Statement of Colby M. May, Director, American Center for Law & Justice, Alexandria, Virginia

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 members of the Subcommittee on Oversight, thank you for extending the invitation to appear before the Subcommittee to testify in support of H.R. 2357, the "Houses of Worship Political Speech Protection Act," a measure designed to advance free speech and to curb the unbridled discretion of the IRS.

I respectfully request that the entirety of my prepared statement be made a part of the record of today's hearing. The following is an overview of my testimony:

I. OVERVIEW

First, replacing the absolute ban on political intervention with the "no substantial part of the activities" test currently used in the lobbying context would not create a loophole in the nation's campaign finance system.

Some critics contend that HR 2357 would open a loophole in the nation's campaign finance system. Such criticism, however, is unfounded since all corporations, including tax-exempt nonprofit corporations, are barred from making "hard money" contributions, or any direct or indirect disbursements for "electioneering communications" under the new Bipartisan Campaign Finance Reform Act of 2002, which amends the Federal Election Campaign Act, 2 U.S.C. §431, et seq. The phrase "electioneering communications" boils down to a communication by "means of any broadcast, cable, or satellite communication, newspaper, magazine, outdoor advertising facility, mass mailing, or telephone bank to the general public, or any other form of general public political advertising." BCFRA §§ 101(a); 102(b); FECA §§ 431(22); 441b(b)(2). These restrictions apply right now, and will continue to apply regardless of any changes to the tax code which may be made by the passage of the "Houses of Worship Political Speech Protection Act."

Second, because there is no clarity on what is a violation of the political intervention ban, having an absolute, one-strike-your-out ban is inherently unjust and unworkable.

The IRS has taken the position that "coded language" violates the political prohibition. TAM 9117001. In the publication "Election Year Issues," it explains that "[t]he concern is that [an exempt] organization may support or oppose a particular candidate without specifically naming the candidate by using code words to substitute for the candidates name in its message, such as "conservative," "liberal," "pro-life," "pro-choice," "anti-choice," "Republican," or "Democrat," etc. ..." Exempt Organizations Continuing Education Technical Instruction Program for FY 2002 at 345 ("2002 CETIP"). In a footnote following the text, the IRS notes that it is the "intent" of the party making the communication which will determine whether these "coded words" are to be treated as violations of the political campaign intervention ban:

"[a] finding of political campaign intervention from the use of coded words is consistent with the word "candidate" - the words are not tantamount to advocating support for or opposition to an entire political party, such as "Republican," or a vague and unidentifiable group of candidates, such as "conservative" because the sender of the message does not intend the recipient to interpret them that way. Coded words, in this context, are used with the intent of conjuring favorable or unfavorable images - they have pejorative or commendatory connotations. [So,] the voter in Vermont, hearing an exhortation regarding "liberal" candidates, may not know who fits that label in Kansas, but presumably he knows who stands for what in Vermont, which is why the coded word is used in the first place." id. at 345, n. 10 (underlining added).

As if just dealing with the uncertainty of losing one's tax exemption because "code words" were used wasn't bad enough, the problem is compounded because the IRS here says "intent" is determinative. That position, however, directly contradicts previous statements by the IRS that "intent" or "purpose" is irrelevant in determining whether the political campaign ban has been violated. In its 1993 version of "Election Year Issues" the IRS stated "the motivation of an organization is irrelevant when determining whether the political campaign prohibition has been violated." 1993 CETIP at 414-15. Then, as if this inconsistency over "intent" was not enough confusion on the matter, in its 2002 version the IRS stated:

"Therefore, the resolution of the 'bad motive' issue depends upon the way the activity is conducted (the facts and circumstances) [- intent doesn't matter - ] and upon any [sic] inquiry into the state of mind of the organization [ - intent matters] ."

2002 CETIP at 351. The only thing that is clear is that the IRS wants the unrestricted discretion to decide it either way. Because a single violation of the political intervention ban requires revocation of exemption, due process and fairness require replacement of the absolute ban with the "no substantial part" standard. (1)

Third, since the beginning of the tax code churches and houses of worship have been exempt from income taxes because they provide services and promote the general welfare, saving the government the costs of having to do so. That fundamental relationship will not be changed by abandoning the absolute political intervention ban and replacing it with the "no substantial part" test.

Following passage of the Sixteenth Amendment allowing the federal government to directly tax personal income, churches and houses of worship have been exempt from income taxes. Tariff Act of 1913. Congress has always recognized that they are tax-exempt because "the government is compensated for the loss of revenue by its relief from financial burden which would otherwise have to be met by appropriations from public funds, and by the benefits resulting from the promotion of the general welfare." The occasional or incidental, intentional or unintentional, participation by a church, synagogue or mosque in activities that may be regarded as political campaign involvement will not change this relationship. Passage of HR 2357 will not require houses of worship to affirmatively do anything, or fundamentally change their functions. Houses of worship will continue to serve the basic needs of their congregations and their local communities, preserving the historic balance between church and state, and fulfilling the purpose for tax-exemption.

Fourth, given the vague and contradictory positions of the IRS that the same activity can be both permissible for an exempt organization and still violate the political intervention ban, modification of the absolute ban is necessary.

The "Houses of Worship Political Speech Protection Act" will both alleviate and obviate the confusion and fear surrounding the requirements for compliance with the political intervention ban. In "Election Year Issues," the tome relied upon by most practitioners in this area as an indicator of the IRS's approach to political campaign activities by exempt organizations, the IRS has taken the view that educational or religious activities which otherwise qualify as exempt activities can nevertheless constitute prohibited political activity:

"The most common question that arises in determining whether an IRC 501(c)(3) organization has violated the political campaign intervention prohibition is whether the activities constitute political intervention or whether they are educational [or religious], purposes for which an IRC 501(c)(3) organization may be formed ... Sometimes, however, the answer is that the activity is both - it is educational [or religious], but it also constitutes intervention in a political campaign."

2002 CETIP at 349. In a 1989 ruling the Service stated that "[e]ducating the public is not inherently inconsistent with the activity of impermissibly intervening in a political campaign." TAM 8936002. Then in a 1999 Tax Advice Memorandum, 199907021, the IRS went on to say "[e]ven if the organization's advocacy is educational, the organization must still meet all other requirements for exemption ...". In short, the IRS says you can do it, but you can't. The "Houses of Worship Political Speech Protection Act" will alleviate the deep chill caused by such IRS double speak since whatever the IRS standard is, a one time step over the line would not result in revocation.

Fifth, modifying the political intervention ban applicable to houses of worship to conform with the "no substantial part" test currently applicable for lobbying activities passes constitutional muster.

In analyzing the constitutionality of a Congressional enactment in the Establishment Clause area, the courts continue to use the three part test articulated in Lemon v. Kurtzman, 403 U.S. 602 (1971). See Lamb's Chapel v. Center Moriches Sch. Dist., 508 U.S. 384 (1993) (noting that despite heavy criticism of the Lemon test, Lemon has not been overruled). See also Jager v. Douglas County Sch. Dist., 862 F.2d 824, 828-29 (11th Cir.), cert. denied, 490 U.S. 1090 (1989) (discussing appropriateness of using Lemon test).

Under the Lemon test, "first, the statute must have a secular legislative purpose; second, its principal or primary effect must be one that neither advances nor inhibits religion ... ; finally, the statute must not foster 'an excessive government entanglement with religion.'" Lemon, 403 U.S. at 612-13 (citations omitted). Allowing Congress to determine the application and reach of the tax code fulfills the "secular purpose" element of the Lemon test since only Congress has power under Article I of the constitution to make and levy taxes. As upheld in Regan v. Taxation With Representation, 461 U.S. 540, 544 (1983), Congress may constitutionally permit certain speakers to be treated differently than others in the context of the tax statute. In Reagan the lobbying limits for exempt organizations were upheld against a constitutional challenge even though different tax-exempt organizations were not subject to the same limitations. As stated in Rosenberger v. Rector and Visitors of Univ. Of Va., 515 U.S. 819, 825 (1995):

Regan relied on a distinction based on preferential treatment of certain speakers - veterans organizations - and not a distinction based on the content or messages of those groups.

Accordingly, allowing Congress to determine the application of the tax code does not violate the secular purpose of the legislation.

Under the second prong of the Lemon test, legislation will only violate the Establishment Clause if its primary effect is to advance or inhibit religion. The effects prong of the Lemon test "'asks whether, irrespective of [the] government's actual purpose, the practice under review in fact conveys a message of endorsement or disapproval'" of religion. Wallace v. Jaffree, 472 U.S. 38, 56 n.42 (quoting Lynch v. Donnelly, 465 U.S. at 690 (O'Connor, J., concurring)). Modifying the absolute ban on political intervention to conform to the "insubstantiality" test now used in the lobbying test conveys no such endorsement.

Moreover, HR-2357 avoids the excessive entanglement of the government with religious institutions, in conformance with the third Lemon requirement "The First Amendment does not prohibit practices which by any realistic measure create none of the dangers which it is designed to prevent and which do not so directly or substantially involve the state in religious exercises or in the favoring of religion as to have meaningful and practical impact." Lee v. Weisman, 505 U.S. 577, 598 (quoting Schempp, 374 U.S. at 308 (Goldberg, J., concurring)). In addition, the U.S. Supreme Court has previously upheld the tax exemption for all religious organizations as required in order to avoid the excessive entanglement of the government in to the affairs of the church. Walz v. Tax Commission, 397 U.S. 664, 671 (1970). (2) It is for all these reasons that "The Houses of Worship Political Speech Protection Act" is constitutional, and a legally appropriate act for Members of Congress to support.

II. CURRENT LAW

The phrase "no substantial part of the activities" is found in the current version of the Internal Revenue Code, section 501(c)(3), and it relates to the limit of how much "lobbying," or legislative activity a church or exempt organization may conduct. The Houses of Worship Political Speech Protection Act (HR-2357) uses that same phrase to loosen the absolute ban now applying to any "political activity" (speech or association) by a house of worship. (3)

As a rough rule-of-thumb, the phrase "no substantial part of the activities" has generally come to mean no more than five percent (5%) of an organization's overall expenditures of time, money and personnel. The five percent (5%) limit also follows the objective expenditure allowances (but a much lower rate) permitted for tax-exempt organizations, but not churches or houses of worship, in IRC 501(h), the so-called safe-harbor for lobbying activities.

The "Houses of Worship Political Speech Protection Act" recognizes that no house of worship should be penalized for an occasional or inadvertent statement or action that may be regarded as "political intervention."

III. THE NEED FOR THE HOUSES OF WORSHIP POLITICAL SPEECH PROTECTION ACT

Congressional hearings over the last few years have served to highlight the abuses of the IRS in the name of tax code enforcement. In addition, the IRS has conducted tax or compliance audits of "the Heritage Foundation, Citizens for a Sound Economy, the Christian Coalition, The National Rifle Association, Freedom Alliance, the Western Journalism Center, the National Center for Public Policy, and National Review." The Washington Times (January 8, 1998 at A.7). These and other conservative organizations have been audited as well, while their counterparts in the liberal establishment have gone unscathed.

This type of selective federal investigation and enforcement highlights the need for regulatory reform and deregulation. The point is that no church or house of worship should be penalized for simply speaking out on the issues, candidates, or public leaders, occasionally or inadvertently engaging in activity that may be regarded as political, or accurately providing the voting records and issue stances of elected officials and candidates. Federal agencies such as the IRS cannot become so highly politicized that they become federal arbiters of political thought and permissible speech. The current federal tax code allows the IRS the unbridled leeway and discretion to conduct such politically motivated audits under the guise of regulatory enforcement, and it is using this unbridled discretion in a partisan and selective fashion.

To reign in the IRS's unbridled discretion and bring balance and fairness back to the system the time has come to change the "Johnson Amendment." This amendment was highly partisan and political and was specifically designed in 1954 by then Senator Lyndon Johnson to "deny tax-exempt status to not only those people who influence legislation but also those who intervene in any political campaign on behalf of any candidate for any political office." (4) Senator Johnson was angry that two non-profit Texas groups had supported his primary opponent, so he rammed his amendment through the Congress as a floor amendment without any benefit of a congressional hearing or debate. (5)

The rule has become so intrusive, and so significant a threat to the First Amendment rights of all churches, synagogues, mosques and houses of worship, that total removal of tax exemption can be imposed if a candidate for office addressing a religious body is favorably introduced, or is supported from the pulpit. Under the law as written, a one hour political strategy meeting held on the premises of a church or charity, without paying a market rental, could trigger the complete destruction of the institution by the IRS. A priest who speaks on the moral issues of abortion or capital punishment during a campaign season runs the risk of triggering an IRS investigation or violating the "coded words" restriction. As written, the rule of '501(c)(3) is akin to a highway in which traffic to 65 mph is permissible, but if a motorist goes even 1 mph over the speed limit, the police can arrest the motorist who would then be subject to the death penalty; and absurd situation. This is not only manifestly unfair, but an intolerable infringement by the IRS of the fundamental rights of free speech, and the free exercise of religion. It also intrusively entangles the government in religious matters.

The solution is simple. Under current tax law, tax exempt organizations may carry on lobbying if their efforts constitute "no substantial" amount of their activities. IRC 501(c)(3). While the term "substantial" is not defined for those entities not making the safe-harbor election permitted under IRC 501(h), such as churches, (6) for over 40 years courts have generally determined that if no more than five percent (5%) of the time and effort of the organization is devoted to lobbying, the lobbying was not "substantial." See, Seasongood v. Commissioner, 227 F.2d 907, 912 (6th Cir. 1955); World Family Corp. v. Commissioner, 81 T.C. 958 (1983)(exempt organization's lobbying activities which were less than ten percent (10%)--but more than 5%--of its total efforts was "insubstantial." Indeed, Marcus Owen, the former head of Exempt Organizations for the IRS, has been quoted as saying that "the law in this area needs to be clarified since anything from five percent to fifteen percent of total expenditures has been permitted for [l]egislative activity." Washington Times, December 2, 1997, p. A5. From this line of cases, and comments, it appears that as long as an organization expends only five percent (5%) or so of its overall expenditures on legislative activity such activity will be regarded as "insubstantial" and not result in a loss of exemption. Adopting a similar standard for political activity, and amending IRC '501(c)(3) as proposed in the House of Worship Political Speech Protection Act, does precisely that.

IV. TAX EXEMPTION IS LINKED TO SOCIAL POLICY, WHICH LEADS TO THE INEVITABLE RESULT OF REVOCATION OF TAX EXEMPTION FOR RELIGIOUS INSTITUTIONS AND RELIGIOUS ORGANIZATIONS

Ever increasing inroads have been made into the tax exempt status of religious organizations and churches. Both the IRS and atheist groups have been seeking the revocation of tax exempt status for religious institutions for some time. See, e.g., Walz v. Tax Commission, 397 U.S. 664 (1969). Religious institutional doctrine has historically been at odds with social mores which are in vogue. To condition tax exemption on a religious institution's willingness to conform to fashionable ideals (e.g., ordination of homosexuals, same sex marriages) unavoidably leads to the demise of tax exemption for houses of worship. To avoid this egregious result, it is necessary to modify the tax code, and allow a wider berth for houses of worship to generally engage in political speech.

The Threat to Free Speech and Free Exercise is Real Since the IRS Sanctions for Using "Coded Language" and is Contradictory on Whether "Intent" Is Relevant

The Service has taken the position that "coded language" violates the political prohibition. 2002 CETIP at 344-45. It explains that "[t]he concern is that [an exempt] organization may support or oppose a particular candidate without specifically naming the candidate by using code words to substitute for the candidates name in its message, such as "conservative," "liberal," "pro-life," "pro-choice," "anti-choice," "Republican," or "Democrat," etc. ..." 2002 CETIP at 345. Then in a footnote, it contradicts its admonition not to use these very "coded words" and states that:

"[a] finding of political campaign intervention from the use of coded words is consistent with the word "candidate" - the words are not tantamount to advocating support for or opposition to an entire political party, such as "Republican," or a vague and unidentifiable group of candidates, such as "conservative" because the sender of the message does not intend the recipient to interpret them that way. Coded words, in this context, are used with the intent of conjuring favorable or unfavorable images - they have pejorative or commendatory connotations.[So,] the voter in Vermont, hearing an exhortation regarding "liberal" candidates, may not know who fits that label in Kansas, but presumably he knows who stands for what in Vermont, which is why the coded word is used in the first place." id. at 345, n. 10 (underlining added).

The confusion and fear surrounding the requirements for compliance with the political intervention ban in section 501(c)(3) are quite real. One need look no further than the guidance pronouncements of the IRS and others in this area. For example, in "Election Year Issues," (7) the tome relied upon by most practitioners in this area as an indicator of the Service's approach to political campaign activities by exempt organizations, the Service has taken the view that educational or religious activities which otherwise qualify as exempt activities can nevertheless constitute prohibited political activity:

"The most common question that arises in determining whether an IRC 501(c)(3) organization has violated the political campaign intervention prohibition is whether the activities constitute political intervention or whether they are educational [or religious], purposes for which an IRC 501(c)(3) organization may be formed ... Sometimes, however, the answer is that the activity is both - it is educational [or religious], but it also constitutes intervention in a political campaign."

2002 CETIP at 349. In a 1989 ruling the Service stated that "[e]ducating the public is not inherently inconsistent with the activity of impermissibly intervening in a political campaign." TAM 8936002. Then in a 1999 Tax Advice Memorandum, 199907021, the IRS went on to say "[e]ven if the organization's advocacy is educational, the organization must still meet all other requirements for exemption ...". So, the IRS says you can do it, but you can't.

There is also considerable uncertainty over whether one's "intent" or "purpose" in making the communication matters. In its 1993 version of "Election Year Issues" the IRS stated "the motivation of an organization is irrelevant when determining whether the political campaign prohibition has been violated." 1993 CETIP at 414-15. However, in its 2002 version the IRS, discussing the debate its 1993 statement generated, stated:

"Therefore, the resolution of the 'bad motive' issue depends upon the way the activity is conducted (the facts and circumstances) and upon any [sic] inquiry into the state of mind of the organization."

2002 CETIP at 351. It's clear, the IRS cares about motive or purpose, but then again it doesn't. (8)

V. THE ORIGINAL PURPOSE OF IRC 501(C)(3) WAS TO PREVENT POLITICAL ACTIVISM OF NON-PROFIT GROUPS IN TEXAS DURING THE 1954 SENATORIAL CAMPAIGN OF L.B.J.

Tax exemption under IRC 501(c)(3) requires four basic criteria. (9) The chief prohibition amongst these is that nonprofit organizations, including houses of worship, must "not participate in, or intervene in" political campaigns. IRC '501(c)(3). As noted above, this provision was added to the federal tax law in 1954, without benefit of congressional hearings, in the form of a floor amendment in the Senate, 100 Cong. Rec.9604 (1954). During consideration of the legislation that was to become the Revenue Act of 1954, Senator Lyndon B. Johnson of Texas forced the amendment out of his anger that local two Texas non-profit groups had supported his primary opponent. Hopkins, 'The Law of Tax-Exempt Organizations," 327 (6th ed. 1992) (hereinafter "Hopkins").

The tax exemptions contained in IRC 501(c)(3) originated as a part of the Tariff Act of 1894. The provision stated that "nothing herein contained shall apply to ... corporations, companies, or associations organized and conducted solely for charitable, religious, or educational purposes" (ie., houses of worship) After ratification of the Sixteenth Amendment, Congress enacted the Tariff Act of 1913, exempting from the federal income tax "any corporation or association organized and operated exclusively for religious, charitable, scientific, or educational purposes, no part of the net income of which inure to the benefit of any private shareholder or individual."

In the Revenue Act of 1918, the enumeration of tax-exempt organizations was expanded to include those organized "for the prevention of cruelty to children or animals." The Revenue Act of 1921 expanded the statute to exempt "any community chest, fund, or foundation" and added "literary" groups to the list of exempt entities. The Revenue Act of 1924, 1926, 1928, and 1932 did not provide for any changes in the law of tax-exempt organizations.

The Revenue Act of 1934 carried forward the exemption requirements as stated in the prior revenue measures and added the rule that "no substantial part" of the activities of an exempt organization can involve the carrying on of "propaganda" or "attempting to influence legislation." The Revenue Acts of 1936 and 1938 brought forward these same rules, as did the Internal Revenue Code of 1939. The current IRC '501(c)(3) language follows the "Johnson Amendment" and came into being upon enactment of the Internal Revenue Code in 1954. 68A Stat. 163 (ch. 736).

VI. THE SUBSEQUENT INTERPRETATIONS OF IRC 501(C)(3) BY THE IRS AND COURTS MAKES IT CLEAR THAT THIS PORTION OF THE TAX CODE IS MEANT TO REPRESS PARTICIPATION IN THE POLITICAL PROCESS

The requirement that a church or charitable organization not engage in political campaign activities has been expanded to prohibit even remotely partisan involvement. In Christian Echoes National Ministry Inc. v U.S., 470 F2d 849 (l0th Cir 197. cert. den. 414 U.S. 864 (1973), a federal appeals court denied tax exempt status to a religious organization for backing a conservative political agenda. The organization, by means of publications and broadcasts, expressed its opposition to candidates and incumbents considered too liberal and endorsed conservative officeholders. The Tenth Circuit summarized the unforgivable offense: "These attempts to elect or defeat certain political leaders reflected ... [the organization's] objective to change the composition of the federal government." Christian Echoes, 470 F2d at 856. See also Monsky v. Comm., 36 T.C.M. 1046 (1977); Giordano v Comm.,36 T.C.M. 430 (1977). This flat ban on religious involvement in politics is not limited to active campaigning, however. In 1978 the IRS issued a ruling that confined "voter education" activities to those that are nonpartisan in nature. Rev. Rul. 78-248, 1978- 1 C.B. 154. (10)

In a later ruling the IRS specified the following factors as demonstrating the absence of prohibited campaign activity by a church or nonprofit organization:

  1. the voting records of all incumbents will be presented;
  2. candidates for reelection will not be identified;
  3. no comment will be made on an individual's overall qualifications for public office;
  4. no statements expressly or impliedly endorsing or rejecting any incumbent as a candidate for public office will be made;
  5. no comparison of incumbents with other candidates will be made;
  6. the organization will point out the inherent limitations of judging the qualifications of an incumbent on the basis of certain selected votes, by stating the need to consider such unrecorded matters as performance on subcommittees and constituent service;
  7. the organization will not widely distribute its compilation of incumbents' voting records;
  8. the publication will be distributed to the organization's normal readership only; and
  9. no attempt will be made to target the publication toward particular areas in which elections are occurring nor to time the date of publication to coincide with an election campaign.

Rev. Rul. 80-282, 1980-2 C.B. 178. The IRS' application of IRC 501(c)(3) then, is to limit any preferential expression for a political candidate. There is no compelling governmental reason to so limit the First Amendment activities of churches and houses of worship. This restriction should thus be modified to track the "insubstantial" standard regarding lobbying, and apply that standard to political activity as well.

VII. THE IRS APPLICATION OF THE LIMITATION ON CHURCHES PARTICIPATING IN THE POLITICAL PROCESS IS EXPANDING, INTRUSIVE AND SELECTIVE

Under the First Amendment, the government lacks the license to make determinations about whether a "creed" or "form of worship" is sufficiently "recognized," and whether the church has an adequate organizational structure (i.e., properly ordained ministers, a literature "of its own," etc.) to prevent IRS intrusion and inspection. If "it is not within the judicial ken to question the centrality of particular beliefs or practices of faith" and the "courts must not presume to determine the place of a particular belief in a religion or the plausibility of a religious claim," Employment Division v. Smith, 494 U.S. 872, 878 (1990) (citations omitted), it stands to reason that the other branches of the federal government are constitutionally unfit to make those judgments as well. Many independent small churches do not meet regularly, do not have an independent existence, do not have ordained ministers, do not have a formal doctrinal code, and yet nonetheless are churches warranting tax exemption. (11)

Similarly, Treasury regulations describe a church as an organization the duties of which include the "ministration of sacerdotal functions and the conduct of religious worship." Reg. I.51 I -2(a)(3)(ii). This definition begs the question, because it requires Treasury officials to exercise their own judgment in determining what is a priestly function, and what is sufficient "religious worship" to qualify for "church" status.

Governmental judgments of this kind are not only unworkable, they are dangerous and unconstitutional. The Supreme court has reiterated the oft repeated principle that "religious freedom encompasses the power of religious bodies to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine. Serbian Orthodox Diocese v. Milivojevich, 426 U.S. 696, 722 (1976) (emphasis added); Kedroffy St. Nicholas Cathedral, 344 U.S. 94, 116 (1952). In Corp. of Presiding Bishops v. Amos, 483 U.S. 327, 341 (1987), Justice Brennan noted: "religious organizations have an interest in autonomy in ordering their internal affairs, so that they may be free to: "Select their own leaders, define their own doctrines, and run their own institutions." (citations and internal quotation marks omitted, emphasis added). Given the weight of constitutional precedent in this area, it defies rationality for the government to empower its tax collecting arm with the ability to invade the religious autonomy of churches while other branches of the government are constitutionally forbidden from doing so.

This is of even greater concern because conservative or orthodox and liberal or reform church organizations are treated quite differently by the IRS. For example, a conservative evangelical church in upstate New York, the Church at Pierce Creek, had its tax exemption revoked in 1995 for impermissible "political" activity. The offending activity involved its published moral and religious stand in the newspaper calling abortions on demand, homosexuality, and premarital sex "sins." "Christians" were admonished to oppose such "sins" and not vote for then Governor Clinton. (12) Historically, currently, and at the time the Church at Pierce Creek was having its tax exempt status revoked, numerous churches engaged in similar or more egregious violations, as follows:

Historical Context

  1. Since the campaign of Thomas Jefferson, religious and political controversy has been prominent in approximately one of every three campaigns for the presidency. B. Dulce & E. Richter, Religion and the Presidency v, 1-11 (1962). See also H. Foote, The Religion of Thomas Jefferson 45 (1960) (electioneering pamphlets written and distributed by clergymen accused Jefferson of atheism and thus "too dangerous an enemy of Christianity to be president").
  2. "During the 1980 election year, a number of religious groups participated in energetic presidential and congressional campaign activities to promote the election of politicians who share their beliefs." Note, "Religion and Political Campaigns: a Proposal to Revise Section 501(c)(3) of the Internal Revenue Code," 49 Fordham L. Rev. at 537 (1981) (footnotes omitted).

Political Activity by Churches Where No Sanctions Have Been Levied, But for Which Other Churches Have Had Their Tax Exemptions Revoked

  1. 3 "[T]he Reverend Jesse Jackson . . . campaigned from pulpits of black churches across the nation in his pursuit of the Democratic nomination" for President in 1984. Reichley, Religion in American Public Life 1 (The Brookings Institution, Wash., D.C. 1985). See also Rosenthal, "Prelates and Politics: Current Views on the Prohibition Against Campaign Activity," Tax Notes 1122 (1991); and Chisolm, "Politics and Charity: A Proposal for Peaceful Coexistence." 58 Geo. Wash. L. Rev. (No. 2) 308 (1990); Tesdahl, "Intervention in Political Campaigns by Religious Organizations After the Pickle Hearings - A Proposal for the 1990s," 4 Exempt Org. Tax Rev. (No. 9) 1165 (1991).
  2. 4 The IRS Chief Counsel's office "reluctantly" concluded in 1989 that an organization "probably" did not intervene in a political campaign on behalf of or in opposition to a candidate for public office, even though the organization ran a political advertising program that (1) was, in the words of the IRS, "mostly broadcast during a two week period around the Reagan/Mondale foreign and defense policy debate on October 21, 1984," (2) contained statements that "could be viewed as demonstrating a preference for one of the political candidates" [Mondale], (3) "could be viewed" as having content such that "individuals listening to the ads would generally understand them to support or oppose a candidate in an election campaign," (4) involved statements that were released so close to the November vote as to be "troublesome." IRS Technical Advice Memorandum 8936002. Even though these campaign broadcasts were in clear violation of the IRS' voter education rules, see e.g., Rev. Rul. 86-95, 1986-1 C.B. 332, the IRS nonetheless took no action against this charitable organization for this campaign activity.
  3. 5 9/25/94 (13) - then-Governor of New York Mario Cuomo, President Clinton, and New York Mayor Rudolf Gulliani all campaigned on behalf of Governor Cuomo from the pulpit of the Bethel A.M.E. Church in Harlem, New York.
  4. 6 10/23/94 - Senator Charles Robb and Governor Wilder campaigned on behalf of Senator Robb from the pulpit of the Trinity Baptist Church in Richmond, Virginia.
  5. 7 10/11/94 - California Democratic gubernatorial candidate Kathleen Brown campaigned in five different Los Angeles churches: Bethel A.M.E. Church, the Mount Tabor Missionary Baptist Church, the First A.M.E. Church, and the West Los Angeles Church of God in Christ.
  6. 8 11/21/92 - Vice President Al Gore campaigned from the pulpit of three different Savannah, Georgia churches on behalf of Democratic run-off candidate Wyche Fowler.
  7. 9 4/5/92 - Presidential candidate Bill Clinton campaigned from the pulpit of the Bridge Street A.M.E. church in Harlem, New York.
  8. 10 1/27/92 - Democratic presidential candidate Tom Harkin campaigned from the pulpit of the Heritage United Church of Christ, located in Baltimore, Maryland.
  9. 11 8/14/90 - District of Columbia Mayor Marion Barry campaigned from the pulpit of the Israel Baptist Church.
  10. 12 4/30/90 - New York Democratic congressional candidate Charles Shumer campaigned at St. John's Church in New York, speaking with 30 black ministers.
  11. 13 4/98 - Democratic congressional candidate contenders Ohio State Senator Jeffrey D. Johnson and Cuyahoga County Prosecutor Stephanie Tubbs Jones campaigned at the Starlight Baptist Church in Cleveland "for an endorsement interview by a black ministers group." Johnson spends his Sundays campaigning at black churches.
  12. 14 4/8/98 - Florida Republican gubernatorial candidate campaigned at Faith Memorial Baptist Church in Liberty City.
  13. 15 3/31/98 - Detroit Democratic gubernatorial candidate Doug Ross "announced a 19-member Executive Board of Clergy United for Ross" which was "expected to include 250 ministers by May."
  14. 16 3/8/98 - Chicago Democratic gubernatorial candidate Roland Burris campaigned at Chicago churches.
  15. 17 2/22/98 - Chicago Democratic gubernatorial candidate Jim Burns "preached his crime-fighting message to South Side parishioners at a storefront church called the House of Refuge."
  16. 18 2/14/98 - Democratic congressional candidate Irma Cohen "is relying on Operation Big Vote, the church-based alliance set up by Florida Democrats in 1994 to bring out the black vote. 'The one thing we have going for us is the church network,' Kennedy said. 'Rightly or wrongly, 90 percent of the people in the church do what the minister says."
  17. 19 1/6/98 - Former Democrat Congressman Rev. Floyd Flake, endorsed the congressional candidacy of New York Democratic Assemblyman Gregory Meeks, during services at Flakes' Church, the Allen African Methodist Episcopal Church in Jamaica, Queens.
  18. 20 11/13/97, 10/24/97 - New Jersey Democratic gubernatorial candidate Jim McGreevy during the course of his campaign, campaigned in more than 100 churches, and made 104 campaign visits to African-American churches.
  19. 21 11/3/97 - Both Virginia Democratic gubernatorial candidate Donald S. Beyer, Jr. and Virginia Republican candidate James S. Gilmore, III campaigned in churches across the State of Virginia.
  20. 22 11/2/97 - Roman Catholic Bishop Frank J. Rodimer endorsed New Jersey Democratic gubernatorial candidate Jim McGreevy in his Sunday service homily at St. John's Cathedral in Paterson.
  21. 23 11/1/97, 10/29/97 - Executive Director of the Black Ministers Council of New Jersey, Rev. Reginald Jackson, endorsed Republican Governor Christie Whitman, while 24 African-American ministers representing more than 600 churches statewide endorsed Democratic gubernatorial candidate Jim McGreevey.
  22. 24 10/20/97 - Rev. Al Sharpton endorsed the candidacy of New York Democratic mayoral candidate Ruth Messinger during Sunday worship services at the Bethel A.M.E. Church in Harlem, and at the New Jerusalem Baptist Church in Queens.
  23. 25 10/4/97 - Washington Governor Gary Locke made four campaign visits to a Redmond Buddhist Temple, where he was offered sizable campaign donations.
  24. 26 10/4/97 - Muslim Amatullah Yamini campaigned in Christian churches in the Onondaga County, New York, State legislative district Democratic primary.
  25. 27 10/2/97 - Houston, Texas Democratic mayoral candidate Lee P. Brown campaigned at the Green Grove Missionary Church.
  26. 28 10/1/97 - New York Democratic mayoral candidate Ruth Messinger campaigned at "the Christian Life Center, a 7000-member nondenominational ministry in Brownsville, Brooklyn."
  27. 29 5/15/97 - The Black Clergy of Philadelphia, representing 450 churches, announced their choices for judicial candidates at the Vine Memorial Baptist Church. The clergy members were joined by many of the candidates they were endorsing.
  28. 30 12/9/96 - At the Houston, Texas, Windsor Village United Methodist Church: "The message to God came just after U.S. Rep. Richard Gephardt of Missouri, the Democratic leader of the U.S. House, asked the audience to support the reelection of Democratic U.S. Rep. Ken Bentsen." Rep. Gephardt and Rep. Bentsen then proceeded to campaign at a Chinese Baptist church and several African American churches in Houston.
  29. 31 11/11/96 - As the Denver Post plainly put it: "Don't try to tell a black minister about the separation of church and state. Not when the state comes striding into the sanctuary nearly every Sunday, begging for votes . . . . Other political and religious leaders in Denver say far more candidates than Webb owe their elections to northeast Denver and the political work of black churches there. They say Tim Wirth and Gary Hart could not have won their U.S. Senate races without an all-out effort from the church congregations."
  30. 32 11/5/96 - U.S. Senator Paul Simon campaigned at the Grace United Methodist Church in Springfield, Illinois, on behalf of Democratic congressional candidate Dick Durbin.
  31. 33 11/5/96 - Rev. Jesse Jackson campaigned on behalf of Rhode Island Democratic candidates at the Pond Street Baptist Church in Providence.
  32. 34 11/4/96 - President Clinton campaigned at the St. Paul AME Church in Tampa, Florida.
  33. 35 11/4/96 - Democratic Rep. Martin Frost "made campaign stops at four African-American churches [during Sunday services] in southeast Fort Worth, Texas."
  34. 36 11/4/96 - Louisiana Democratic Senatorial Candidate Mary Landrieu "visited African-American churches Sunday, including Asia Baptist Church, where she received an enthusiastic endorsement from the Rev. Zebadee Bridges."
  35. 37 11/4/96 - North Carolina Democratic "Senate Candidate Harvey Gantt visited five black Charlotte congregations on Sunday, mounting the pulpit in three. . . 'There comes a time in a campaign when you have to trust the voters to do the right thing,' he said from the pulpit, 'I'm not going to beat up on Senator Helms . . . . All I'm going to say is, he's been there 24 years. That's enough time."
  36. 38 11/4/96 - Pastor Joe Fuiten of the Cedar Park Assembly of God Church in Seattle, Washington urged his congregants to vote for Republican candidates, while across town at the Mount Zion Baptist Church, Rev. Samuel B. McKinney urged his church members to vote the Democratic ticket.
  37. 39 11/4/96 - Democratic Senatorial candidate Mark Warner campaigned in African American churches across the State of Virginia.
  38. 40 11/3/96 - Democratic Memphis Mayor Herenton endorsed Democratic congressional candidate Harold Ford, Jr. at the Greater Imani Church, in Memphis, Tennessee.
  39. 41 10/28/96 - The Northeast Ministers Alliance, an organization of 60 mostly African American churches located in Houston Texas, endorsed a slate of Democratic Candidates running for various state-level offices, and one Republican running for local sheriff.
  40. 42 10/21/96 - President Clinton campaigned at the New Hope Baptist Church in Newark, New Jersey.
  41. 43 9/17/96 - "The Greater Denver Ministerial Alliance, representing more than 100 black churches and 20,000 Denver voters, endorsed Bill Clinton for president, Al Gore for vice president, Democrat Ted Strickland for the Senate and Republican Joe Rogers for the House."
  42. 44 9/13/96 - Reverend Acen Phillips endorsed the candidacy of Republican congressional African American candidate Joe Rogers, at the Mount Gilead Baptist Church, in Denver, Colorado.
  43. 45 8/26/96 - Vice President Al Gore campaigned with the Rev. Jesse Jackson at the Fellowship Baptist Church in Charleston, North Carolina. The Rev. Jackson is co-minister of the church.
  44. 46 11/8/95 - U.S. Democratic Rep. Cleo Fields campaigned for governor at a New Orleans church.
  45. 47 9/15/95 - Several Orthodox Rabbis spoke from the pulpit in favor of Baltimore Democratic mayoral primary candidates.
  46. 48 8/12/95 - "the influential and powerful United Ministerial Coalition of Baltimore threw their thousands of affiliated church members behind the re-election effort of [Baltimore] Mayor Kurt L. Shmoke."
  47. 49 5/18/95 - Gubernatorial candidate Kentucky Senate President John "Eck" Rose campaigned at the Canaan Missionary Baptist church in Louisville, Kentucky.
  48. 50 2/28/95 - Philadelphia Mayor Edward G. Rendell picked up a re-election endorsement from the Black Clergy of Philadelphia & Vicinity, representing more than 400 churches and ministries. The endorsement "was formally announced at a press conference in the basement of the Vine Memorial Baptist Church in West Philadelphia."
  49. 51 2/6/95 - Chicago Democratic primary mayoral candidate Joe Gardner campaigned at the St. Stephen's African Methodist Episcopal Church, on Chicago's west side.
  50. 52 11/7/94 - Rev. Jesse Jackson campaigned on behalf of Democratic candidates at the New Hope Church of God in Christ, in Norfolk, Virginia.
  51. 53 11/6/94 - Republican Senatorial Candidate Ollie North and Democratic Senatorial incumbent Charles Robb both campaigned at Virginia churches.
  52. 54 11/3/94 - President Clinton campaigned for Democratic candidates at the Antioch Baptist Church in Cleveland, Ohio.
  53. 55 10/31/94 - New Jersey Democratic Senator Frank Lautenberg campaigned at the Salem Baptist Church in Jersey City.
  54. 56 10/24/94 - Former Virginia Gov. Douglas Wilder campaigned for Virginia Senator Charles Robb at the Trinity Baptist Church.
  55. 57 10/13/94 - New Jersey Democratic Senator Frank Lautenberg was endorsed by a group of 30 ministers at a news conference held at the Zion AME Church in Brunswick, New Jersey.
  56. 58 7/19/94 - Democratic Rep. Maxine Waters campaigned at Detroit's Dexter Avenue Baptist Church on behalf of Michigan Democratic gubernatorial candidate Howard Wolpe.
  57. 59 6/2/94 - Democratic Governor Mario Cuomo campaigned at the St. John Baptist Church in Buffalo, New York.
  58. 60 5/13/94 - Democratic Governor Mario Cuomo campaigned at "the Hillcreat Jewish Center in Queens, a Conservative shul, to Temple Emmanuel on Fifth Avenue, a Reform synagogue, and wrapped up his evening at the Orthodox Union dinner at the Grand Hyatt Hotel."

VIII. THE IRS SHOULD NOT HAVE UNBRIDLED DISCRETION

Clearly, churches and houses of worship engage in "political activity." However, the IRS uses its authority selectively to only target those it wishes to silence or threaten. Today it may be orthodox and conservative views, but tomorrow it could be liberal or unconventional views. Such unbridled discretion not only creates constitutional concerns, but illustrates why Congress needs to reign-in the IRS to insure constitutional compliance and lift the sword of Damocles hanging over churches. The Supreme Court has "previously identified two major First Amendment risks associated with unbridled licensing schemes: self-censorship by speakers in order to avoid being denied a license to speak [or having one withdrawn]; and the difficulty of effectively detecting, reviewing and correcting content-based censorship as applied without standards by which to measure the licensor's action." City of Lakewood v. Plain Dealer Publishing Company, 108 S. Ct. 2138, 2145 (1988).

In Shuttlesworth v. City of Birmingham, 394 U.S. 147, 153 (1969), the court also explained: "[w]e have consistently condemned licensing [or regulatory] schemes which vest in administrative officials discretion to grant or withhold a permit upon broad criteria." This is the heart of the problem which has been created due to the IRS' discretion and selective application of the law. It is precisely the absence of sufficient clear and specific standards by which to gage the qualifications and conduct of houses of worship in the political activities area which needs to be corrected. Otherwise, government officials may unconstitutionally "pursue their personal predilections."

IX. A SIMPLE REVISION TO THE TAX CODE WILL ALLEVIATE THIS PROBLEM

The IRS' enforcement and regulation of the "political" activities of houses of worship is discriminatory and improperly based upon its "predilections" of the moment: one church is permitted to say something another is not, one's activity is appropriate, but same activity by another not, etc. To avoid this type of arbitrary or capricious enforcement, and remove the dramatic chilling impact the IRS' selective enforcement has, the Houses of Worship Political Speech Protection Act proposes a substantiality test for this type of "political activity," as is currently the case with regard to legislative or lobbying activity by churches and houses of worship.

Present Language of IRC 501(c)(3):

The following organizations are [exempt from taxation under this subtitle . . . ]

Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if not part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing and distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

Proposed Change to IRC 501(c)(3) in the Houses of Worship Political Speech Protection Act:

The following organizations are [exempt from taxation under this subtitle . . . ]

Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if not part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation (except as otherwise provided in subsection (h)), and except in the case of an organization described in section 508(c)(1)(A) (relating to churches), which does not participate in, or intervene in (including the publishing and distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office and, in the case of an organization described in section 508(c)(1)(A), no substantial part of the activities of which is participating in, or intervening in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.

X. CONCLUSION

Given the historic and critically necessary role churches and houses of worship have played in speaking to the issues of the day, and with the continuing desire of many religious people in the United States to speak out collectively on matters of moral importance, the time has come to rectify a nearly 50-year old injustice and to change IRC 501(c)(3), as proposed in the Houses of Worship Political Speech Protection Act.

1. The courts have repeatedly held that when a regulatory agency has conflicting interpretations or applications of its rules and regulations, due process is violated because no clear or fair notice of what is required for compliance has been given. Satellite Broadcasting Co., Inc. v. FCC, 262 U.S. App. D.C. 274, 824 F.2d 1 (D.C. Cir. 1987); General Elec. Co. v. EPA, 311 U.S. App. D.C. 360, 53 F.3d 1324, 1327 (D.C. Cir. 1995); United States v. Chrysler Corp., 332 U.S. App. D.C. 444, 158 F.3d 1350, 1354-57 (D.C. Cir. 1998) (holding that agency failed to provide fair notice of specific requirements of compliance and therefore could not move to enforce its regulations); Rollins Envtl. Svcs. (NJ) Inc. v. EPA, 290 U.S. App. D.C. 331, 937 F.2d 649, 653 (D.C. Cir. 1991) (rescinding fine assessed by EPA because regulation was ambiguous); Gates & Fox Co., Inc. v. OSHRC, 252 U.S. App. D.C. 332, 790 F.2d 154, 156 (D.C. Cir. 1986) (holding that agency failure to give fair notice of its interpretation of its regulations precluded enforcement); Trinity Broadcasting of Florida, Inc., et al. v. FCC, 211 F3d 618, 2000 U.S. App. LEXIS 8918 (D.C. Cir. 2000) (same).

2. The concern over entanglement is also why churches and houses of worship, pursuant to IRC 6033(a)(2), need not file annual informational tax returns (IRS Form 990), while all other exempt organizations must.

3. Section 501(c)(3) of the Internal Revenue Code has been interpreted by courts to prevent even a single activity which might be regarded as Aparticipating in, or intervening in@ a political campaign on behalf of or in opposition to a candidate for public office. Association of the Bar of the City of New York v. Commissioner, 858 F.2d 876 (2nd Cir, 1988); Branch Ministries v. Rossotti, 40 F. Supp. 2d 15 (D.D.C. 1999); aff'd, 211 F.3d 1137 (D.C. Cir. 2000).

4. 100 Cong. Rec. 9604 (1954).

5. See, Hopkins, The Law of Tax-Exempt Organizations at 327 (6th ed. 1992)(herein "Hopkins").

6. Churches are not permitted to make the election for lobbying activities pursuant to IRC '501(h)(5). This exclusion means that the lobbying activities of churches is governed by the" substantial part test," which is a facts and circumstances evaluation. IRS Reg. '1(a)(4); Kentucky Bar Foundation, Inc. v. Comm'r, 78 T.C. 971 (1982)(the issue of "[]substantial[ity]" is a question of facts and circumstances). Moreover, for the same reason that churches need not file an annual tax return (IRC '6033(a)(2)) -- to avoid government entanglement -- so too churches may not make the IRC '501(h) election.

7. Judith Kindell and John F. Reilly, "Election Year Issues," Exempt Organizations Continuing Education Technical Instruction Program, www.irs.gov ("2002 CETIP Text").

8. The courts have repeatedly held that when a regulatory agency has conflicting interpretations or applications of its rules and regulations, due process is violated because no clear or fair notice of what is required for compliance has been given. Satellite Broadcasting Co., Inc. v. FCC, 262 U.S. App. D.C. 274, 824 F.2d 1 (D.C. Cir. 1987); General Elec. Co. v. EPA, 311 U.S. App. D.C. 360, 53 F.3d 1324, 1327 (D.C. Cir. 1995); United States v. Chrysler Corp., 332 U.S. App. D.C. 444, 158 F.3d 1350, 1354-57 (D.C. Cir. 1998) (holding that agency failed to provide fair notice of specific requirements of compliance and therefore could not move to enforce its regulations); Rollins Envtl. Svcs. (NJ) Inc. v. EPA, 290 U.S. App. D.C. 331, 937 F.2d 649, 653 (D.C. Cir. 1991) (rescinding fine assessed by EPA because regulation was ambiguous); Gates & Fox Co., Inc. v. OSHRC, 252 U.S. App. D.C. 332, 790 F.2d 154, 156 (D.C. Cir. 1986) (holding that agency failure to give fair notice of its interpretation of its regulations precluded enforcement); Trinity Broadcasting of Florida, Inc., et al. v. FCC, 211 F3d 618, 2000 U.S. App. LEXIS 8918 (D.C. Cir. 2000) (same).

9. That is, organizations described in IRC '' 170(c)(2)(B), 501(c)(3), 2055(a)(2), 2106(a)(2)(A)(ii) & (iii), and 2522(a)(2) and (b)(2).

10.  This ruling was a reversal of a prior ruling wherein the IRS stated that the prohibitions against involvement in political campaigns "do not refer only to participation or intervention with a partisan motive, but to any participation or intervention which affects voter acceptance or rejection of a candidate." Consequently, the IRS determined that "the organization's solicitation and publication of candidates' views on topics of concerns to the organization can reasonably be expected to influence voters to accept or reject candidates." Rev Rul.78- I 60. 1978- 1 C.B. at 154 (emphasis added). This flat ban on all First Amendment activity relating to politics engendered a public outcry and a rare reversal by the IRS. Hopkins at 332.

11. Indeed, by the standards the IRS applies today, Jesus and the Apostles would not qualify for "church" status. See, Internal Revenue Service Manual '321.3 (outlining the 14 point test used by the IRS to determine "church" status).

12. Branch Ministries v. Rossotti, 40 F. Supp. 2d 15 (D.D.C. 1999); aff'd, 211 F.3d 1137 (D.C. Cir. 2000).

13. The cited dates are the dates of articles about the church campaign events, not necessarily the dates of the events themselves.