Committee on Ways and Means, Subcommittee on Oversight, 5-14-02 Testimony

Statement of Bruce R. Hopkins, Of Counsel, Polsinelli, Shalton & Welte, Kansas City, Missouri

Testimony Before the Subcommittee on Oversight
of the House Committee on Ways and Means

Hearing on Review of Internal Revenue Code Section 501 (c)(3)
Requirements for Religious Organizations

May 14, 2002

Mr. Chairman and other Members of the House Subcommittee on Oversight, thank you for the opportunity to appear before the Subcommittee today.

Attached is a description of the federal income tax rules concerning legislative and political campaign activities by churches, other religious organizations, and public charities (IRC § 501(c)(3) entities) in general.

I have been asked to review the history of and current requirements for tax exemption for these organizations.

As to legislative activities:

Public charities can engage in attempts to influence legislation, without endangering tax-exempt status, as long as these efforts are not substantial.
The term substantial remains undefined.
There is a safe-harbor exception, which must be elected, using a mechanical test for measuring allowable lobbying (IRC § 501(h)).
Churches and other religious organizations may not make this election.
There are taxes on excess legislative expenditures (IRC §§ 4911, 4912).

As to political campaign activities:

Public charities cannot engage in political campaign activities.
Some of these activities are considered educational and thus are permissible.
There is a tax on political campaign expenditures (IRC § 4955).

Other points:

The federal tax law contains several provisions creating special advantages and benefits for churches and other religious organizations.
Tax exemption for all public charities is constitutional, even though religious organizations are benefited.
Tax exemption only for religious organizations is unconstitutional.
The bills that are the subject of this hearing pass constitutional law muster, unless it is intended that one or more tax exemptions only for religious organizations are to be created.

[The attachment is being retained in the Committee files.]