By Sam Brunson
Pity the IRS.[fn1] It is, right now, stuck in the middle of a battle over religion. See, churches, like other public charities, are exempt from tax under section 501(c)(3). But the exemption comes with certain limitations, including an absolute prohibition on supporting or opposing candidates for office.
This prohibition has become something of a culture wars battleground, at least with respect to churches. Some churches argue that they have a moral and religious obligation to support candidates whose actions are in line with their beliefs, or, alternatively, to oppose candidates whose actions violate their beliefs. As such, they claim this prohibition violates their Free Exercise rights, and is unconstitutional, at least as applied to churches.
The funny thing is that, as best I can tell, only one church has ever lost its tax exemption for violating this campaigning prohibition.
Though not for lack of trying. Over the last eight years or so, the Alliance Defending Freedom has sponsored an annual event it calls Pulpit Freedom Sunday, in which pastors preach a sermon that expressly violates the prohibition, then send a copy of their sermon to the IRS. Of the possibly thousands of churches that have participated over the years, none have lost their exemptions.
The Freedom From Religion Foundation noticed the IRS’s lack of response and, in 2012, sued to compel the IRS to enforce the campaigning prohibition. In 2014, it announced that it was dismissing the case, because FFRF and the IRS had come to an agreement resolving the FFRF’s concerns about the IRS’s treatment of church campaigning.[fn2]
Not long after the FFRF suit was (at least temporarily) resolved, the ADF jumped in, filing a FOIA request for records relating to changes to its church audit procedures. The IRS (belatedly, according to ADF) produced fewer than half of the documents requested, and the requested documents were allegedly heavily redacted.[fn3]
I’m not interested here in opining on the constitutional validity of the campaigning prohibition, either writ large or as applied to churches. There’s abundant scholarship arguing both for and against the prohibition’s constitutionality. I do want to suggest, though, that the IRS has a way out of being the scapegoat-in-the-middle for these religious culture wars: it should revoke some church exemptions.
FFRF wants the IRS to enforce the provision. ADF wants to create a test case. And, frankly, I suspect a lot of churches want some kind of certainty.
I recognize that, besides being stuck in the middle, the IRS is stuck in what appears to be a no-win-situation. It has been villanaized by the FFRF and its allies for not enforcing the provision. If it starts, it risksbeing villainized by the ADF and its allies for infringing on religious liberty. Either way, it seems to have significant downside without the possibility of upside.
All that said, by revoking the tax-exempt status of churches that violate the prohibition, it can finally put the constitutional question in front of the courts.
And, as I discuss in a recent law review article, it can do so without incurring significant enforcement costs and without being accused of being engaged in a partisan witch-hunt. And it can do so without imposing litigation costs on any church that doesn’t want to bear them. How?
- Over the next couple months, the IRS should announce that it will revoke the tax exemption of any church that participates in Pulpit Freedom Sunday and violates the campaigning prohibition.
- The IRS should review any sermon that a church sends itself, not for content, but solely to ensure that the sermon does, in fact violate that campaigning prohibition.
- The IRS should revoke the exemptions of all of the sermons it receives that do, in fact, violate the campaigning prohibition.
A little further explanation: with advance notice, any church that really doesn’t want to fight this fight can avoid it by not preaching a violative sermon. Or, if it does, it can choose not to send the sermon to the IRS. And the IRS should only review sermons sent by the church itself, not sermons sent by whistleblowers. Basically, this would set up a series of test cases, and with presumably plenty of confident and willing participants, there’s no need to investigate more.
This way, too, the IRS doesn’t have to expend resources (initially, at least) to find churches.
It may be that the churches losing their exemptions are primarily conservative churches, supporting Ted Cruz. It could be that they’re primarily liberal, supporting Bernie Sanders. But if the IRS has announced objective criteria, and only revokes the exemptions of churches that voluntarily participate, there’s no good-faith way to accuse it of going after only churches with particular political ideologies.
My proposal isn’t perfect, of course: even if the Supreme Court blesses the campaigning prohibition, the IRS has limited upside in revoking church exemptions: these revocations won’t raise a significant amount of revenue for the government, and probably won’t make the IRS more popular with the general taxpaying public.
But it will provide guidance to churches, and it will allow the IRS to focus on adminstering the tax law, rather than being buffeted by the religious culture wars.
[fn1] No, seriously. It’s underfunded, overmandated, and underloved.
[fn2] In the original reports, it sounded like there was an actual contractual agreement between the two; I emailed the FFRF to ask if I could see it, and received a very nice email in response telling me the relevant information was here and here. It’s interesting information (including the docket from the case!), but it doesn’t lay out the terms of their agreement, if any.
[fn3] I said pity the IRS. And I meant it. But I didn’t mean that the IRS never committed unforced errors.
The Surly Subgroup 
Interesting proposal! I agree that the IRS is “underfunded, overmandated, and underloved.” I can see why an IRS in that situation would look the other way on this church/politics issue, especially given tight resources and many other issues crying out for attention (such as cybersecurity issues). Your approach would, as you say, eliminate a good-faith way to accuse the IRS of only going after churches with particular political ideologies. But that wouldn’t stop misleading or bad faith attacks. Nor would it stop accusations that the IRS is “targeting churches.” I think we saw in the Tea Party controversy that many people are ready to believe that the IRS has an agenda and that the IRS is not able to defend itself very effectively.
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Leandra, that’s true–there still will be unfair attacks on the IRS, even if it does everything I say (expressly announces what it will do, lays out the criteria, etc.). But those attacks, I think, will be easier to refute (but see, I guess, all the other historic unfair attacks on the IRS).
Mostly, I see the campaigning prohibition (as applied to churches, at least) as something both sides want to get in front of the Supreme Court, though it’s possible that one or both sides are insincere about this desire. Assuming some level of sincerity, though, it can’t get in front out he Supreme Court without the IRS acting, so, at the very least, IRS action gets the question out of the IRS’s immediate court.
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I see your point (and Ben’s). Cracking down on churches seems politically tough, though, especially for the IRS, and especially so soon after the Tea Party controversy. Apart from that, with the IRS’s severely limited resources, is this issue a high enough priority? Shouldn’t tax collection, cybersecurity issues, and service to taxpayers take precedence?
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I agree that the IRS should enforce the campaign prohibition ban and that in doing so, it should consider enforcing it against organizations that are looking to get into court on the issue of whether the ban is constitutional as applied to sermons. As I’ve said previously in print (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1221163), I think nonprofits have a pretty good argument that they have a constitutional right to endorse candidates, so long as they do it with non-subsidized funds (e.g. using the funds of a non-(c)(3) affiliate). Arguably, the argument is even stronger if their leaders have a religious duty to educate their members with respect to candidates’ positions. If it’s true that the IRS is just trying to get its ducks in a row after the the so-called Tea Party Scandal, then I would personally give them a little wiggle room and not be too impatient if they choose to sit out this election cycle. But, if someone wanted to get things moving, they could always file an application for tax-exempt status that clearly stated that they plan to endorse candidates (and how), and then the IRS is required to either approve the application or deny it. Unless I’m somehow mistaken, that would take IRS inaction off the table. It wouldn’t even cost that much to get it started. Sam, do you have any thoughts on that approach?
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Ben, thanks for your thoughts. I’m certainly amenable to giving the IRS a little post-Scandal wiggle room (in fact, that’s part of the deal they made with the FFRF). Still, with a presidential election this year, this also seems like a valuable—and easy—year to act; at the very least, I want some approach on the IRS’s radar this year.
As for your suggested solution: it’s clever, and it potentially would work, although I have two caveats. First, if the purported tax-exempt’s sole (or even primary) purpose is to endorse candidates, it pretty clearly doesn’t qualify for 501(c)(3), even if the non-endorsement rule were impermissible. To create a test case, you’d need a legitimate 501(c)(3) that just grafted an endorsement on (and query whether, by stating in its application that it planned on endorsing a candidate for office, the IRS could argue that it didn’t operate “exclusively” for 501(c)(3) purposes—although the regs temper the meaning of “exclusively,” if the organization mentions campaigning in its application, can that be read as saying it will endorse candidates as a not-insubstantial part of its operations?). I assume that, if there were other grounds to deny the exemption, the IRS would use those other grounds first.
Second, if you’re right that the non-endorsement rule is equally suspect between religious and non-religious exempt organizations (and you can get past my first caveat), then it’s a fine test case. But if there’s something different about religions, creating the test case strikes me as harder; given that religions don’t need to file an exemption request, can the IRS just ignore a request filed by a religion?
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Phil probably knows this stuff better than I do, but section 7428 creates a declaratory judgment action for an adverse determination about an organization’s qualification for exempt status under 501(c)(3)(or a failure by the IRS to make a determination). Even though churches are not required to file an application, they are permitted to, and I don’t know of any reason that 7428 would not apply to them if they did. (But, obviously, I’d have to do a little more research … or ask someone like Lloyd Mayer).
As for your other points, of course the organization would have to have a legitimate tax-exempt purpose, and if that purpose was religious (or if it is a church) then it would have to meet the requirements for those organizations. I personally think that the argument is the same whether the organization is a church or not, but I think there’s enough room for disagreement on that point that it would probably be better if the “test case” organization was a church. But, as you point out in your post (and excellent article on the topic), there are a bunch of churches chomping at the bit to litigate this, so they could just go ahead and submit applications for exemption to the IRS to force the issue. Section 7428 applies to “the initial qualification or continuing qualification” of the organization, so the fact that they have been operating for a long time (and even if they already had their tax-exempt status recognized by the IRS) should not be an impediment.
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Yes. 7428 allows a nonprofit whose status is denied on application, is not handled within a certain number of days or is being revoked to challenge the IRS on those decisions or choices not to act. The IRS cannot ignore an application without the organization (church in this case) having a right to challenge that ignoring.
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