Details from a settled lawsuit in Wisconsin slowly continue to surface, giving a growing sense the Internal Revenue Service (IRS) is ready to resume monitoring political activities of churches, although questions still remain.
A letter sent in June by Mary Epps, the acting director of the IRS's Exempt Organizations Examinations, to the U.S. Department of Justice's tax division, says theIRS process for reviewing and approving investigations of churches is in place, and that "99 churches merit a high priority examination," based on referrals analyzed by the IRS Review of Operations and the Political Activities Referral Committee.
"Of these 99 churches, the number of churches alleged to have violated the prohibition during 2010 is 15, during 2011 is 18, during 2012 is 65, and during 2013 is one," Epps wrote.
IRS reviews of political activities by churches had been on hold since 2009, when a Minnesota church successfully challenged the procedures used by the IRS to initiate church income tax audits. Since then, the government hasn't identified the high-ranking official authorized to approve such reviews.
The absence of a solution was one reason the Freedom From Religion Foundation (FFRF) filed a lawsuit in 2012. The Alliance Defending Freedom's (ADF) annual Pulpit Freedom Sunday—which directly challenges the 1954 amendment that created political restrictions for tax-exempt organizations and hasn't resulted in any publicly known church investigations or examinations—has also drawn the ire of FFRF.
The FFRF lawsuit was settled last month, after FFRF said it was provided assurances by the IRS that procedures are in place. On its website, FFRF posted its "memorandum in support of motion to dismiss the lawsuit" and included Epps's letter as an attached exhibit.
The case isn't entirely closed yet, though; a Milwaukee church and the Becket Fund for Religious Liberty has asked the court to dismiss the case "with prejudice," as our sister site Christianity Today reports, which would prevent FFRF from filing suit against the IRS again on the matter. FFRF wants the case dismissed "without prejudice."
FFRF issued a press release in July about the settlement, characterizing it as a victory, but cautioning it would pursue additional legal action should an unrelated moratorium on IRS reviews of tax-exempt organizations further restrict monitoring of church political activities.
The IRS has repeatedly declined to comment to news outlets regarding specifics of the FFRF agreement. ADF, a faith-based legal organization, has criticized the IRS's silence and filed a Freedom of Information Act request seeking further details.
Those details are critical for church leaders to know and understand. Of primary concern are the processes that the IRS will use to review churches, and the official—or officials—who will authorize those reviews. Epps's letter provides vague insight on both fronts:
Subsequent to the publication of proposed regulations on section 7611 of the Internal Revenue Code on August 5, 2009, the IRS has processed several cases involving churches using procedures designed to ensure that the protections afforded to churches by the Church Audit Procedures Act are adhered to in all enforcement interaction between the IRS and churches. The procedures require the reasonable belief determination under section 7611(a) to be made by the Commissioner,TEGE [Tax Exempt & Government Entities], either directly or as concurrence to the determination made by the Director, Exempt Organizations.
ADF has previously said it believes the 1954 amendment is unconstitutional, with Pulpit Freedom Sunday designed to provoke a legal battle that may help undo it.
Church leaders will need to continue to monitor the situation and decide what activities are best. As attorney Nathan Adams with Holland & Knight noted in an advisory issued today, "in advance of the next campaign cycle, religious organizations are now on notice that the IRS will not exclude them from its general prohibition on participating in, or intervening in, a political campaign on behalf of a candidate for elective public office. Naturally, religious organizations have constitutional rights that must be reconciled with these limitations."
Watch for further updates on ChurchLawAndTax.com and in Church Law & Tax Report.
Church Finance Today recently covered the IRS's continued efforts to conduct church payroll audits.
For more help regarding churches and political activity, check out:
- Pastor, Church & Law, Volume 4: Liability & Church and State Issues ;
- Church Political Involvement ; and,
- Politics and the Pulpit
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