The IRS received several complaints of political activity by tax-exempt organizations during the 2004 election campaign. It responded by launching a 'Political Activities Compliance Initiative' that carefully examined the political activities of 110 exempt organizations, including several churches. In 2006 the IRS released a Final Report on its Political Activities Compliance Initiative based on 82 examinations that had been completed. The final report not only presents the IRS's conclusions, but also unveils new procedures for the 2006 election season. All the examinations resulted from referrals and covered only a small segment of the tax-exempt community, which includes more than 1 million tax-exempt 501(c)(3) organizations in the U.S.
Nearly three-quarters of 82 examinations have concluded that the tax-exempt organizations, including churches, engaged in some level of prohibited political activity. Most of these exams concerned one-time, isolated occurrences of prohibited campaign activity, which the IRS addressed through written advisories to the organizations. In three cases involving tax-exempt organizations that were not churches the prohibited activity was serious enough to warrant the IRS proposing the revocation of the organizations' tax-exempt status.