IRS to Investigate Church's Political Activities

IRS to Investigate Church's Political Activities

News story posted in Compliance on 28 February 2008| 12 comments
audience: National Publication | last updated: 18 May 2011
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Summary

In a news story published on its website, the United Church of Christ has announced it has received notice from the IRS that it is initiating a church tax inquiry "because reasonable belief exists that the United Church of Christ has engaged in political activities that could jeopardize its tax-exempt status." The inquiry stems from U.S. Sen. Barack Obama's address at the UCC's 2007 General Synod in June of 2007.

Click here to visit the UCC website to read the full story. 

Full Text of IRS Letter:

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

TAX EXEMPT AND GOVERNMENT
ENTITIES DIVISION

CERTIFIED MAIL

Date: FEB 20 2008

United Church of Christ
700 Prospect Ave E
Cleveland, OH 44115

Dear Sir or Madam:

The Internal Revenue Service (the "Service") is responsible for administering the Internal Revenue laws of the United States, including those that apply to organizations exempt from federal income tax. To carry out that responsibility, section 7602 of the Internal Revenue Code ("IRC") authorizes the Service to determine the correctness of any tax return, to make a return when none has been filed, and to determine the tax liability of any person or organization. However, IRC section 7611 imposes restrictions on the Service in conducting tax inquiries and examinations of churches and conventions or associations of churches.

In passing IRC section 7611, Congress intended to ensure that the Service carry out its obligation to resolve questions concerning the tax liability, if any, and the tax-exempt status of churches and organizations claiming to be churches, with due regard for both the rights of church organizations and the responsibility of the Service to enforce the Internal Revenue laws.

Because a reasonable belief exists that the United Church of Christ ("church") has engaged in political activities that could jeopardize its tax-exempt status as a church described in section 501(c)(3) and exempt under section 501(a), this letter is notice of the beginning of a church tax inquiry described in IRC section 7611(a). We are sending it because we believe it is necessary to resolve questions concerning your tax-exempt status as a church described in section 501(c)(3) and in section 170(b)(1)(A)(i) of the Code.

Our concerns are based on articles posted on several websites including the church's which state that United States Presidential Candidate Senator Barack Obama addressed nearly 10,000 church members gathered at the United Church of Christ's biennial General Synod at the Hartford Civic Center, on June 23, 2007. In addition, 40 Obama volunteers staffed campaign tables outside the center to promote his campaign.

All section 501(c)(3) organizations, including churches, their integrated auxiliaries, conventions or associations of churches, are prohibited from participating in, or intervening in (including the publication or distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office. This is an absolute prohibition, violation of which results in denial or revocation of exempt status and/or the imposition of certain excise taxes, if applicable.

The prohibition against political campaign activity does not prevent candidates from being invited to speak at an event of an organization described in section 501(c)(3). If a candidate is invited to speak in his or her capacity as a candidate, then other candidates running for the same office must also be invited to speak and there should be no indication of support for, or opposition to, any candidate by the organization. Also, the prohibition does not prevent an organization's officials from being involved in a political campaign, so long as those officials do not in any way utilize the organization's financial resources, facilities, or personnel and clearly indicate that the actions taken or the statements made are those of the individuals and not of the organization.

A list of specific questions about your operations/activities is attached. Please answer each question completely. If your response resolves our concerns about your exempt status and tax liability, it will not be necessary to pursue this matter further.

Attached as required by section 7611(a)(3)(B)(ii), is a statement of your administrative and constitutional rights during a tax inquiry and examination. Your rights include the right to a conference with Service representatives to discuss our concerns before the Service begins an examination. The Service will formally offer you the opportunity for a conference in a Notice of Church Examination Letter, if such a notice of examination is sent to you.

Please reply within 15 days of the date of this letter to:


    Internal Revenue Service TEGE Division
    Attn: Kenneth Roton
    1601 Market Street, 19th Floor
    Philadelphia, PA 19103
If we do not hear from you within that time, we may issue a Notice of Church Examination Letter, which section 7611 requires to be issued before we initiate an examination of your records or religious activities.

If you have any questions, please contact the person whose name and telephone number are shown above.

Thank you for your cooperation.

                Sincerely yours,

                Marsha Ramirez
                Director, EO Examinations
Enclosures:
Questions
Statement of Administrative and Constitutional Rights

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Comments

The Rules and Faith

As one theologically trained, and slightly legally trained (took some constitutional law), I must say that this will be an interesting investigation. The most coherent comment by Charles Watkin, a tax attorney, helps delinate the issues, including the call for more clear guidelines for churches. It seems clear to me that I have rights and privileges as an American citizen under the Constitution, and I have responsibilities as a Christian to express my faith and live out the Gospel. I believe we are blessed in this country to have this debate and dilemma, and look forward to the ongoing process as it will help us all articulate our religious expressions within the framework of a free society.

IRS Church Tax Inquiry

I am a tax lawyer, and have represented several churches and other tax-exempt organizations in IRS audits, some of which have inquired about political activity. The IRS letter opening a church tax inquiry relating to Sen. Obama's speech at the UCC convention is not an "attack" on the UCC. Instead, it is the initial procedure that the IRS is required to follow to ascertain the facts necessary to enable it to make a determination regarding whether the UCC improperly intervened in a political campaign. There is alot of controversy regarding whether the prohibition on political activity should be retained in Section 501(c)(3). Politicians from both parties, and churches on both sides of the political and theological spectrum, disagree. Some conservatives and liberals think the prohibition should be scrapped. Others think it should be retained. The Supreme Court has ruled that the prohibition does not violate the First Amendment. So for purposes of this discussion, let's assume that it is valid and should be enforced evenhandedly. We can also disagree about how the prohibition should be enforced. But the IRS has published a number of revenue rulings, and has released technical advice memoranda arising out of audits, that provide alot of guidance. Again, we may disagree about the IRS' application of the law, but I hope we can agree that the rules should be evenly enforced against all parties. I reviewed the video of Sen. Obama's speech to the UCC convention, and although it is not overtly "political" in many places, Sen. Obama refers in one instance to action he would take as President, and there are several other references to public policy issues that are significant in the presidential campaign. The IRS guidelines for Sec. 501(c)(3) exempt organizations are clear: A candidate may be invited to speak in his or her capacity as, e.g., a public official. However, there can be no references to the campaign or candidacy. Sen. Obama's speech violated this principle. (I don't think the UCC can be held responsible for the presence of Obama campaign volunteers outside the convention center--on space not controlled by the UCC. In contrast, if the UCC permitted the volunteers to set up inside the convention center in space controlled by the UCC as part of its use agreement with the convention center, then the UCC could be held responsible for their presence.) Based on my experience, and given the limited nature of the references to the campaign and Sen. Obama's candidacy, the IRS will find that the speech was an improper intervention in a political campaign, it will ask the UCC to adopt and enforce policies designed to prevent a recurrence, and unless the UCC wants to fight the issue in the way that All Saints Church in Pasadena, California did, that will be the end of it. This case is much less egregious than the sermon preached at All Saints Church, but the IRS was not able to pursue that case because the Justice Department wouldn't authorize enforcement of the subpoenas issued to the Church. (Funny, I didn't see any praise for the Justice Department from liberals for that decision.) In addition, a potential legal question related to whether the sermon preached by the retired rector of the Church could be attributed to the Church. One commenter asked why the IRS has not gone after the churches "used blatantly by J. Kenneth Blackwell in Ohio for his last campaign." The IRS is prohibited by law from disclosing whether it is auditing any taxpayer, including an exempt organization. The only reason we know that the NAACP, or All Saints Church, or the UCC were or are being audited is that the organization--not the IRS--released that information, presumably for tactical reasons. However, of the more than 160 audits related to political activity that were referred to by the IRS in a 2006 news release, we know the identities of only a few who have chosen to release that information. Thus, it is entirely possible that the churches in Ohio, and many elsewhere, are being audited, and only the IRS and the organization (and not even the pastor's hairdresser!) will know for sure. Am I happy about this state of affairs? Not at all! The IRS relies too much on "facts and circumstances" analyses that wind up chilling free speech because in many situations, neither the law, nor the regulations, nor the IRS rulings provide churches and other charities with any clear rules delineating what can and can't be done. Congress ought to provide such rules. The IRS has also got itself into a position in which it has invited complaints from political and ideological opponents of charities and churches that are in any way associated with a political candidate. There are undoubtedly many such complaints that are unfounded, or where the conduct is only superficially political. However, the IRS appears to feel compelled to open a church tax inquiry, or an audit, with respect to conduct that is either not political at all, or that should be dealt with by a summary letter noting the conduct and the nature of the information received by the IRS, and reminding the taxpayer of the prohibition, with no inquiry or audit. This would minimize the need for the IRS to devote extensive resources to the problem, and would avoid imposing substantial legal fees--disproportionate to the conduct complained of--to respond to an audit. Only repeat offenders would be audited, and the excise tax imposed or their exemption revoked. Until the rules are clarified and the IRS uses a more rational process (and don't hold your breath for either of those!), everyone needs to "chill," and let the church tax inquiry/church tax examination process run its course.

As a Pastor

Pastors who use their pulpits to promote individual candidates or parties have forgotten the power of prayer and have put thier faith in political power. They have forgotten the words of Jeremiah: "Cursed is the man who trusts in man and makes flesh his arm and whose heart departs from the Lord." God is simply using the IRS to get their attention and to shut them down if they do not get His message. As the pastor of a multi-cultural, multi-racial congregation whose members cover the political spectrum, I teach our members to invest prayer first, then time and money to support the candidate of their choice. I want to have godly people actively participating in the process. I am not concerned that the candidates will destroy the faith of my members, I am believing that my members will impact the lives of their candidates and the supporters of those candidates. God's word says: "When the righteous bear rule the people rejoice." So, we send our folks out to use prayer and every other thing in thier arsenal to turn candidates, office holders and officials from wickedness to righteousness. That is what churches should be doing - touching the lives of people of every political persuasion - Pastor David Southwell

IRA Attack on the UCC

No where is it asserted that the UCC actually took a position supporting one candidate or another; it simply invited one of its members to provide some remarks. The IRS's investigation of the UCC is, unfortunately, of a piece with so much of the current administrations activities - - - using the agencies and departments of government to advance a narrow political agenda or to attack perceived political enemies.

IRS Attack on the UCC

We do not have all of the facts yet, so it is unclear whether there was a violation or not. The purpose of the IRS's letter is to gather the facts. W. Larson's comment that "no where (sic) is it asserted that the UCC actually took a position supporting one candidate or another . . ." is misguided on two counts. First, it is misguided because it is a misstatement of the law. It is possible to violate the law without formally taking a position. For example, inviting one candidate in his or her capacity as a candidate but not inviting other candidates violates the law. At this point we do not know whether this occurred or not. Second, it is misguided because it fails to understand the purpose of the IRS correspondence. The purposes are to explain the reason for the inquiry (postings on websites, including the UCC's) and to request information.

The frog in the slowly heating pot . . .

The indirect regulation of religious practices and gatherings by the government creating regulations regarding what qualifies as tax-exempt practices and what does not would have been rejected, I believe, by the writers of the first amendment to the constitution.

Of course, the writers of the first amendment did not labor under the provisions of the later amendment allowing for direct federal taxation of incomes for individuals and entities. It may be time to take stock of the freedoms we have relinquished by our 20th-century subscription to this invasive system of financing our government. If we don't, why should we complain when the government decides it is only right to tax our gatherings? (Or, for now, merely tax the organization that promotes the gatherings that it finds too political to qualify for its allowed religious exemption?)

I suspect there are other ways to design our tax system to raise our needed taxes that would not result in such restrictions being indirectly imposed on our freedoms to gather, speak, or worship.

Tax exemption

The solution is simple; just end the indirect subsidy of all "nonprofits" (including hugely profitable HMOs, hospitals, churches, etc.) by eliminating the exemption altogether. Why shouldn't my small business be tax exempt? Is it any less virtuous or valuable to society than a megachurch that's rolling in cash?

Well within UCC's rights

This investigation is questionable at best. The speech was about faith in public service and was not a speech promoting his candidacy. The Senator's campaign staff was not allowed on the premises. And, the Senator is himself a full and participating member of this denomination.

The rules are the rules

As a staff member of a non chuch  NPO for 35 yrs. who has ALWAYS played by the IRS rules, its about time all churches etc. are put on notice, left ,right, middle. Why should churches be any different. This has always irritated me to see politicians using the pulpit to get votes.

bout time

I say its about time the IRS began taking  a serious look at the political activities of lefty churches. They have done it on the right. Churches should be kept out of certain political activities involving candidates, not issues.

Charles L Stanley CFP ChFC AIF

UCC Denomination and Obama Speech

Why?

As a member of this denomination and in attendance at this speech, I would suggest that under the IRS interpretation, no-one, none, zero, candidate for any political office who is a member of any denomination or organization would ever be allowed to talk to or express in that body any ideas as to their faith journey or passion for that organization that brought them to this place and time.  This IRS ruling, if allowed to stand, would apply to any organization (right, left, or center) whose own member spoke in any organization gathering.  Is that what the words "freedom of speech" stand for?  Be careful of what you wish for, it may effect your own organization.  The speech I heard was not political - but discussed his faith found by becomming a member of a church within this denomination.  Peace.

IRS Attack on the United Church of Christ

This action smells of political dirty tricks and harassment. It is similar to a case in California that the IRS lost. Why do they not attack the churches used blatantly by J. Kenneth Blackwell in Ohio for his last campaign?   

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