IRS Commits to Auditing Churches
But details about procedures are kept secret.
IRS Commits to Auditing Churches

Editor's Note: In story released on July 25, CT's Gleanings reported, "The Internal Revenue Service (IRS) has agreed to investigate the political activity of churches after reaching a settlement with an atheist legal group." According to the report, the Freedom from Religion Foundation (FFRF) and the IRS" jointly asked a Wisconsin federal court last week to dismiss a 2012 lawsuit, FFRF v. Koskinen. The FFRF had alleged that the IRS failed to have a policy in place for investigating political activity at tax-exempt churches and religious organizations, nor did the agency enforce its 501(c)(3) codes against electioneering." Details of the settlement, however, have not been disclosed, which lead the Alliance Defending Freedom to file a Freedom of Information Act (FOIA) request "in pursuit of the documents surrounding the settlement." A few days after the Gleaning's story, the Evangelical Council for Financial Accountability issued a news release expressing concerns about both the secret settlement and secrecy regarding the agency's church auditioning procedures. The following article is taken from that release.

Does the IRS have procedures in place for auditing churches? Apparently so, to the surprise of many.

And the agency is adding further fuel to the fire of its critics by keeping the details a secret.

The controversy began in 2009 when a Minnesota church successfully challenged the IRS in court over its procedures for auditing churches. A judge agreed with the church that the individual designated by the IRS for initiating church income tax audits was not sufficiently high-ranking to be consistent with federal law.

In the five years since that case was decided, the federal government has failed to finalize appropriate regulations dictating who in the IRSshould have the authority for approving these church audits.

This sparked a recent court battle between the Freedom from Religion Foundation (FFRF) and the IRS over enforcement of political activity rules within churches. The IRS and FFRF reached a settlement in the case earlier [in July], with FFRF agreeing to drop its lawsuit after "receiving satisfactory assurances from the IRS that it has resolved internal policies preventing examination of church politicking claims, and no longer has a blanket policy or practice of non-enforcement of political activity restrictions."

The IRS has declined requests to comment on the case or to provide details regarding the settlement. So, while FFRF has reportedly been provided with information on the IRS's policies and procedures for auditing churches, everyone else is left to wonder for now.

The post is taken from the ECFA news release, "IRS Commits to Auditing Churches but Keeps Procedures a Secret" (7/29/2014). Used with permission.

See also Dan Busby's article, "Church Payroll Tax Audits-- the IRS Is Watching" on

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.


If you found this article helpful, subscribe to for access to more articles like this one.

Recent Posts
Subscribe to Church, Law & Tax

Receive a customized salary report for up to 18 different ministry positions. Learn how your church should compensate based on size, budget, location, and employee work experience.

Setting Wages and Benefits for Church Staff

Setting Wages and Benefits for Church Staff Subscriber access only

This training download addresses key aspects of compensation planning for church employees.
Understanding Unrelated Business Income

Understanding Unrelated Business Income Subscriber access only

Richard Hammar explains how to compute and report unrelated business income.