Tying the IRS’s Hands. Even Tighter

By Sam Brunson

Yesterday, the House Committee on Appropriations reported H.R. 2995 to the House of Representatives. H.R. 2995, the Financial Services and General Government Oversight Appropriations Bill  for FY 2017, if passed, would continue the trend of reducing the IRS’s budget, this time by $236 million.

It is undoubtedly worth looking at what exactly the bill does, but I’m interested in an amendment added yesterday by Rep. John Culberson (R-TX). Section 135 of the bill would make it even harder than it already is for the IRS to audit churches. 

The IRS already faces significant limitations on its ability to audit churches. Unders section 7611 of the Code, the IRS can only start an audit if a high-level Treasury official reasonably believes that the church doesn’t qualify as exempt or that it has unrelated business taxable income. Then the IRS has to provide specific notice to the church about the audit.

And even if the IRS meets those requirements, the IRS faces significant statutory constraints on how long the audit can last andon when the IRS can audit a church again, among other things.

The result? Churches are rarely audited, and even more rarely lose their exemptions. While the IRS doesn’t disclose the number of church audits it performs, the ECFA suggests that there may be 100 church audits a year. And how many churches are there in the U.S.? Again, hard to say, but the U.S. Religion Census finds about 345,000 congregations in the U.S. That would be a 0.03% audit rate; even assuming the number of churches is off by a factor of 10, we’re talking a 0.3% audit rate. And I can only find one report of a church losing its exemption for violating the campaigning prohibition (even though thousands of churches have deliberately and explicitly violated it).

That, though, is apparently insufficient for Rep. Culberson, who claims he added his amendment to “protect churches from being bullied by the Internal Revenue Service (IRS) and left-wing activists whenever a church engages in educational political activity.”

And what would his amendment do? It would require the IRS Commissioner personally to consent to any determination that a church had violated the campaigning prohibition, it would require the IRS to notify the House Ways and Means Committee and the Senate Finance Committee of the determination within 30 days, and it would require that the determination not take effect for 90 days after the notification.

It’s good, I guess, that Congress is doing something. But where that something addresses a problem that doesn’t even pretend to exist while cutting the IRS’s budget and tying its hands unnecessarily, maybe it would be better if Congress didn’t do anything at all.

One thought on “Tying the IRS’s Hands. Even Tighter

  1. The Minority portion of House Report 114-194 is informative:

    “Democrats attempted to address many of these inadequacies
    through the amendment process in Committee. We even offered an
    amendment in Committee to remove twenty-one partisan riders,
    including those affecting the SEC, CFPB and other agencies, the
    District of Columbia, efforts to improve diplomatic relations
    with Cuba, the FCC’s order on open internet, and federal
    employee health benefits. The majority strongly rejected these
    efforts. Instead, more controversial riders were added during
    Committee mark-up including those prohibiting funds for the
    Financial Stability Oversight Council to designate non-banks as
    systemically important financial institutions (SIFIs) without
    allowing non-banks to change their business practices prior to
    designation, prohibiting funds for the IRS to audit churches
    that are 501(c)(3)s unless that audit is approved by the
    Commissioner and certain notifications are made to Congress.[…]”


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