A Stitch in Haste

A Stitch in Haste recommends the following report from the Congressional Research Service:

This report examines the limitations that the Internal Revenue Code places on political activity, including lobbying and campaign intervention, by tax-exempt organizations. … The report also looks at the administrative procedures recently unveiled by the IRS that provide for expedited review of possible tax laws violations by IRC §501(c)(3) organizations that conduct political activities. In addition, the report contains a summary of the information that tax-exempt organizations must report to the Internal Revenue Service about their political activities and whether the information must be made publicly available.

I have long chronicled, one example here, the abuses by, and the inadequate oversight of, more theocratically-inclined churches during the Bush Administration and have repeatedly debunked the argument that there is a “First Amendment right to a tax break.”

An excerpt:

The organizational definition in IRC § 501(c)(3) restricts the ability of these organizations to participate in political activity in two ways: (1) they may only conduct an insubstantial amount of lobbying and (2) they may not intervene in political campaigns. Organizations that violate either restriction may lose their tax-exempt status and the eligibility to receive deductible contributions. Additionally, the organization may, either in addition or as an alternative to the loss of tax-exempt status, be required to pay an excise tax on its political or lobbying expenditures, be enjoined from making further expenditures, and receive a termination assessment of all taxes owed.

One point that is often overlooked in this faux debate is how parishioners suffer if their church loses its tax-exempt status (i.e., since they are unable to deduct charitable contributions to the church).

On lobbying:

Case law suggests that “no substantial part” is between 5% and 20% of the organization’s expenditures. However, there is no bright-line test and the percentage of expenditures spent on lobbying is not determinative.

So “no lobbying” actually means “some lobbying.” This is, somehow, an “oppressive” violation of “religious freedom.”

On campaign activity:

Clearly, IRC § 501(c)(3) organizations may not do such things as make statements that endorse or oppose a candidate, publish or distribute campaign literature, or make any type of contribution, monetary or otherwise, to a political campaign. On the other hand, IRC § 501(c)(3) organizations are allowed to conduct activities that are not related to elections, such as issue advocacy, lobbying for or against legislation, and supporting or opposing the appointment of individuals to nonelective offices.

So, for example, bigoted Evangelical and other “Christians” can agitate against gay marriage all they want, either inside or outside their church, and absolutely no one from the IRS will come calling. Just don’t do it in front of a John McCain campaign banner. Is that too much to ask in exchange for your tax exemption?

On theocracy:

There has been ongoing congressional and public concern about violations of the political campaign prohibition by IRC § 501(c)(3) organizations. … The 2004 PACI project involved the expedited review of 110 cases in which IRC § 501(c)(3) organizations had been alleged to have violated the political campaign prohibition (47 of the cases involved churches). The IRS issued a written advisory in 69 of these cases, which meant that the agency determined the organization engaged in political campaign activity but there were mitigating factors so that the organization was not penalized. … The IRS revoked the tax-exempt status of five organizations (one of which was for issues not related to campaign activities) and proposed revocation of the tax-exempt status of two organizations.

Meanwhile, one particularly obnoxious theocrat has openly and notoriously broken the IRS rules for the express purpose of gaining notoriety for himself crafting a “test case” of the IRS restrictions. Somehow I doubt that God will smile down upon his litigation.

The report concludes with a helpful overview of so-called “527 organizations.” Very useful.

Previous CRS Recommendations:
The Law of Church and State
Constitutional Limits on Hate Crime Legislation
Same-Sex Marriage — Legal Issues
Saudi Arabia
The National Debt
Restricting Video Game Sales to Minors
Warrantless Wiretapping
Foreign Holdings of Public Debt
China’s Internet Censorship
Summary of Rumsfeld v. FAIR

Filed under: First Amendment - Religion, First Amendment - Speech, Law, Politics, Society, Religion, Culture Wars, Taxation & Fiscal Policy