United States v. Christian Echoes National Ministry (1972)
Religious Tax Exemptions: Religion vs. Politics
How far can the IRS go in determining whether a religious organization should retain its tax exempt status? This is an important question because religious groups receive automatic tax exemption on the condition that they act for religious goals and not political goals. Thus, it would seem appropriate that IRS should be able to weigh religious activity against political activity in order to determine if a group's tax exempt status is justified.
Background Information
Christian Echoes National Ministry was formed in 1951 by Dr. Billy James Hargis and it received tax exempt status in 1953. It's theology was fundamentalist in nature and it's politics was focused on opposition to communism, socialism, liberalism, all believed to be enemies of Christianity.
The IRS took away their tax exempt status in 1964, arguing that the group did not operate "exclusively for religious purposes," that it had "substantial activity aimed at influencing legislation," and that it had "intervened in political campaigns on behalf of candidates for public office." Because 501 (c)(3) religious tax exemptions are conditioned upon a group remaining religious and refraining from political advocacy, the IRS determined that Christian Echoes National Ministry had violated its tax exemption requirements.
Christian Echoes National Ministry appealed this decision and an Oklahoma District Court ruled in favor of them, finding that the IRS had acted improperly. The IRS appealed directly to the Supreme Court. The Supreme Court let the District Court's decision stand, finding that the IRS did not have the right to appeal directly to the Supreme Court in a case where a lower court simply ruled on a narrowing of how a statute should be interpreted rather than overturning a statute entirely. This meant that the Supreme Court did not rule on the substance of the case and whether the District Court's opinion was sound or not. So, the IRS appealed to the Tenth Circuit Court.
Court Decision
According to the Tenth Circuit Court, the political activity of the Christian Echoes National Ministry was pervasive. It encouraged people to write to their representatives in support of particular political causes, it worked on behalf of constitutional amendments to bring organized prayer back to public schools, it sought to have things like Communism and socialized medicine outlawed, and it even endorsed Barry Goldwater for president in 1964. Because of this, the Court agreed with the decision of the IRS to revoke the group's tax exempt status.
Tax exemptions are matters of legislative grace and taxpayers have the burden of establishing their entitlement to exemptions. The limitations in Section 501(c)(3) stem from the Congressional policy that the United States Treasury should be neutral in political affairs and that substantial activities directed to attempts to influence legislation or affect a political campaign should not be subsidized.
There are three key points to note in the above. First, tax exemptions are a matter of "legislative grace" - that means that no one is necessarily entitled to tax exemptions and that they are not protected by the Constitution. If a government doesn't want to allow tax exemptions, it doesn't have to. Second, it is up to taxpayers to establish that they are entitled to get any exemptions which the government allows - if they fail to meet that burden, the exemptions can be denied.
Finally, charitable and religious organizations which receive a 501(c)(3) tax exemption have a clear and simple choice to make: they can engage in religious activities and retain their exemption or they can engage in political activity and lose it, but they cannot engage in political activity and retain their exemption:
A religious organization that engages in substantial activity aimed at influencing legislation is disqualified from tax exemption, whatever the motivation. ...The free exercise clause of the First Amendment is restrained only to the extent of denying tax exempt status and then only in keeping with an overwhelming and compelling Governmental interest: That of guaranteeing that the wall separating church and state remain high and firm. ...The taxpayer may engage in all such activities without restraint, subject, however, to withholding of the exemption or, in the alternative, the taxpayer may refrain from such activities and obtain the privilege of exemption.
The Supreme Court refused to hear an appeal of this case, letting the decision stand.
Significance
This decision served to emphasize the importance of IRS rules which prevent religious organizations (or any other charitable, non-profit groups) from benefiting from tax exempt status while also working to influence politics. Churches have to choose: politics or religion, and then accept the consequences of what will happen to their tax exempt status if they choose the former. They are not automatically entitled to their tax exemptions, so they have to adhere to the regulations set forth by the government.
