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Political Speech & Non Profit Tax Issues

While discrimination against churches and religious organizations is on the rise, the ACLJ has been at the forefront in defending the First Amendment rights of churches and religious organizations. Whether it is in the context of restrictions on political speech during elections or nonprofit tax issues, the ACLJ is committed to protecting churches and religious organizations against unconstitutional discrimination.
Short Legal Brief
Legal Documents

Below is a short legal analysis prepared by ACLJ attorneys on this topic. A more in-depth legal analysis is available here.

The First Amendment to the United States Constitution protects a church’s right to speak out on the moral issues affecting society. In addition, while the Internal Revenue Code prohibits churches from assessing the qualifications of specific candidates for public office, it does not infringe upon a church’s inherent right to speak out on the morality of specific political issues.

The Supreme Court has unequivocally found that religious speech is at the apex of protected speech under the First Amendment. Capitol Square Review and Advisory Bd. v. Pinette, 515 U.S. 753 (1995). The Supreme Court stated that “in Anglo-American history, at least, government suppression of speech has so commonly been directed precisely at religious speech that a free-speech clause without religion would be Hamlet without the prince." Id.at761.

The Supreme Court also noted in upholding tax exemptions for churches:

Adherents of particular faiths and individual churches frequently take strong positions on public issues including, . . . vigorous advocacy of legal or constitutional positions. Of course, churches as much as secular bodies and private citizens have that right.

Walz v. Tax Comm'n of N.Y., 397 U.S. 664, 670 (1969).

As a first principle, the government may not censor a church’s' speech on moral issues of the day without running afoul of the First Amendment. However, the Internal Revenue Code has circumscribed the rights of 501(c)(3) organizations to engage in political speech.

In exchange for the receipt of tax-exempt status, I.R.C. § 501(c)(3) absolutely prohibits churches and other tax-exempt organizations from campaigning for or against a candidate for public office.  If a church participates or interferes, directly or indirectly, in any political campaign for or against any candidate for public office by publishing and distributing certain written material or making oral statements regarding the candidate, then a church can lose its tax-exempt status for violating the campaigning ban. I.R.C. § 1.501(c)(3)-1(c)(3)(iii). Quite simply courts have interpreted 501(c)(3) to ban  any degree of participation or intervention in a campaign for public office. Ass’n of the Bar of N.Y. v. Comm'r of Internal Revenue, 858 F.2d 876, 879 (2d Cir. 1988).

While the ACLJ believes that this campaigning ban impermissibly infringes on the First Amendment rights of churches, it is nevertheless the current law. Consequently, churches desiring to keep their tax-exempt status must stringently adhere to it.

While some provisions within the Internal Revenue Code prohibit a church from engaging in certain political conduct, it also provides “an alternate means by which [a church could] communicate its sentiments about candidates for political office." Branch Ministries v. Rossotti, 211 F.3d 137, 143 (D.C. Cir. 2000). In Rossotti, the court explained that a church that wishes to be more politically active can form a political action committee (“PAC”) within a church-created 501(c)(4) organization. Id.  However, a church that wishes to do this must proceed carefully. The related 501(c)(4) organization must be separately incorporated from the church and it "is also subject to the ban on intervening in political campaigns." Id.  However, to legally circumvent this ban, the church-created 501(c)(4) organization may form a PAC which “would be free to participate in political campaigns." Id.; see also 26 C.F.R. § 1.527-6(f), (g) (1999). It is the PAC formed within the 501(c)(4) organization that may engage in political activities, not the 501(c)(4) organization. Id. As long as churches follow this procedure, churches can indirectly support or oppose political campaigns or legislation.

Public charities and houses of worship may permit the use of auditoriums, meeting rooms and gymnasium facilities for civic or political events, such as polling places on Election Day, without violating the political intervention ban. The facilities of public charities and houses of worship may also be rented to third-parties, including candidates or political parties, as long as they are not provided free or at a reduced charge, they are made available on the same and equal basis to all candidates and political committees, and such events are not promoted or advertised by the charity or house of worship. See, IRS Publication 1828 (pp. 13-14)(2008); and Revenue Ruling 2007-41, 2007-25 I.R.B. 1421, 1425 (June 18, 2007).

In addition, churches may distribute voter guides without running afoul of the campaign ban. I.R.C. § 501(c)(3) organizations and churches may make available, or distribute, a voter guide which includes all viable candidates for an elective office, provided they follow certain guidelines. IRS Revenue Rulings 78-248, 80-282.  Specifically, the material must be neutral and unbiased in its statement of candidates and must include candidates' positions on a broad range of issues. A voter guide cannot endorse candidates or direct individuals to vote for or against a candidate. Also, the voter guide must not contain editorial comments about any political party aimed at inducing voters in a particular way. This includes grading the candidate on his or her positions on the issues of the day.  If church-distributed voting guides adhere to these restrictions, a church will not run afoul of the candidate campaigning ban. Of note, churches and § 501(c)(3) tax-exempt organizations may also engage in voter registration efforts, provided such efforts are neutral.

The IRS has also conditioned a church's tax-exempt status on the requirement that "no substantial part of the activities" of the organization may constitute "carrying on propaganda, or otherwise attempting, to influence legislation." I.R.C. § 501(c)(3). If a substantial part of the activities of an exempt organization, such as a church, consists of lobbying, the organization will not be tax-exempt under § 501(c)(3). However, certain tax-exempt organizations may elect to engage in limited lobbying activities under the objective expenditure allowances calculated under I.R.C. § 501(h). It is important to note that churches are ineligible to make this election. I.R.C. § 501(h)(3) & (4).

Organizations which cannot make the expenditure elections under § 501(h) are governed by the "substantial part of activities" test. In regard to determining what constitutes a “substantial part of the activities” of a tax-exempt organization, the issue of substantiality is essentially a question of fact and circumstance. Ky. Bar Found., Inc. v. Comm'r of Internal Revenue, 78 T.C. 921 (1982).

Based on relevant case law, it appears that as long as an organization expends only five percent (5%) or so of its overall expenditures on legislative activity such activity will be regarded as "insubstantial" and not result in a loss of exemption. Seasongood v. Comm'r of Internal Revenue, 227 F.2d 907, 912 (6th Cir. 1955) (establishing a five percent safe harbor rule); World Family Corp. v. Comm'r of Internal Revenue, 81 T.C. 958 (1983) (finding that an exempt organization's lobbying activities which were less than ten percent (10%)--but more than 5%--of its total efforts being "insubstantial").

It should be noted, however, that in Christian Echoes Nat'l Ministry, Inc. v. U.S., 470 F.2d 849 (10th Cir. 1972), the Tenth Circuit Court of Appeals rejected the "substantiality" test when a radio ministry directly intervened in a political campaign and engaged in lobbying activities. Instead, the Christian Echoes court explained “substantiality" of the political activity should be assessed based on “whether a substantial part of [an organization’s] activities [not just expenditures] was to influence or attempt to influence legislation." Id. at 855.

In light of the vagueness of the substantiality test, Congress enacted I.R.C. § 501(h), the Expenditure Election, to define what amount of expenditures on lobbying is "substantial." Exempt organizations, other than churches and private foundations, may elect to be subject to definite limitations on the amount of permissible lobbying activities and expenditures. I.R.C. §§ 501(h) & 4911. In no event, however, regardless of the size of the charity, may the permitted total level of expenditures for lobbying exceed $1,000,000 for any one year. I.R.C. § 4911(c).

In sum, churches have clear First Amendment rights to speak out on the moral issues of the day, and to develop, prepare and distribute information on issues of public policy. These rights include the distribution of voter guides which are neutral and unbiased in the presentation of a candidate's position on a broad range of issues. Also, voter guides cannot endorse candidates, or urge individuals to vote for or against candidates. Churches also have the right to engage in a limited amount of lobbying activity, as long as such activity does not constitute a "substantial" part of the churches' total activities. Moreover, non-church exempt organizations may engage in lobbying activity so long as they do not exceed the expenditure limitations specified in § 501(h).

Can Christian groups host voter registration drives?

Voter registration and get-out-the-vote drives are not considered as "participating or intervening in a political campaign" so long as activities are conducted in a neutral, unbiased and nonpartisan manner. That's the catch. You must not wear buttons or display signs encouraging people to vote for particular candidates or to vote in a particular way on the issues. You may do a simple voter registration, but if you choose to discuss a particular upcoming election, you must name all candidates without favoring any candidate over any other. You must limit your comments to encouraging voting and to facts such as time and place to vote. You must allow everyone to register regardless of their stated party preference. Care must be taken to follow the above guidelines. The IRS has ruled that voter registration materials referring to a "conservative" agenda and offering specific examples of "liberal" groups and politicians threatening that agenda violate the political prohibition, even though the registration materials did not refer to any conservative candidate by name. Putting your faith in action by encouraging citizens to vote is a great idea. You can even hold voter registration drives at your church building, as long as you remember to give no endorsements to particular candidates.

Can church members discuss issues and candidates during church services?

Certainly, individual church members can share with other church members their views on the presidency and who they're going to vote for. The church cannot take an official position, but individual church members have the right to free speech. A pastor can discuss who he's supporting and why; he just can't make his position an official statement of the church. This is a free country, and this is one provision of the Internal Revenue Code that frankly needs to be changed. You do have a right to speak out on the issues and talk with other church members about the importance of voting, who you're voting for and why.

Does my vote really count?

It sure does count. Remember, about 400 votes decided the presidency in 2000 in Florida, and that resulted in two Supreme Court appointments. The decisions of that court today will affect probably the rest of your life. Look, I know there are people who are disheartened about the election and all this Wall Street turmoil. Don't shrug your responsibility as citizens to vote. At the ACLJ we will never tell you who to vote for. But we are going to tell you that you need to participate in the system and you need to vote. It's very, very important.

How can a candidate win the popular vote and lose the election?

It's a great question, and let me tell you why the Electoral College exists. The founding generation put an electoral college in place in our Constitution so that the big states -- New York, California, Texas -- would not control the entire election process. Electoral College representation coincides with the state populations. This process puts the smaller states in play. For instance, Ohio is getting a lot of attention, despite the fact that it's much smaller than California or Florida, because there are a lot of electoral votes in play there. The candidates must campaign in less populated states because of the Electoral College process. At the same time, you could win the overall popular vote, by even a million votes, and still not win enough states through the Electoral College. It spreads the election process throughout the country, but that's why the Electoral College and the popular vote are not always the same.

How can a layman help fellow Christians to take their voting responsibility seriously?

Not only are clergy allowed to speak out on moral issues, I think it is their responsibility to do so. When an election campaign involves candidates' stated views on issues such as abortion or same-sex marriage, a sermon including biblical admonitions on these subjects cannot be construed to represent the church's endorsement of certain candidates. However, Christians are able to better make their decisions in every area of life, including political elections, when educated in a biblical worldview. As a lay person, you can help educate your fellow Christians by preparing a voter guide. It is perfectly permissible for churches and synagogues to prepare and distribute voter guides in your own building or at other locations as well. You are not limited in distributing these guides to fellow church-goers. However, the IRS has guidelines which must be strictly followed in the preparation of the guide. As with voter registration and get-out-the-vote activities, voter guides must be neutral, unbiased and nonpartisan, and under no circumstances may candidates receive an endorsement. The idea is to educate voters about the candidates and the issues in an unbiased way. A candidate's voting record is already public. While you must not present editorial comments, it is important to present the voting records of the candidates. In fact, voter guides must include the voting records of all incumbent members of the legislative body who represent the local area; however, the candidates for reelection will not be identified as incumbents. No editorial comments may be made on any individual's overall qualifications for office. The voting report should not be specifically linked to any election campaign. The guide must cover a broad range of issues and not simply target issues of particular concern to the church's known "agenda" or target candidates in a particular race. Hosting a candidate forum or debate is an excellent way to educate your fellow Christians. The fundamental requirement is that candidate forums or debates educate voters and not be a cover to assert the virtues of particular candidates. The guidelines are simple. The forum or debate must include all legally qualified candidates, cover at least three important campaign issues, pose questions presented by a non-partisan, independent panel of knowledgeable persons, and give each candidate an equal opportunity to present his or her views. The moderator must state at the beginning and end of the program that the views expressed are those of the candidates and not of the church, and that sponsorship of the forum does not constitute an endorsement of any candidate by the church.

How can I learn which candidates represent my views on the most important moral issues?

There is material available. Many voter guides contain the voting records of political candidates running for office at all levels of government, and your church is allowed to prepare and distribute voter guides. In fact, it is a good idea to do so. However, there are strict, though simple, legal guidelines on what must be presented and what cannot be presented in these voter guides. The guides must include a broad range of topics and must include all candidates running for election. They cannot focus only on ìagendaî issues, such as abortion or same-sex marriage, and they cannot endorse particular candidates. Because of these and other restrictions, a careful study would be necessary on your part to determine which candidates have best represented your views on subjects of particular interest to you in their voting record of the past. However, there is no voting record for new candidates, and a candidate's past voting record does not insure future voting if reelected. There are cases of constituents feeling betrayed by candidates they had helped to put in office. Based on your comments and questions, it sounds as if you would do well to do the research on local candidates yourself. Call their offices, ask for printed materials or a face-to-face meeting and learn to speak out as a private citizen for or against candidates based on the answers you learn. You are not prohibited from focusing on particular issues of concern to you. You may ask people you respect, such as your pastor, to discuss personal opinions with you on who to vote for. However, your pastor is prohibited from endorsing a particular candidate from the pulpit. He may speak against abortion and same-sex marriage from the pulpit, but he cannot tell you which candidates to vote for as a pastor representing a church.

How do I get a replacement absentee ballot?

This became a huge issue in the 2000 campaign. Remember, in Florida alone there were 15,000 military absentee ballots that were not counted. All you need to do is get her on the phone today with the election office there in Washington state, in the county that she is registered in. You have her tell them that she needs a replacement ballot, and that the other one they sent had not arrived. If necessary, they have to overnight it, and then you overnight it back. Get on the phone with them right away and they will send it out to you.

Is it illegal for a nurse to wear a political button at a private hospital?

We get this question a lot, actually. I would check to see what the policies are. I mean, if they don't say anything, you've got no problem. If they have a policy concerning what comprises the nurse's uniform, that's another story. They have the right to do that, especially in a hospital setting. If the policy is enforced in a discriminatory way, particularly if the expression is religious in nature, there may be a religious discrimination claim there somewhere. In your situation, that wouldn't apply to a political button.

Is it legal for a pastor to endorse a particular candidate for public office?

Religious leaders are not prohibited from speaking as individuals and endorsing a candidate for political office, or speaking out on a matter of public policy. However, because churches and synagogues, as institutions, are not permitted to intervene in political campaigns, whenever a religious leader individually endorses or supports a political candidate it must be done in a way that does not make it appear as if the church or synagogue is endorsing the candidate. This means the religious leader may not use the letterhead or publications of the church or synagogue when an individual endorsement is made. Also, no endorsement may be made during an official church or synagogue function. However, a minister, priest, rabbi, etc., may be identified in their individual endorsements by the title or position they hold. For more on this see IRS Publication 1828, pp. 7-8. When we're talking about 501(c)3, we're talking about recognition of tax-exempt status, and churches are automatically tax-exempt. They don't have to apply for 501(c)3 status in order to be tax-exempt, so that's very, very important to understand. While some churches choose to apply for 501(c)3 status, a legitimate church is automatically exempt from taxes, and because the church is a non-profit religious organization, it cannot endorse or oppose a candidate for public office, whether it is 501(c)3 or whether it is just recognized as exempt under 508 of the Internal Revenue Code. Now, if the church were to be operated as a tax-paying, for-profit business, then the pastor could say whatever he wants. However, we don't think any church should have to give up tax-free status in order to speak out on the issues. First of all, pastors, you can take a Christian worldview from the pulpit right up to Election Day and address every one of the contemporary cultural and biblical issues without any problem, and you can even talk as an individual citizen about your view on candidates. You can also talk about how important it is to vote and encourage your people to vote. We think itís important for churches to be able to speak out on the issues.

Is there anything wrong with churches distributing voter guides from Christian organizations?

There's nothing wrong with any of these voter guides. The IRS has actually issued regulations on this. The guides must include a broad range of topics and must include all candidates running for election. They cannot focus only on "agenda" issues, such as abortion or same-sex marriage, and they cannot endorse particular candidates. Several groups, including the Christian Coalition, and Focus on the Family all have voter guides, and they're perfectly legal to distribute in churches if the pastor or the committee consents to it. You can't make them do it, but there's no problem from a legal standpoint at all.

Isn't there a double standard in how IRS rules are being applied in churches inviting politicians to speak?

There is a double standard being applied. Barry Lynn has "deputized" himself and his organization as the thought police for churches around the country, and that has to stop. There are Catholic priests and pastors who feel that they must say nothing about major moral issues during election season. This is absolutely wrong. At the ACLJ we're talking to clergy all over the United States, letting them know what their free speech rights are and telling them not to be intimidated by these tactics. It is an intimidation tactic to try to scare these pastors into complacency and silence so that they won't address the key cultural issues of the day. The good news is that pastors can and must stand up, and I'm actually quite optimistic on where that's going. We're going to continue to monitor this issue and educate clergy as to what they can and cannot do.

What does the law say about what pastors can and can't say about politics from the pulpit?

There's a lot of confusion on this issue. Here's what the law says: Pastors can preach messages on the issues without any problem. What they are not allowed to do under IRS rules is to endorse or oppose, in their official capacity as a church pastor, a particular nominee for office - the presidency, the vice presidency, whatever it might be. You can't endorse a specific candidate or oppose a specific candidate. But they can preach messages on moral issues, including moral issues that political candidates may disagree on. As an individual - i.e., in private conversation with members of your church or with friends - a pastor is not prohibited from naming the particular candidate that one is voting for. You have that constitutional right, just like any other US citizen. And from the pulpit, you can speak to any topics that are at issue in a particular campaign, without naming candidates. But I would also encourage you to ask your congregation to exercise their constitutional authority, their constitutional obligation, to vote. And I think there should be a lot of sermons on Sunday about not only the obligation to vote, but about the importance of voting your conscience.