Political Activities

Impact on Tax-exempt Status

Can churches engage in political activities without jeopardizing their tax-exempt status? That is the issue in a lawsuit brought by several abortion rights groups challenging the tax-exempt status of the Roman Catholic Church on the basis of its alleged anti-abortion legislative and political activities.

The lawsuit is based on the language of section 501(c)(3) of the Internal Revenue Code, which defines a tax-exempt organization as one "which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office."

The lawsuit alleges various activities undertaken by the Roman Catholic Church that constitute "intervention in political campaigns to further the Church's religious belief that no one should be able to obtain an abortion in the United States." These activities, undertaken without loss of the Church's tax-exempt status, are alleged to have injured the abortion rights groups in several ways. In particular, the groups are "disadvantaged in the political arena with respect to political activity on behalf of their pro-abortion or pro-choice candidates because they abide by the political action prohibition of section 501(c)(3) while the Church allegedly does not."

Some of the groups also alleged that a tax exemption for a religious organization engaging in political activity constitutes a government expenditure to establish a religion. In order to determine whether the Church was in violation of the prohibition of political activity, the groups (and the federal government) issued subpoenas in 1983 seeking various documents in the possession of the Church.

For a variety of reasons, the Church never responded to the subpoenas. Accordingly, in 1986 the Church was held to be in contempt of court, and was assessed a fine of $50,000 for each day (following May 12, 1986) that it refused to comply with the subpoenas. The Church appealed the contempt order and fine on the ground that the court lacked jurisdiction over the case on account of the plaintiff organizations' lack of "standing" (i.e., actual or threatened injury).

A federal appeals court affirmed the contempt order, and the Church petitioned the United States Supreme Court for review. Recently, the Court agreed to hear the case. While the issue before it will be the narrow one of the propriety of the lower court's contempt order, such a ruling will be directly relevant to the underlying issue of the Church's exempt status.

Church Law & Tax will review the Court's decision, the ultimate disposition of this significant case, and the significant question of a church's right to engage in political or legislative activities. In re U.S. Catholic Conference.

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