TABLE OF CONTENTS
I. CHURCHES MAY SPEAK OUT ON THE MORAL ISSUES OF THE DAY.
A. A Primary Purpose Of The Church Is To Influence The Culture Through Advocacy Of Moral Issues.
B. The First Amendment Protects Churches' Right To Speak Out On Moral Issues Of The Day
C. Under Current Tax Law, Churches May Not Speak Out On The Moral Qualifications of Candidates For Public Office.
II. CHURCHES MAY DISTRIBUTE VOTER GUIDES WITHOUT RUNNING AFOUL OF THE CAMPAIGNING BAN.
III. CHURCHES MAY ENGAGE IN LIMITED LOBBYING ACTIVITIES.
A. Lobbying Defined.
B. The "Substantial" Part Test.
C. The Expenditure Test.
IV. AMERICANS UNITED FOR SEPARATION OF CHURCH AND STATE HAVE SINGLED OUT CONSERVATIVE CHURCHES FOR DISCRIMINATORY ENFORCEMENT OF THE CAMPAIGNING BAN AND LOBBYING RESTRICTIONS.
V. ANSWERS TO FREQUENTLY ASKED QUESTIONS
The First Amendment clearly protects Churches' right to speak on moral issues of the day and, to develop and disseminate information on public policy matters. In recent years, however, some have attempted to intimidate pastors and their churches from getting involved in political matters during elections. The chief tool of intimidation has been the threat of loss of a church's tax-exempt status under 501(c)(3) of the Internal Revenue Code. Liberal advocacy groups and some government officials selectively target churches with a conservative viewpoint who speak out on political and social matters. They invoke provisions of the Internal Revenue Code restricting political speech by churches, and attempt to revoke a church's tax exempt status. As a result of these efforts to chill churches' exercise of Amendment rights, churches are confused and intimidated. To clear up confusion, the American Center for Law and Justice provides this information letter on what the IRS regulations and guidelines provide, and what the First Amendment rights of churches are under constitutional law.
I. CHURCHES MAY SPEAK OUT ON THE MORAL ISSUES OF THE DAY.
A. A Primary Purpose Of The Church Is To Influence The Culture Through Advocacy Of Moral Issues.- (to table of contents)
Because every major religion promulgates a moral code, churches often speak out on the social and political issues of the day. As one commentator declared: "Religion and politics have been intertwined since the birth of our nation. In a democracy created to reflect the social fabric of its citizens, religious groups have always advocated moral positions to further or impede political causes and political campaigns." Judy Ann Rosenblum, Note, Religion and Political Campaigns: A Proposal to Revise Section 501(c)(3) of the Internal Revenue Code, 49 Fordham L. Rev. 536 (1981) (citations omitted). Churches are unique in this respect among other 501(c)(3) organizations.
Government policy necessarily involves moral issues naming some things as wrong or unlawful, and others as right or commendable. Many churches include among their purposes the goal of influencing government policy in accordance with their moral principles. As the Third Circuit Court of Appeals observed:
Religion includes a way of life as well as beliefs upon the nature of the world and the admonitions to be "Doers of the word and not hearers only" (James 1:22) and "Go ye therefore, and teach all nations, . . ." (Matthew 28:19) are as old as the Christian Church. The step from acceptance by the believer to his seeking to influence others in the same direction is a perfectly natural one, and is found in countless religious groups.
Girard Trust Co. v. Comm'r, 122 F.2d 108, 110 (3d Cir. 1941) (omission in original). The United States Catholic Conference agrees:
It is the Church's role as a community of faith to call attention to the moral and religious dimension of secular issues, to keep alive the values of the Gospel as a norm for social and political life, and to point out the demands of the Christian faith for a just transformation of society.
Wilfred R. Caron and Deirdre Dessingue, I.R.C. 501(c)(3): Practical and Constitutional Implications of "Political" Activity Restrictions, 2 J. L. & Pol. 169, 183 (1985) (quoting Political Responsibility: Choices for the 1980s, A Statement of the Administrative Board of the United States Catholic Conference 2 (rev. ed. Mar. 22, 1984)). Thus, free speech is of paramount importance to churches because a church's mission can only be fully achieved through unfettered religious expression.
B. The First Amendment Protects Churches' Right To Speak Out On Moral Issues Of The Day- (to table of contents)
If "a page of history is worth a volume of logic," Committee for Public Education and Religious Liberty v. Nyquist, 413 U.S. 756, 777 n.33 (1973), then the history of this country, the history of the First Amendment, and perhaps most importantly, the history of the Tax Code show that churches have always taken stands on moral issues of the day. Clearly, government attempts to chill or censor this religious expression is unconstitutional. As stated in Walz v. Tax Comm'n, 397 U.S. 664 (1969), a case upholding tax exemptions for churches:
Adherents of particular faiths and individual churches frequently take strong positions on public issues including, as this case reveals in the several amici, vigorous advocacy of legal or constitutional positions. Of course, churches as much as secular bodies and private citizens have that right.
Id. at 670 (emphasis added).
Rather than being a First Amendment orphan as some would have it, religious speech is at the apex of protected speech under the First Amendment. See Lovell v. City of Griffin, 303 U.S. 444 (1938). As the Supreme Court stated in Capitol Square Review and Advisory Board v. Pinette, 515 U.S. 753, 761 (1995), "[I]n 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." See also Police Dep't v. Mosely, 408 U.S. 92 (1972) (content-based restrictions on speech violate the Free Speech Clause of the First Amendment and the Equal Protection Clause of the Fourteenth Amendment.) Consequently, the government may not censor churches' speech on moral issues of the day without running afoul of the First and Fourteenth Amendments to the United States Constitution. The Internal Revenue Code, however, has circumscribed the rights of 501(c)(3) organizations to engage in political speech. Thus, the First Amendment notwithstanding, churches who desire to retain their status as tax-exempt organizations under I.R.C. 501 (c)(3) must adhere to IRS restrictions on political speech.
C. Under Current Tax Law, Churches May Not Speak Out On The Moral Qualifications of Candidates For Public Office.- (to table of contents)
The Internal Revenue Code does not restrict churches' right to speak out on the moral and political issues of the day, but it does prohibit churches from speaking out on the qualifications of candidates for public office.(1) In exchange for 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:
Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes . . . no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
I.R.C. 501(c)(3) (emphasis added).
An IRS regulation explains that "an organization is not operated exclusively for one or more exempt purposes if it is an action' organization." Regulation 1.501(c)(3)-1(c)(3)(i). An "action" organization is:
[one that] participates or interferes, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office. . . . Activities which constitute participation or intervention in a political campaign on behalf of or in opposition to a candidate include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to such a candidate.
Regulation 1.501(c)(3)-1(c)(3)(iii). Hence, churches can violate the campaigning ban through the written or spoken word.
Moreover, an organization's motive for engaging in campaign activity is irrelevant in determining whether the campaigning ban has been violated. The IRS has stated that the campaigning ban "does not refer only to participation or intervention with a partisan motive, but to any participation or intervention which affects voter acceptance or rejection of a candidate." Revenue Ruling 78-160, 1978-1 C.B. 154 (emphasis added).
Additionally, unlike IRS restrictions on lobbying activities by 501(c)(3) organizations, see Section III infra, the prohibition on political candidate campaigning is absolute. 501(c)(3) allows no degree of participation or intervention. See Association of the Bar of the City of New York v. Comm'r, 858 F.2d 876 (2d Cir. 1988) (court upheld the denial of exempt status to an organization that rated elected judicial candidates, affirming the principle that the campaigning ban is absolute).
Neither the I.R.C. nor IRS regulations define the term "candidate." In Fulani v. League of Women Voters Education Fund, 882 F.2d 621 (2d Cir. 1989), however, the court did imply that the prohibition on political campaign activity applies only to campaigns for political office.
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. A recent Court of Appeals decision has made it clear, however, that a church may form a separate organization which, in turn, may form a political "arm" to conduct the very political activities that are impermissible for a church.
D. Churches May Form Separately Incorporated 501 (c) (4) Organizations Which May, In Turn, Form Political Action Committees That Are Free To Participate in Political Campaigns.
Though a church is forbidden from certain political conduct, the Internal Revenue Code provides an "alternate means by which [a church could] communicate its sentiments about candidates for political office." See Branch Ministries v. Rossotti, 211 F.3d 137, 143 (D.C. Cir. 2000). Just as a lobbying group could "use its . . . 501(c)(3) organization for its nonlobbying activities and may create a 501(c)(4) affiliate to pursue its charitable goals through lobbying," id. (quoting Regan v. Taxation With Representation, 461 U.S. 540, 552 (1983) (Blackmun, J., concurring)), a church "has such an avenue available to it." Rossotti, 211 F.3d at 143. A related organization under section 501(c)(4) may then form political action committees to engage in political campaigns and lobbying. Id.
Churches that wish to create a 501(c)(4) organization must proceed carefully. The 501(c)(4) organization must be separately incorporated from the church. Id. It is important to note that such a related organization, like a 501(c)(4) organization, "is also subject to the ban on intervening in political campaigns." Id.; see also 26 C.F.R. 1.501(c)(4)-1(a)(2)(ii) (1999). The 501(c)(4) organization is exempt from taxation, but contributions to such organizations, unlike contributions to 501(c)(3) organizations, are not deductible. Branch Ministries, 211 F.3d at 143.
The church-created 501(c)(4) organization, not the church itself, may then form a political action committee ("PAC") "that would be free to participate in political campaigns." Id.; see also 26 C.F.R. 1.527-6(f), (g) (1999). Note that it is the PAC of the 501(c)(4) organization that may engage in political activities, not the 501(c)(4) organization. See id. In fact, the 501(c)(4) organization "must maintain records that will demonstrate that tax-deductible contributions to the [c]hurch have not been used to support the political activities conducted by the 501(c)(4) organization's political action arm." Id. See also 26 U.S.C. 527(f)(3); 26 C.F.R. 1.527-6(e), (f). Churches, therefore, still maintain a means to indirectly support or oppose political campaigns or legislation.
II. CHURCHES MAY DISTRIBUTE VOTER GUIDES WITHOUT RUNNING AFOUL OF THE CAMPAIGNING BAN.- (to table of contents)
According to the current IRS regulations and their interpretations, 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 the tax-exempt organizations follow certain guidelines. These guidelines must be strictly followed because violation of the campaigning ban can easily occur. The IRS has stated that "[w]hether an organization is participating or intervening, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office depends upon all of the facts and circumstances of each case." IRS Revenue Ruling 78-248.
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 or scorecard 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 stands on the issues of the day.
In undertaking the educational function of publishing or distributing voting records of incumbent members of the U.S. Congress or state legislative bodies, churches and exempt organizations must avoid the appearance of endorsing or opposing candidates based on an agreement or disagreement with voting patterns. IRS Revenue Rulings 78-248 and 80-282 specifically provide these guidelines:
(1) The voting records of all incumbent members of the legislative body who represent the region where the exempt organization works should be included and fairly described;
(2) the voting report should not identify legislators as candidates for re-election;
(3) no comment should be made on an individual's overall qualifications for office;
(4) no statements should be expressly or impliedly made endorsing or rejecting any incumbent as a candidate for public office;
(5) the voting report should not be linked to any election campaign, i.e., by widely distributing the voting report on the eve of an election; and
(6) the voting report should cover a broad range of issues and not target issues that track the organization's known "agenda."
If church-distributed voting guides adhere to these restrictions, a church will not run afoul of the candidate campaigning ban. If a church does not wish to discuss voting records of the candidates, it may elect to make generalized broad-based statements on particular moral issues. The Internal Revenue Code does not restrict such statements. Churches and 501(c)(3) tax-exempt organizations may also engage in voter registration efforts, provided such efforts are neutral and are not conducted on behalf of any candidate or political party.
Stated differently, under IRS guidelines, churches are free to discuss the moral issues of the day and also register persons to vote as long, as they do not support or oppose a particular candidate or political party. Again, whether the IRS' restrictions are truly constitutional is, in our view, highly doubtful.
III. CHURCHES MAY ENGAGE IN LIMITED LOBBYING ACTIVITIES.
A. Lobbying Defined.- (to table of contents)
As stated earlier, 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 consists of lobbying, the organization will not be tax-exempt under 501(c)(3). Certain tax-exempt organizations may, however, elect to engage in limited lobbying activities under the objective expenditure allowances calculated under I.R.C. 501(h). See infra, Section III. C. It is important to note that churches, integrated auxiliaries of churches, or conventions or associations of churches, as well as private foundations, are ineligible to make this election.(2) I.R.C. 501(h)(3) & (4).
Organizations which cannot or do not make the expenditure elections under 501(h) are governed by the "substantial part of activities" test. If the "substantial" test is not met, the organization will be deemed an "action" organization and disqualified as an exempt organization under 501(c)(3). IRS Regulation 1.501(c)(3)-1(c)(3)(ii) states that an action organization is one that, inter alia, "attempts to influence legislation." Lobbying, therefore, essentially means attempting to influence legislation. While there is no hard-and-fast objective test to determine what is "substantial," Subsection B of this letter addresses such standards as there are.
The term "legislation" encompasses actions by the U.S. Congress, state legislative bodies, local councils or similar governing bodies, as well as public referendums or initiatives, constitutional amendments, or similar procedures. IRS Regulation 1.501(c)(3)-1(c)(3)(ii)-(iv). Legislation also includes a federal judicial confirmation proceeding in the U.S. Senate. IRS Notice 88-76, 1988-2 C.B. 392. Legislation does not include actions by an executive branch, or by an independent regulatory agency. See, e.g., Gellhorn, Public Participation in Administrative Proceedings, 81 Yale L.J. 359 (1972).
There is also a difference between "direct lobbying" and "grass roots" lobbying. Direct lobbying includes the presentation of testimony at public hearings held by legislative committees, correspondence and conferences with legislators (and staff), and publication of documents advocating specific legislative action. Grassroots lobbying consists of appeals to the general public to contact legislators or take other specific action as regards a legislative matter. See Roberts Dairy Company v. Comm'r, 195 F.2d 948 (8th Cir. 1952); American Hardware and Equipment Company v. Comm'r, 202 F.2d 126 (4th Cir. 1953).
Lobbying or influencing legislation does not, however, include the following:
(1) Making available the results of nonpartisan analysis study or research;
(2) providing technical advice or assistance (where such advice would otherwise constitute lobbying) to a government body in response to its written request;
(3) appearing before, or communicating with, any legislative body with respect to a possible decision of that body which might affect the existence of the organization, its powers and duties, its exempt status, or the deduction of contributions to the organizations;
(4) communicating with the exempt organization's members on legislation of direct interest to the organization and its members (but not directly encouraging organization members to contact a member of the legislature, or his/her staff, or engaging in "grass roots" lobbying); and
(5) communications with a government official or staff member that is not lobbying.
Revenue Ruling 78-248, 1978-1 C.B., modified, Revenue Ruling 80-282, 1980-2 C.B. 178; I.R.C. 3911(d).
B. The "Substantial" Part Test.- (to table of contents)
The rules concerning lobbying--influencing legislation--by churches and tax-exempt organizations revolve around whether the activity is a "substantial" part of the church's or organization's activities. The determination of whether a specific activity of an exempt organization is "substantial" is essentially a factual one; and until enactment of the expenditure limitations allowed under I.R.C. 501(h), there was no formula for computing "substantial" legislative undertakings. As held in Kentucky Bar Foundation, Inc. v. Comm'r, 78 T.C. 921 (1982), the issue of "substantial[ity]" is a question of facts and circumstances.
In Seasongood v. Comm'r, 227 F.2d 907, 912 (6th Cir. 1955), the court established a five percent (5%) safe harbor rule based on total expenditures applied to legislative activities. This limitation was expanded in World Family Corp. v. Comm'r, 81 T.C. 958 (1983), where the Tax Court ruled that an exempt organization's lobbying activities which were less than ten percent (10%)--but more than 5%--of its total efforts was "insubstantial." In 1997, Marcus Owen, the head of Exempt Organizations for the IRS, said that "the law in this area needs to be clarified since anything from five percent to fifteen percent of total expenditures has been permitted for [l]egislative activity." Washington Times, December 2, 1997, p. A5. From this line of cases, and comments, 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.
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. In doing so, it stated that the percentage test obscured the "complexity of balancing the organization's activities in relation to its objectives and circumstances." Id. at 855.
Instead, the Christian Echoes court explained, "the political [activities of charity] must be balanced in the context of the objectives and circumstances of the organization to determine whether a substantial part of its objectives [not just expenditures] was to influence or attempt to influence legislation." Id. In this context, the following legislative activities were found to be "substantial":
(1) Preparing and distributing several articles constituting appeals to the public to react to certain issues;
(2) supporting and opposing specific terms of legislation;
(3) and repeated efforts to persuade members of the public to contact members of Congress in various matters.
Id. at 855.
In light of the uncertainty and vagueness of the facts-and-circumstances evaluation, Congress enacted I.R.C. 501(h), the Expenditure Election, which, borrowing from the safe-harbor rationale in Seasongood essentially established a sliding scale dollar value to define what level of expenditures on direct and grass roots lobbying is "substantial."
C. The Expenditure Test.- (to table of contents)
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. See I.R.C. 501(h) & 4911. The election is made by filling out IRS Form 5768. The expenditure limitations for electing organizations are as follows:
1. Twenty percent (20%) of exempt purpose expenditures up to $500,000; I.R.C. 4911(c) & (e)(1) and IRS regulation 56.4911-4(a) define "exempt purpose expenditure" as:
a. Expenditures for one or more charitable purposes, including grants made for charitable ends;
b. Amounts paid as employee compensation in furtherance of a charitable purpose;
c. The portion of administrative expenses allocable to a charitable purpose;
d. All lobbying expenditures;
e. Amounts expended for nonpartisan analysis study or research;
f. Amounts expended for examination of broad social, economic, and similar problems or issues;
g. Amounts expended in response to requests for technical advice;
h. Amounts expended pursuant to the self-defense "exception," which includes direct lobbying on an issue that directly affects the exempt status or purpose of the organization;
i. Amounts expended for communications to members of the exempt organization that are not lobbying expenditures;
j. Depreciation of amortization of charitable assets; and
k. Fund raising expenditures.
2. $100,000, plus 15% of the excess of exempt purpose expenditures over $500,000 up to $100,000;
3. $175,000, plus 10% of the excess of exempt purpose expenditures over $1,000,000 up to $1,500,000; or
4. $225,000, plus 5% of the excess of exempt purpose expenditures over $1,500,000.
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). Additionally, 501(h) provides that an electing organization's tax exemption will be denied if its expenditures "normally" exceed the designated amounts. IRS regulations indicate that "normally" is to be determined on the basis of a 4-year average. IRS regulation 1.501(h)-3.
Finally, the total amount of grass roots lobbying expenditures in any year is limited to twenty-five percent (25%) of the total lobbying expenditures for the organization. Id. Exempt organizations (and their operating officers and directors) exceeding these limits are subject to an excise tax in the amount of 25% of the excess lobbying expenditures, plus penalties. See I.R.C. 4911(a); IRS regulation 56.4911-1(a).
IV. AMERICANS UNITED FOR SEPARATION OF CHURCH AND STATE HAVE SINGLED OUT CONSERVATIVE CHURCHES FOR DISCRIMINATORY ENFORCEMENT OF THE CAMPAIGNING BAN AND LOBBYING RESTRICTIONS.- (to table of contents)
While the IRS' position is that the I.R.C. 501(c)(3) campaigning ban and lobbying restrictions apply equally to both liberal and conservative churches, the liberal watch dog organization, Americans United for Separation of Church and State, apparently believes that the I.R.C. 501(c)(3) restrictions apply only to conservative churches. Americans United have attempted to intimidate pastors and churches during the election cycle not to get involved in any matter which might be regarded as political. This effort seems designed to confuse and pressure churches not to speak out on the moral issues of the day, and to stop circulation of voter guides.
On December 10, 1998 Americans United issued a press release detailing the report it made to the IRS regarding voter guide distribution by eight conservative churches. See "American United Reports Eight Churches To IRS For Distributing Christian Coalition Voter Guides During November Elections," December 10, 1998. The following churches were cited in the press release:
Crossroads Cathedral, Oklahoma City, Okla.: Christian Coalition guides were stacked on a table near the church's south entrance.
Lighthouse Baptist Church, St. Maries, Idaho: John Farris, the head of the Republican Party in Benewah County, distributed Christian Coalition voter guides in this church.
First Assembly of God, Worcester, Mass.: Christian Coalition guides were stacked on a counter in the church foyer.
Calvary Chapel, Santa Ana, Calif.: Stacks of guides were left on tables around the church sanctuary.
Wheaton Evangelical Free Church, Wheaton, Ill.: Christian Coalition guides were displayed prominently on a table in the church foyer next to the service's program.
Sonrise Church, Hillsboro, Oregon: During services, a church elder advised congregants to pick up Christian Coalition guides, which were stacked in an adjoining wing.
It is regrettable that such mean-spirited attempts to chill churches' First Amendment activities are occurring today. Yet, these intimidation efforts guarantee that the ACLJ will continue its efforts to protect the First Amendment rights of churches and religious believers.
V. ANSWERS TO FREQUENTLY ASKED QUESTIONS- (to table of contents)
Q. From where did the campaigning ban originate?
A. The 501(c)(3) prohibition of political candidate activities was added to the federal tax law in 1954, without benefit of congressional hearings, in the form of a floor amendment in the Senate. During consideration of the legislation that was to become the Revenue Act of 1954, Senator Lyndon B. Johnson of Texas, on July 2, 1954, offered the amendment out of concern that funds provided by a charitable foundation were being used to help finance the campaign of an opponent in a primary election." Bruce Hopkins, The Law of Tax-Exempt Organizations, 327 (6th ed. 1992).
Q. May churches educate their members and the general public on the moral issues of the day and allow their pastors to preach sermons on moral issues of the day?
A. YES. As long as the pastors and churches do not engage in activities that favor or oppose candidates for public office or political parties, the First Amendment protects their right to speak out on the moral issues of the day.
Q. May community groups use church facilities to discuss moral issues of the day?
A. YES. As long as the discussion remains on moral issues and does not include candidates for public office or political parties, community groups may use church facilities to discuss moral and social issues.
Q. May a pastor raise funds and grant the use of his/her name to support a political candidate?
A. YES. As long as the pastor makes clear that his efforts are solely his and not his church's, he may raise funds and grant the use of his/her name to support a political candidate.
Q. May churches sponsor candidate debates without endangering their tax-exempt status?
A. YES. In Revenue Ruling 86-95, 1986-2 C.B. 73, the IRS indicated that under appropriate circumstances, a tax-exempt organization could sponsor candidate debates:
The presentation of public forums or debates is a recognized method of educating the public. See Revenue Ruling 66-256. Providing a forum for candidates is not, in and of itself, prohibited political activity. See Revenue Ruling 74-574. However, a forum for candidates could be operated in a manner that would show a bias or preference for or against a particular candidate. This could be done, for example, through biased questioning procedures. On the other hand, a forum held for the purpose of educating and informing the voters, which provides fair and impartial treatment of candidates, and which does not promote or advance one candidate over another, would not constitute participation or intervention in any political campaign on behalf or in opposition to any candidate for public office.
Q. Has an organization that studies matters of potential legislation in a "nonpartisan" manner and distributes its findings to the general public engaged in an attempt to "influence legislation"?
A. NO. If this organization neither proposes specific bills nor advocates passage or defeat of any pending legislation, it is not "attempting to influence legislation" for purposes of I.R.C. 501(c)(3). Revenue Ruling 64-195, 1964-2 C.B. 138.
Q. Does time spent within an organization formulating lobbying plans constitute an attempt "to influence legislation"?
A. YES. One court has held that, in addition to time spent "writing, telegraphing, or telephoning" legislators and testifying before legislative committees, the time spent within the organization "formulating, discussing and agreeing upon the positions" to be advocated should be taken into account and cumulated to determine substantiality. See Kuper v. Comm'r, 332 F.2d 562 (3rd Cir. 1964).
Q. Should an organization make the 501(h) election?
A. Consider the following:
(1) Whether the organization can make the election (remember that churches and private foundations are not eligible under 501(h));
(2) The certainty of the elective limits contrasted with the vagueness of the substantiality test;
(3) the amount of lobbying permitted if the election is not made (anywhere from 5% to 15%);
(4) the type of lobbying the organization intends to undertake, in light of the lower elective limits for grass-roots lobbying;
(5) potential additional annual reporting requirements imposed upon electing organizations;
(6) the four-year averaging available under 501(h);
(7) the non-inclusion under 501(h) of lobbying activities for which there are no expenditures, for example, lobbying by volunteers;
(8) the wisdom of electing to make an organization subject to a tax to which it would not otherwise be subject.
Douglas Cook, NonProfit, Tax-Exempt Organizations, 5-16 (1998 ed.).
CONCLUSION- (to table of contents)
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).
This material is intended to be an overview only. Specific questions in the complex area of I.R.C. 501(c)(3) and its application to the activities of churches should be directed to your legal advisors.
AMERICAN CENTER FOR LAW & JUSTICE
Jay Alan Sekulow
The contents of this website do not constitute legal advice. If you are seeking legal advice, you will need to contact an attorney in regard to your legal matter. If you are unable to obtain an attorney, you may call the ACLJ national headquarters at 1/800-296-4529 and we will attempt to assist you.
(1.) In Branch Ministries v. Rossotti, 211 F.3d 137, 143 (D.C. Cir. 2000), the ACLJ argued that churches are unique and have First Amendment and statutory rights to speak out on the moral issues of the day, even if those moral positions mention or touch upon a political campaign or candidate. Nothing in this letter should be understood to compromise that position. Rather, this letter summarizes existing law, which currently provides that speaking out on a political candidate's qualifications for office could jeopardize a church's tax-exempt status.
(2.) It is the ACLJ's opinion that Congress' decision to preclude churches from making a 501(h) election indicates that Congress did not intend for churches to be subject to the lobbying or political campaigning restrictions of 501(c)(3). Nothing in this letter should be understood to contradict that position. Rather, this letter summarizes existing law, and currently, a church may not engage in lobbying activities which compose a "substantial" part of the church's total activities.
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