Unfortunately, not all churches and religious organizations have been content to live within the legal rules. Quite a few have attempted to evade the rules, either secretly or very openly, in order to allow churches and religious groups to participate actively in political campaigns even while retaining their charitable tax-exempt status.
One of the earliest (and only) cases where a religious group had to be sanctioned by the IRS involved Christian Echoes National Ministry. Founded in 1951 by Dr. Billy James Hargis, it engaged in a wide range of political activity, all the way up to endorsing Barry Goldwater for president in 1964. That year the IRS revoked their tax-exempt status, an action which was affirmed by the Tenth Circuit Court in 1972.
For the most part, however, the IRS has done little in reaction to religious organizations which have crossed the line into explicit political advocacy. In 1980, the abortion-rights group Abortion Rights Mobilization had to sue the IRS to try and get them to take action against the Roman Catholic Church over the fact that many parishes had openly endorsed anti-abortion political candidates for office. The case was dismissed on procedural grounds and its merits were never ruled upon.
In 1991, the IRS investigated Jimmy Swaggart and found that he was guilty of violating IRS rules because he had twice endorsed Pat Robertson for president. There was no fine, the tax-exempt status of his ministry was unaffected, and all he was asked to do was sign a pledge not to do it ever again. After that, however, the IRS seemed to start acting a bit more proactively.
In 1993, the IRS investigated Jerry Falwell and found that his Old Time Gospel Hour had illegally funneled money towards a political action committee which, in turn, had given money to conservative political candidates. This time, there was a $50,000 fine and the tax-exempt status for the organization was revoked retroactively for the years 1986 and 1987, the time when the violations occurred.
Also in 1993, the IRS investigated a small church in Binghamton, New York (the home church of radical anti-abortion activist Randall Terry, by the way). Pastor Daniel Little had been so outraged over the candidacy of then-Arkansas Governor Bill Clinton that he and his congregation took out a full-page ad that ran in USA Today and The Washington Times. With the headline “Christian Beware,” it accused Clinton of supporting “policies that are in rebellion to God’s Laws,” along with other vituperative attacks on the Democratic party and liberals generally.
It ended with the question, “How then can we vote for Bill Clinton?” just before it solicited “tax-deductible donations” to help fund even more such advertisements (and it did result in hundreds of contributions from all across the nation). This was perhaps one of the most blatant abuses of a church’s tax-exempt status that the IRS had ever seen, and it’s no wonder that it attracted quite a lot of attention, both positive and negative.
Eventually, in 1995, the IRS revoked the church’s tax-exempt status — but the church sued the IRS to get it back, with the help of Pat Robertson’s American Center for Law and Justice. Both a Washington, D.C. district judge and Circuit Court of Appeals in Washington, D.C. ruled in favor of the IRS, however, dealing a symbolic blow both to the church and to Pat Robertson.
Symbolic? Absolutely. If the church does not intervene in any future political campaigns, it can continue claiming 501(c)(3) status and receive all of the attending benefits. Even the letter in which the original status was revoked did not, according to the IRS, “convert bona fide donations into income taxable to the Church.” The church can even reapply for official tax-exempt status.
So what does the ruling mean? According to the court decision, “All that will have been lost is the advance assurance of deductibility in the event a donor should be audited.” This means that people who contribute to the church are not assured, in advance, that their contributions will be tax-deductible because of the status of the church. Donors to the church may continue to deduct their contributions; but in the event of an audit, they will bear the burden of proving that the church meets the requirements.
That’s all. IRS oversight when it comes to churches engaging in political activity does not appear to have much force.
