under Sections 501(a) and 501(c)(3) is, bluntly speaking, a government subsidy of non-profit organizations relative to for-profit organizations.  It was originally granted to churches as a prudential measure -- partly to avoid favored treatment for a single state established national church such as the C. of E., and partly to reduce the ability of the government to harass minority religious bodies -- and then extended to secular non-profits as well.  In terms of modern tax law, such status for churches avoids violation of the First Amendment "Establishment Clause" precisely because this extension to secular non-profit organizations makes it religiously neutral under the "Lemon Test" (Lemon v. Kurtzman) that is the current legal standard established by the SCOTUS.  (I am not endorsing that standard, which is much controverted.  I merely point out that it is the current legal standard, and it binds the IRS as much as any other part of the government.)  But there is no metaphysical or Scriptural warrant for tax exempt status for a church.  (Please, no out-of-context misinterpretations of Matt. 17:24-27 here.)

Speaking strictly for myself, I personally think that the current standard is basically sound (there is definitely room for clarification and other improvements) and one based on common sense.  I likewise think that nothing could be more disastrous to the integrity of the Christian faith and churches than to embroil them into secular politics to the extent of endorsing particular candidates or parties, as so many adherents on both sides evidently desire.  Theological conservatives or traditionalists cannot rightly complain about the NCC being in effect a political action committee for the Left if they seeking to debase their own churches into political handmaidens for the Right.  But the central underlying questions which this IRS ruling brings to the fore -- the relations between church and state; how the Church can and should be in but not of the world; how it can and should present a faithful witness without succumbing to worldly means and blandishments -- have long been debated, and are worthy of thoughtful, intense, but civil discourse here.

--James Altena

Comments

[Lee Herring]

Misters Altena and Kushiner,

Thank you for this most reasonable and informative post.

Sincerely,
Lee Herring
Pastor, FBC-Santa Fe, NM

[Bill R]

Well stated, James. I think this is a sound and wise analysis.