ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS

Subcommittee on Oversight

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

Congressman Amo Houghton (R-NY), Chairman, Subcommittee on Oversight of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing to review Internal Revenue Code (I.R.C.) Section 501(c)(3) requirements for religious organizations. The hearing will take place on Tuesday, May 14, 2002, in room 1100 Longworth House Office Building, beginning at 2:00 p.m.

In view of the limited time to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Subcommittee and for inclusion in the printed record of the hearing.

BACKGROUND:

I.R.C. §501(c)(3) organizations – such as religious, charitable, educational, scientific, and literary organizations – enjoy certain benefits because of their tax-exempt status:

• Being exempt from Federal income taxation under I.R.C. §501(a), and
• Allowing contributors to take tax deductions under I.R.C. §170(a) for charitable contributions.

However, §501(c)(3) organizations also have certain restrictions and limitations imposed on their allowable activities, including lobbying and political activity.

All §501(c)(3) organizations may attempt to influence legislation as long as it does not constitute a "substantial part" of the organizations’ overall activities. In addition, §501(c)(3) organizations can elect to use an alternative I.R.C. §501(h) safe-harbor "expenditure test," in which the I.R.C. outlines specific expenditure limits in I.R.C. §4911 that may be spent on lobbying activities. However, churches, along with church-related organizations outlined in I.R.C. §501(h)(5), were excluded from this "expenditure test" election at their own request.

All §501(c)(3) organizations must not "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." Violation of this political activity prohibition, which has been in existence since 1954, can result in the organization losing its tax-exempt status and the imposition of certain excise taxes.

The Internal Revenue Service (IRS) has revoked one §501(c)(3) church’s tax-exempt status for violation of this political activity prohibition. In 1992, the Church at Pierce Creek purchased a full-page advertisement in two newspapers that attacked the views of then-Governor Bill Clinton. The bottom of the advertisement stated that "[t]ax-deductible donations for this advertisement gladly accepted." The IRS found that the newspaper advertisement was prohibited intervention in a political campaign.

In announcing the hearing, Chairman Houghton stated, "This is a very complex issue, and I look forward to a careful review of this section of the tax code."

The focus of the hearing is to review the history of and current requirements for I.R.C. §501(c)(3) organizations. In addition, the Subcommittee will hear testimony on two bills, H.R. 2357, the Houses of Worship Political Speech Protection Act, and H.R. 2931, the Bright-Line Act of 2001, that are intended to revise current tax law for religious organizations so as to then permit certain activities that presently are prohibited (political campaigns) and limited (lobbying) by I.R.C. §501(c)(3) organizations.

Please Note: Due to the change in House mail policy, any person or organization wishing to submit a written statement for the printed record of the hearing should send it electronically to hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to (202) 225-2610, by the close of business, Tuesday, May 28, 2002. Those filing written statements who wish to have their statements distributed to the press and interested public at the hearing should deliver their 200 copies to the Subcommittee on Oversight in room 1136 Longworth House Office Building, in an open and searchable package 48 hours before the hearing. The U.S. Capitol Police will refuse sealed-packaged deliveries to all House Office Buildings.

FORMATTING REQUIREMENTS:

Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below.  Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.

1.   Due to the change in House mail policy, all statements and any accompanying exhibits for printing must be submitted electronically to hearingclerks.waysandmeans@mail.house.gov, along with a fax copy to (202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a total of 10 pages including attachments.  Witnesses are advised that the Committee will rely on electronic submissions for printing the official hearing record. 

2.  Copies of whole documents submitted as exhibit material will not be accepted for printing.  Instead, exhibit material should be referenced and quoted or paraphrased.  All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.

3.  Any statements must include a list of all clients, persons, or organizations on whose behalf the witness appears.  A supplemental sheet must accompany each statement listing the name, company, address, telephone and fax numbers of each witness.

Note: All Committee advisories and news releases are available on the World Wide Web at http://waysandmeans.house.gov.

The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call (202) 225-1721 or (202) 226-3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.