IRS EYES POLITICAL ACTIVITY IN CHURCHES NONPROFITS UNDER MAGNIFYING GLASS.

Byline: BETH BARRETT Staff Writer

The IRS has ratcheted up its surveillance and investigation into church political activities in the wake of a surge in prohibited contributions to candidates.

The Internal Revenue Service has begun to more closely monitor church and other charities' political activities and intends to expand it into a systematic nationwide approach, said Steven Miller, the Internal Revenue Service's commissioner of tax-exempt and government entities in Washington, D.C.

Miller said in an interview Friday that the IRS has realized that its historic reliance on complaints -- such as the one that prompted the current controversial investigation of All Saints Episcopal Church in Pasadena -- has not kept pace with growing abuses.

``Should we get smarter, more systematic? The answer is yes,'' Miller said.

The Daily News reported on Wednesday that in Los Angeles alone, 39 churches, synagogues and Buddhist temples were identified by political candidates on a city Web site as contributing more than $15,000 to their election campaigns since 1998.

Under the Internal Revenue Service tax code, contributions to political candidates by nonprofits -- including houses of worship -- violate a prohibition against political campaign activity, which includes a ban on endorsing a candidate in an active election.

But the IRS action comes amid a growing national debate over churches' role in politics -- and whether the IRS is fairly monitoring their activities.

The local spotlight has focused on All Saints, where the IRS began investigating a complaint that a 2004 sermon by a former rector was critical of the Bush administration.

All Saints attorney Marcus Owens, with Caplin & Drysdale in Washington, D.C., said Friday that any beefed-up IRS enforcement needs to be coupled with clearer definitions of prohibited political campaign intervention.

All Saints officials have said the IRS grounds for investigating the church are subjective and less clear than straight political contributions or candidate endorsements.

``They should pick where it's clear and not subjective and in the middle of a religious service,'' Owens said.

Miller said the IRS began more aggressively monitoring charities' contributions after seeing an uptick in complaints ``and a lot of money floating around'' during the 2004 election.

The agency launched a campaign to educate nonprofits on what types of activities could jeopardize their tax-exempt status.

This spring the IRS began reviewing national Web sites for charities -- including houses of worship -- for reports of political contributors.

Miller declined to say how many cases it has found and pursued. He also said he did not know whether the sites are detailing charities and churches in Los Angeles or other local regions.

But he said the review is the first step toward broader enforcement efforts.

``If it doesn't pick up Los Angeles, then eventually before or after the election, if there are good leads, we will follow them,'' he said.

While Miller said the IRS' previous reliance on the complaint-based system wasn't perfect, he noted it netted complaints across the political spectrum.

The IRS said it examined 47 churches nationwide for political activity compliance in 2004 and wrote warning letters or assessed excise taxes to 37. No revocations of tax-exempt status were proposed.

In 2005, the agency began audits of 70 churches and charities that are still pending. It reportedly has 40 cases pending so far this year.

While some have railed against the IRS scrutiny, others said that in many instances the houses of worship have brought it upon themselves.

``The sad thing to me is, historically, the government generally has tried their best to stay out of these kind of arguments as to what goes on in houses of worship,'' said the Rev. Welton Gaddy, president of the Interfaith Alliance in Washington, D.C., which represents 185,000 members from 75 different religions.

``Now it's almost as though houses of worship are throwing out an invitation, `Come and get us if you want.'''

Gaddy said the level of IRS scrutiny is worrisome if it impinges on legitimate scriptural-based commentary on political issues.

But, he said, it also underscores how politicized religion has become and vice versa.

``I think we're giving the IRS more authority than we ought to be giving them, but many houses of worship are going to be as much to blame as the IRS agents.

``I think there are religious leaders in this society so absolutely certain they know God's will for everybody that they feel like they have the authority even to defy the government in order to tell people what to do.

``What's playing out in the churches is being fed by a conclusion that we can measure the authenticity of your religion by looking at how you vote.''

Gaddy said the perception of the conservative right commandeering the political arena is fading as more liberal houses of worship take on political overtones.

``The left is so fearful of the right having an almost unbreakable grip on government power that the left is beginning to take risks in that area also,'' he said.

For its part, Miller said the IRS does not intend to ``sit in the pews'' to monitor political speech in churches.

But it will more aggressively search Web site databases for potential abuses of political contributions. ``It's not that they wear a scarlet letter if they're on the list, but it's a good lead.''

beth.barrett(at)dailynews.com

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