Every so often, there are calls for the federal government to revoke the tax-exempt status of churches.
The most common
arguments made for taxing churches are that exemptions deny the government important sources of revenue to pay its bills, and that many churches (usually
the ones that continue to teach traditional sexuality morality such as the
Catholic, Evangelical, and Mormon churches) often abuse their tax-exempt status by violating IRS guidelines that prohibit them from
engaging in political activity.
The chronic obsession with the activities of
the churches in the public square has obscured the fact that they are only a
part of the overall nonprofit sector.
According to data collected by the National Center for Charitable
Statistics (NCCS), there are over 1.5 million registered
nonprofit organizations (with combined total
assets of nearly $5.7 trillion as of August 2012) in the United States
today—many of which are nonreligious institutions and organizations that, like
churches, seek to influence public policy despite being tax-exempt.
Houses of worship and charities are registered with the
IRS as 501 (c) (3) nonprofit organizations. Since financial contributions to
501 (c) (3) nonprofits are tax-deductible,
donors have the incentive to open their wallets.
IRS guidelines for nonprofits—which
are available on the agency’s Web site—are
often misunderstood. While many people use these terms interchangeably, the IRS
specifically defines “politics” as
seeking to influence the election of candidates and “lobbying” as
seeking to influence legislation.
According to the IRS, all 501 (c) (3) nonprofits cannot endorse or oppose candidates for elected
office and make financial contributions to political campaigns. In 1964, the
liberal Protestant magazine Christian Century lost its tax-exempt status for one year after it
endorsed President Lyndon Johnson for re-election.
Nonprofit organizations, however, can certainly praise or
criticize candidates, elected officials, political parties, and their stands on
public policy issues and controversies without specifically telling people to
vote for or against them. This is what many nonprofits have been doing since
the passage of the 1954 Internal Revenue Act, which added section 501 (c) to
the federal tax code that specified the types of organizations that qualified
The IRS recognizes that the heads of nonprofits,
including churches, can
exercise their individual rights as private citizens without jeopardizing the tax-exempt status of their
For example, in January 2008, the Rev. Calvin O. Butts, the
influential pastor of the Abyssinian Baptist Church in New York City, endorsed then-Senator Hillary Clinton for president.
The Rev. Butts made the endorsement at a press
conference held on a public sidewalk. Had the Rev. Butts endorsed Senator
Clinton from his church’s pulpit, it would have violated the IRS’ guidelines
because he would have involved his tax-exempt organization.
If any Catholic
cardinal or bishop wished to make an endorsement in the 2012 election, he could
have legally done so by writing an op-ed for a secular newspaper or appearing
in studio on a television or cable news program.
The IRS affirms that 501 (c) (3) nonprofits can engage in some lobbying just as long as lobbying is not a “substantial”
part of the organization’s regular activities.
The fact that a nonprofit’s
lobbying on a piece of legislation may have generated considerable media
attention and even criticism—such as the Catholic bishops’ lobbying in 2009 against the inclusion of abortion coverage in
ObamaCare—does not mean that it violated the IRS’ limits.
Angered that the bishops helped frustrate her side’s
legislative goals, Democratic Congresswoman Lynn Woolsey of California,
in an op-ed piece for Politco (Nov. 9, 2009),
called on the IRS to investigate the “political behavior” of the United States
Conference of Catholic Bishops (USCCB).
Strangely, Rep. Woolsey didn’t object
when the bishops lobbied for immigration reform and
the ratification of the New START Treaty (signed in 2010 by the United States and Russia).
No one, including Rep. Woolsey and even the Catholic bishops, ever questioned
the legal right of the progressive
religions denominations, who often lobby
against any legal restrictions on abortion and supported the inclusion of
abortion coverage in ObamaCare.
Since the USCCB remains tax-exempt, it seems
that the IRS found Rep. Woolsey’s complaint without any merit.
The Catholic Church in the United States does not have a
single tax-exemption; it has many.
The IRS treats every Catholic-affiliated
institution, such as churches, schools, hospitals, diocesan offices, and other
organizations, as separate, individual entities. If the IRS were to rule that
one Catholic church violated nonprofit guidelines the ruling would not apply or
legally affect other Catholic-affiliated nonprofits such as the USCCB, the
Archdiocese of New York, or Catholic charities.
When most people hear the term “tax-exempt,” they usually
think of churches and charities. In fact, the IRS exempts many different types of organizations from paying taxes, including labor unions, chambers
of commerce, social clubs, and “social welfare” organizations such as the
National Organization for Women (NOW), American Civil Liberties Union (ACLU),
and the Human Rights Campaign (HRC).
Along with churches and charities, the IRS
provides the coveted 501 (c) (3) nonprofit status to scientific, literary, and educational organizations.
(The type of nonprofit status that an organization
may have can be checked online at the GuideStar database. Registration is free
and provides access in PDF to the 990 disclosure forms that
nonprofit organizations must file every year with the IRS.)
As fraternal organizations, individual chapters of the Knights of Columbus, Elks Lodge, and the
Freemasons do not pay federal taxes. Since they qualify as educational
organizations, most private colleges and universities in the United States, including
those that have generous endowments and cash-producing sports programs, are also tax-exempt.
Other 501 (c) (3) nonprofits include: Americans United
for the Separation of Church and State, American Atheists, American Humanist
Association, Freedom from Religion Foundation, Richard Dawkins Foundation for
Reason and Science, Project Reason, Planned Parenthood Federation of America,
Anti-Defamation League, Secular Coalition for America Education Fund, Council
for Secular Humanism, Catholics for Choice, Feminist Majority Foundation,
Center for Reproductive Rights, Ayn Rand Institute, Southern Poverty Law
Center, Clinton Global Initiative, the Gay and Lesbian Alliance Against Defamation
(GLAAD), NAACP, PETA, well-known magazines such as Mother
Jones, The Progressive, Commentary, Reason, and Commonweal (which published an
article last August endorsing President Obama
A check of these organizations’ Web sites and
publications and the countless other 501 (c) (3) nonprofits on the left and
right show that they all seek to influence public policy, engage in some
lobbying, and often praise and criticize elected officials, political
candidates, political parties, and their views.
These activities are no
different than those pursued by the United States Conference of Catholic
Bishops and the many other religious denominations, traditional and
progressive, that have long sought to influence public policy.
Does the IRS impose any additional restrictions on
Prof. John D.
Colombo, the Albert E. Jenner, Jr. Professor at
the University of Illinois’
College of Law in Champaign and a blogger at
the Nonprofit Law
Prof Blog, told this writer that “[IRS] rules
regarding political activity are the same for all 501(c) (3) organizations.”
fact, a check of the IRS Web site shows that the agency’s guidelines for all
registered 501 (c) (3) nonprofits make
no distinction between religious and nonreligious organizations.
All 501 (c) (3) nonprofits, religious and nonreligious,
have to follow the same IRS guidelines at the risk of losing their tax-exempt
Many people do not realize that more than a few of the
same organizations that seek to uphold the strict separation of church and
state ironically have the same nonprofit status with the IRS as any church,
synagogue, or mosque.
Like houses of worship, nonreligious 501 (c) (3)
nonprofits cannot make political endorsements and financial contributions to
political campaigns and are limited in the amount of lobbying they can do.
It is unreasonable and hypocritical to expect the IRS to
selectively enforce its existing nonprofit guidelines.
How can the IRS revoke
the tax-exempt status of the Catholic, Evangelical, and Mormon churches—only
because some of their teachings offend the sensibilities of a significant
number of supposedly “tolerant” individuals—and, at the same time, allow the
progressive religious denominations and the countless number of 501 (c) (3)
nonprofit activist organizations to continue their efforts to influence public
policy, which affects everyone?
Prof. Colombo, who is often critical of houses
of worship that violate IRS guidelines, said, “I absolutely agree that the IRS
should enforce its guidelines evenly across all 501 (c) (3) organizations.”
At a time when the national debt is now over $16
trillion, it is certainly understandable for the federal government to seek out
new sources of revenue.
However, why should only houses of worship be expected
to help the government pay its bills and not the many other nonprofits,
including those with much larger assets?
Since only Congress has the power to
revise the tax code, which regulates the nonprofit sector, revoking the
tax-exemptions for only religious institutions would likely have political
consequences at the ballot box.
Without the limitations imposed by tax-exemption, what
exactly would stop the churches from endorsing candidates from the pulpit,
making financial contributions to campaigns, holding political rallies in
church buildings, and engaging in nonstop lobbying?
Congress could pass new
laws banning such activities, but the courts will probably strike down such
laws because they would openly violate the freedoms guaranteed to everyone,
including members of the clergy, under the First Amendment.
Should Catholic, Evangelical, and Mormon churches be
worried that they could lose their tax-exempt status if they refuse to give in
to the demands of critics and scale back their activities in American public
Since 1990, the IRS has revoked the tax-exempt status of exactly one church,
which used its assets to purchase newspaper advertisements in 1992 urging
Christians to vote against Bill Clinton.
In fact, on November 4, 2012, the Associated
Press reported that the IRS “hasn’t been
investigating complaints of partisan political activity by churches [since
2009], leaving religious groups who make direct or thinly veiled endorsements
of political candidates unchallenged.”
themselves against baseless attacks, church leaders should help educate the
public what IRS guidelines for 501 (c) (3) nonprofits actually state—especially
the important difference between politics and lobbying—and that their
activities are no different than those pursued by the progressive religions,
atheist and pro-secular organizations, and the many activist groups on the left
and right that are all tax-exempt despite their continued efforts to influence
public policy in the United States.