Federal law prohibits tax-exempt churches from (1) intervening or participating in any political campaign on behalf of or in opposition to any candidate for public office at the local, state, or federal level, and (2) engaging in substantial efforts to influence legislation. Many churches violate either or both of these restrictions, but the IRS has been reluctant to respond. A bill (H.R. 2931) introduced in Congress by Rep. Philip Crane (R-IL) would allow churches to engage in some political activities without loss of their tax-exempt status. The bill would add the following section 501(p) to the tax code:
(1) Expenditures to Influence Legislation-An organization to which this subsection applies shall be denied exemption from taxation under subsection (a) because a substantial part of the activities of such organization consists of carrying on propaganda, or otherwise attempting, to influence legislation, but only if such organization normally makes lobbying expenditures (as defined in section 4911(d)) for each taxable year in excess of an amount equal to 20 percent of such organization's gross revenues for such year.
(2) Expenditures to Participate in Campaigns-An organization to which this subsection applies shall be denied exemption from taxation under subsection (a) because such organization participates in, or intervenes in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office, but only if such organization normally makes expenditures for such purpose for each taxable year in excess of an amount equal to 5 percent of such organization's gross revenues for such year.