McLEAN, Va. (BP)–For churches and other tax-exempt organizations, every four years the doctrine of election takes on a special meaning — as the IRS warns of the dangers of involvement in elections.
Since the inception of the federal income tax in 1913, Congress has granted churches an exemption from paying this tax. However, in 1954, Congress enacted an additional condition for maintaining Internal Revenue Code Section 501(c)(3) exempt status: a prohibition from engaging in “any political campaign on behalf of (or in opposition to) any candidate for public office.” This politicking prohibition was put forward by then-Sen. Lyndon Johnson to spank a Texas nonprofit that dared to oppose his political candidacy.
As we round the sharp turns leading to another presidential election this fall, and as churches seek to fulfill their biblical calling to engage our culture morally and socially, their understanding of the actual contours of this legal guardrail becomes increasingly important. Examining the permitted exits in the guardrails is vital as a growing number of evangelical leaders engage in renewed efforts to increase voter turnout. This article addresses in FAQ format questions commonly raised by churches concerning this issue.
Q: How much political campaign activity is permissible for a tax-exempt church?
A: None. Section 501(c)(3) provides an absolute prohibition on churches from participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office. This absolute prohibition on politicking is in contrast to the limited amount of lobbying activities in which a tax-exempt church can engage.
Q. Hasn’t Congress changed the law recently to make it legal for churches to be involved in political campaign activity?
A. Recent efforts to amend Section 501(c)(3) so that tax-exempt churches are no longer subject to an absolute prohibition on political activities, such as the Houses of Worship Political Speech Protection Act, have yet to garner sufficient support in Congress. If such legislation should pass, it likely will not be a blank check on politicking but provide for limited exceptions to the blanket prohibition.
Q: Is a church allowed to encourage its members and others to vote?
A: Yes. Nonpartisan encouragement of members to be responsible citizens who vote and take an interest in the political process is not prohibited political campaign activity. A church also may organize voter registration campaigns, provided that the campaigns are strictly nonpartisan. Our law firm has been engaged in providing guidance on the iVoteValues.com campaign of the Southern Baptist Ethics & Religious Liberty Committee to ensure that it is fully compliant with Internal Revenue Code provisions for tax-exempt organizations.
Q: Does the political campaign prohibition prevent churches from taking stands on moral issues?
A: Tax law does not prohibit a church from teaching about moral issues and advocating biblical values. However, such teaching and advocacy may not include expression of support for a particular political candidate or party.
Q: Is a pastor allowed to endorse or raise funds for a particular candidate in his personal capacity?
A: Yes, pastors and other church leaders are free to become involved in their individual capacities in political campaigns so long as they do so without using the church’s financial resources, facilities or personnel either directly or indirectly. Also, they must clearly and unambiguously indicate that their actions and statements are on their own behalf and not on behalf of the church. In contrast, a minister’s endorsement of a candidate at an official church function or in an official church publication, even with a disclaimer, would violate the politicking prohibition, since the audience and the media of communication are created and subsidized by the church.
Q: Has the IRS ever penalized a church for political campaign activity?
A: Yes, the IRS revoked the tax-exempt status of a church in Binghamton, N.Y., for its placement in two national newspapers of a partisan political advertisement opposing the presidential candidacy of Bill Clinton four days prior to the 1992 presidential election. Our firm has been involved in defending churches tagged by the IRS for politicking. All have ended in settlements without loss of tax-exempt status.
Q: Is a church allowed to distribute voter guides?
A: Yes. A church may distribute voting records, candidate surveys and other voter guides so long as they are nonpartisan and do not indicate a preference towards any particular candidate or party. Voter guides are more likely to be considered nonpartisan if they cover all candidates, address a wide variety of issues and do not compare candidate positions with positions of the church, and otherwise do not indicate bias.
Q: May a church provide political candidates with a forum for speeches and debates?
A: A 1974 IRS ruling concerning a broadcasting station held that a tax-exempt organization could provide airtime to qualified candidates for public office, so long as it made such time equally available to all candidates. The station had expressed that the candidates’ views were not necessarily those of the station and that the presentation was a public service to educate its viewers. Similarly, a church may provide a public forum to political candidates as long as all candidates are invited and the church carefully avoids indicating its own views, commenting on candidates’ statements or otherwise implying endorsement of or opposition to any candidate.
Q: What options, if any, exist for a church to engage in political campaign activity?
A: A church may establish a related, though separate 501(c)(4) organization to promote “social welfare.” Such organizations are exempt from federal income taxation, but unlike their 501(c)(3) counterparts, contributions to them are not tax-deductible. Although subject to limits, a 501(c)(4) entity is not totally barred from political campaign activities, and a 501(c)(4) may form a political action committee (PAC) that would be free to participate in political campaigns, a church setting up such affiliated entities must carefully ensure that no church funds or other resources are used to support the entities engaged in political campaign activities.
Q: What are prohibited political campaign activities?
A: Among the political campaign activities that Section 501(c)(3) prohibits a church from engaging in, directly or indirectly, are the following: endorsing, supporting or opposing any political candidate; permitting a church trustee, pastor, other officer, employee or representative to use his or her position, or the reputation or resources of the church, to endorse, support or oppose a candidate or make any statements to encourage its members to vote for or against a particular candidate or party; contributing to or fundraising for the campaign of any candidate, party or PAC; permitting the facilities, name, reputation or resources of the church to be used by a candidate, party, PAC, church member or others to support or oppose a candidate; distributing partisan voter guides or other candidate information that favors or disfavors a particular candidate or party; and any other activity that intervenes or otherwise supports or opposes a candidate.
Q: What penalties does the IRS impose on churches that violate the 501(c)(3) prohibition on political campaign activities?
A: A church that participates in political campaign activities jeopardizes both its tax-exempt status and its eligibility to receive tax-deductible contributions. The IRS also may subject a church that engages in political activities to an initial tax of 10 percent of its political expenditures, and impose a tax of 2.5 percent of the political expenditures on the church’s leaders (jointly and severally) who, without reasonable cause, agreed to the expenditures knowing they were political expenditures. If an initial tax is imposed, and the church does not correct the expenditures within the period allowed by law, an additional tax equal to 100 percent of the expenditures is imposed against the church and 50 percent of the expenditures (up to $10,000) is imposed against the church leaders who refuse to make the correction.
Conclusion
Churches must remain knowledgeable and vigilant if they are to comply with their legal obligations as tax-exempt entities while also serving as agents of moral and social change and instruments for promoting civic responsibility among their members. Undertaking this precarious balancing act with integrity and boldness will undoubtedly require purposeful strategy, guidance from legal counsel, and prayer.
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George R. “Chip” Grange, Stephen H. King and Stephen S. Kao are attorneys with Gammon & Grange, P.C., McLean, Va., which serves as legal counsel for the Southern Baptist Ethics & Liberty Commission. Grange is the managing owner of Gammon & Grange, P.C. This article constitutes legal information and is NOT legal advice. The information in this article is current as of the date of publication. Because the relevant laws may have changed since that time, you should not rely upon this information, but rather should consult legal counsel. The authors may be contacted regarding the content of this article and any other questions regarding tax-exempt church issues at [email protected], [email protected] and [email protected], respectively.
