The Politics of Religion

Downloads:

Download Spring 2010 PDF

The Politics of Religion

How Not To Cross the Political Line

by Richard R. Hammar

The participation by churches and church leaders in political campaigns is an American tradition. Common examples include:

inviting candidates to speak during worship services
distributing “voter education” literature reflecting candidates’ views on selected topics
voter registration activities
enlisting volunteers for a particular candidate’s campaign
collecting contributions for a particular candidate
statements by ministers during worship services either supporting or opposing various candidates

Unfortunately, pastors may not understand that these activities, as well-meaning as they may be, jeopardize a church’s exemption from federal income taxation. This is because section 501(c)(3) of the tax code prohibits tax-exempt organizations (including churches) from any intervention or participation in political campaigns on behalf of or in opposition to any candidate for public office. There have been massive violations of this prohibition during every presidential election year with not a word of protest from the Internal Revenue Service. But things are changing. In 1999, the IRS for the first time revoked the exempt status of a church for its involvement in a political campaign. Over the past few years the IRS has made a number of pronouncements indicating that it will no longer ignore church political activities.

The Legal Basis — Section 501(c)(3)

The legal basis for the limitation on church political activities is section 501(c)(3) of the tax code, which exempts from federal income taxation any church organized and operated exclusively for religious, charitable, educational, or other exempt purposes and

“no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.”

Note that there are two distinct limitations here. First, churches may not engage in substantial efforts to influence legislation. Second, churches may not participate or intervene in any political campaign, even to an insubstantial degree. The first limitation is referred to as the “lobbying” limitation. The second limitation is referred to as the “campaign” limitation.

I need to emphasize that none of the political activities described above is “illegal.” The primary legal consequence of church political activity is that the church’s exemption from federal income taxation may be jeopardized.

The Lobbying Limitation

To be exempt from federal income taxation, no “substantial part” of a church’s activities can be the “carrying on of propaganda, or otherwise attempting to influence legislation.” Congress enacted this limitation in 1934. Unfortunately, however, it is not entirely clear why Congress adopted the limitation. One commentator has observed that “it is fair to assume that Congress gave virtually no thought to what it was doing when it enacted the [limitation on legislative activities], and it is highly unlikely that it ever imagined that the [limitation] might be applied to threaten a church.”

Whatever its justification, this limitation has seldom been enforced against churches despite numerous apparent violations. For example, many churches and religious denominations have lobbied actively for or against specific legislation concerning civil rights, workers’ rights, peace, nuclear disarmament, aid to the poor, women’s rights, abortion, treaties, education, sale and advertising of alcoholic beverages, Sunday closing restrictions, sales and property tax exemptions, lotteries, and gambling. Despite the long history of legislative activism, only one religious organization has lost its tax-exempt status as a result of political activities.

Why has the limitation on substantial legislative activity been enforced so infrequently? One reason is the limitation’s ambiguity. Specifically, what is meant by the terms “legislation,” “attempts to influence legislation,” and “substantial”? These definitional problems, coupled with the limitation’s uncertain purpose and the reluctance of the courts (and to a lesser extent the IRS) to attack the exempt status of churches, have all contributed to the sporadic enforcement of the “legislative activity” limitation.

Only substantial lobbying activity will jeopardize a church’s exempt status. The tax code does not define the termsubstantial. TheIRS Tax Guide for Churches clarifies that

“whether a church or religious organization’s attempts to influence legislation constitute a substantial part of its overall activities is determined on the basis of all the pertinent facts and circumstances in each case. The IRS considers a variety of factors, including the time devoted (by both compensated and volunteer workers) and the expenditures devoted by the organization to the activity, when determining whether the lobbying activity is substantial. Churches must use the substantial part test since they are not eligible to use the expenditure test described in the next section.”

It is truly lamentable that neither Congress nor the IRS has provided churches with any meaningful guidance as to the definition of “substantial” lobbying activities. Churches may engage in insubstantial efforts to influence legislation, but once such efforts become substantial, the church’s tax-exempt status is in jeopardy.

For now, church leaders must remain in the dark concerning the definition of these terms. The only clarification the IRS Tax Guide for Churches provides is that the IRS will consider both time and expenses devoted to lobbying activities in assessing whether those activities are substantial. But what amount of time or expenses constitutes substantial activity?

Example. A few times each year, a few church members circulate petitions following worship services. The petitions enable members to express their support of or opposition to bills pending before Congress or the state legislature. The petitions do not identify the church, and the church itself takes no official position on any of the issues addressed. Such activities clearly do not jeopardize the church’s tax-exempt status, for two reasons. First, they are not substantial. While this term has not been defined with clarity, it could not reasonably be construed in such a way as to cover the activities that occur at this church. No precedent suggests that such activities are substantial. They involve an expenditure of neither funds nor time by the church. Second, the church itself is not directly involved in the activity. Rather, concerned members of the congregation are simply using the occasion of church services as an opportunity to canvass their fellow members. A church is a public forum, and as such it is an appropriate location for citizens to exercise their constitutional right to petition their government, as long as the church itself is not involved in supporting or opposing specific legislation.

Example. A church congregation adopts a resolution expressing support for a constitutional amendment banning abortions. This resolution, by itself, should not jeopardize the church’s exempt status, since it does not constitute a substantial attempt to influence legislation.

The Campaign Limitation

To be exempt from federal income taxation a church may not “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.” This limitation is worded in absolute terms — prohibiting any attempts by churches or any other tax-exempt organizations to participate or intervene in a political campaign — and therefore does pose a significant threat to churches. Unlike the limitation on attempts to influence legislation, there is no requirement that the participation or intervention in a political campaign be substantial. Presumably, one isolated event could be construed as intervention in a political campaign.

The income tax regulations interpreting the limitation on campaign intervention provide that neither a church nor any other organization can be exempt from federal income taxation if its charter empowers it “directly or indirectly to participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office.” The regulations further provide that:

“The term ‘candidate for public office’ means an individual who offers himself, or is proposed by others, as a contestant for an elective public office, whether such office be national, state, or local. Activities which constitute participation or intervention in a political campaign on behalf of or in opposition to a candidate include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.”

A table summarizes the most significant legal precedent applying the campaign limitation to churches.

POLITICAL CAMPAIGN ACTIVITIES BY CHURCHES

(AN ANALYSIS OF SELECTED ACTIVITIES )

CAMPAIGN ACTIVITY	IMPACT ON TAX- EXEMPT STATUS	BASIS
Contributions to political campaign funds.	Prohibited	IRS Tax Guide for Churches and Religious Organizations
Public statements of position (verbal and written) in favor of or in opposition to candidates for office — in official church publications and at official church functions.	Prohibited	IRS Tax Guide for Churches and Religious Organizations
Providing a forum for all candidates to address the church.	Permitted	IRS Tax Guide for Churches and Religious Organizations
Public comments made by ministers and other church employees in connection with political campaigns, not made at church facilities or in church publications and accompanied by statement that the comments are strictly personal and are not intended to represent the church.	Permitted	IRS Tax Guide for Churches and Religious Organizations; Revenue Ruling 2007-41
A church invites all candidates for a political office to address the congregation and informs the congregation before each candidate’s speech that the views expressed are those of the candidate and not the church and that the church does not endorse any candidate.	Permitted	Revenue Ruling 74-574; IRS Tax Guide for Churches and Religious Organizations
A church invites only one candidate in a political campaign to address the congregation.	Prohibited	Revenue Ruling 2007-41
The church provides an opportunity for a candidate to speak in a noncandidate capacity (for example, as a member of the church, public figure, or expert in a nonpolitical field) without providing equal access to all political candidates for the same office. The church ensures that the candidate speaks in a noncandidate capacity; no reference is made to the person’s candidacy; the church mentions the capacity in which the candidate is appearing (without mentioning the person’s political candidacy); and no campaign activity occurs.	Permitted	IRS Tax Guide for Churches and Religious Organizations
A church distributes a compilation of voting records of all members of Congress on major legislative issues involving a wide range of subjects; the publication contains no editorial opinion, and its contents and structure do not imply approval or disapproval of any members or their voting records.	Permitted	Revenue Ruling 78-248
A church distributes a voter guide containing questions demonstrating a bias on certain issues.	Prohibited	Revenue Ruling 78-248
The endorsement of candidates.	Prohibited	Int. Rev. News Release IR-96-23
Campaign activities by employees within the context of their employment.	Prohibited	FSA 1993-0921-1
A church fails to “disavow” the campaign activities of persons under “apparent authorization” from the church by repudiating those acts “in a timely manner equal to the original actions” and taking steps “to ensure that such unauthorized actions do not recur.”	Prohibited	FSA 1993-0921-1
Engaging in fund-raising on behalf of a candidate.	Prohibited	Int. Rev. News Release IR-96-23
Neutral voter registration drives.	Permitted	11 C.F.R. Â§ 111.4(c)(4)
Newspaper ads urging voters to vote for or against a candidate.	Prohibited	Branch Ministries, Inc. v. Commissioner, 99-1 USTC Â¶50,410 (D.D.C. 1999), aff’d, Branch Ministries v. Rossotti, 2000 USTC Â¶50,459 (D.C. Cir. 2000)
Church Web sites that contain information either supporting or opposing candidates for public office.	Prohibited	Revenue Ruling 2007-41
Church Web sites containing a link to candidate-related material, if the facts and circumstances indicate that one or more candidates are being supported or opposed.	Prohibited	Revenue Ruling 2007-41
A minister who is well-known in the community attends a press conference at a political candidate’s campaign headquarters and states that the candidate should be reelected. The minister does not say he is speaking on behalf of his church. His endorsement is reported on the front page of the local newspaper, and he is identified in the article as the minister of his church.	Permitted	Revenue Ruling 2007-41
The Sunday before the November election, a minister invites a political candidate to preach to his congregation during worship services. During his remarks the candidate states, “I am asking not only for your votes, but for your enthusiasm and dedication, for your willingness to go the extra mile to get a very large turnout on election day.” The minister invites no other candidate to address his congregation during the campaign.	Prohibited	Revenue Ruling 2007-41
A church maintains a Web site that includes biographies of its ministers, times of services, details of community outreach programs, and activities of members of its congregation. A member of the congregation is running for a seat on the town council. Shortly before the election, the church posts the following message on its Web site: “Lend your support to your fellow parishioner in Tuesday’s election for town council.”	Prohibited	Revenue Ruling 2007-41

“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. The increase in allegations, coupled with the dramatic increases in money spent during political campaigns, has raised concerns about whether prohibited funding and activity are emerging in section 501(c)(3) organizations. 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.” (Excerpt from a 2006 IRS “executive summary” of its final report on the Political Activities Compliance Initiative.)

Conclusion

Some church leaders have asked, “So what if our church loses its tax-exempt status for intervening in a political campaign? What practical difference would it make?” A loss of exempt status would have several consequences, including the following:

The church’s net income would be subject to federal income taxation.
The church’s net income would be subject to state income taxation (except in the few states not having an income tax).
Donors no longer could deduct charitable contributions they make to the church.
The church would be ineligible to establish or maintain 403(b) tax-sheltered annuities.
The church could lose its property tax exemption under state law.
The church could lose its sales tax exemption under state law.
The church could lose its exemption from unemployment tax under state and federal law.
The church could suffer an adverse impact on zoning classification.
The church could lose its preferential mailing rates.
The church could lose its exemption from registration of securities under state law.
Nondiscrimination rules pertaining to various fringe benefits (including an employer’s payment of medical insurance premiums) would apply.
In some cases a minister’s housing allowance may be affected.
In some cases the exempt status of ministers who opted out of Social Security may be affected.
The significant protections available to a church under the Church Audit Procedures Act may no longer apply.
The exemption of the church under the state charitable solicitation law may be affected.
The exemption of the church from the ban on religious discrimination under various federal and state civil rights laws may be affected.
The exemption of the church from the public accommodation provisions of the Americans With Disabilities Act may be affected.

Clearly, any activity that jeopardizes a church’s exemption from federal income taxation is a matter that must be taken seriously.

Need more help? Richard Hammar’s annual Church & Clergy Tax Guide addresses church political activities in much more detail. It is available by calling 1-800-222-1840.

RICHARD R. HAMMAR, J.D., LL.M., CPA, serves as legal counsel to The General Council of the Assemblies of God, and is editor of the Church Law & Tax Report newsletter. He has written over 50 books on church legal and tax issues, including the newly released third edition to Pastor, Church & Law.