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Political Activity by Religious Organizations: The Unpardonable Sin.


As Election Day 2000 draws near, so does controversy over political activity from religious organizations. Accounting professionals are connected to this controversy by serving as paid or volunteer advisors to directors and administrators of religious organizations, pastors, and others in positions responsible for preparing financial reports, filing returns or paying taxes. In a recent survey, 226 church administrators were asked to rank individuals or organizations they had consulted with regarding tax issues [14] Administrators consulted accountants most frequently about tax matters. Considering the advisor role that the accounting professional has with religious organizations, it is important that he or she understands what these organizations can and cannot do related to political activities.

The purpose of this article is to provide guidance to accounting professionals who serve in advisory capacities to religious organizations. Specifically, they should be prepared to advise these organizations of the prohibition of political activity, provide specific situations that might be deemed as noncompliance with the Internal Revenue Code (IRC) provisions prohibiting political activity, and provide information on the consequences of noncompliance. Accordingly, this article is divided into five sections. The first section presents a brief overview of the history of the political activity prohibition. The provision of the IRC relating to the political activity prohibition is discussed in the second section. The third section presents illustrative cases of religious organizations' troubles involving political activities. The current political activity environment is discussed in the fourth section. The fifth section presents lessons learned that include a summary of potential violations and probable non-violations.


In the United States, the practice of income tax exemption for religious organizations began with independence and the adoption of the Constitution and the First Amendment. Congress' decision to exempt charitable organizations, including religious organizations, from income taxation was based on the theory that the government is compensated for lost revenue by its relief from the financial burden that would otherwise have to be met from public funds by appropriations, and by the benefits resulting from the promotion of the general welfare. [10] The IRC of 1939, in [sections]101(6), provided for the tax exemption of religious organizations. The IRC of 1954 moved the provision to [sections]501(c)(3).Although tax-exempt organizations, including religious organizations, were prohibited from conducting a substantial part of their activities in carrying on propaganda, or attempting to influence legislation, there was no prohibition against intervening in political campaigns.

The political activity limitation of the provision was introduced as a Congressman's retaliation against a political foe. Lyndon B. Johnson, who was at that time, a Senator from Texas, proposed the limitation on political activity in 1954. Apparently, Senator Johnson was attempting to limit the political activities of tax-exempt entities that had supported one of his opponents in a Texas election. [15] Senator Johnson proposed to extend the provision of [sections]501 to deny tax-exempt status to those people who intervene in any political campaign on behalf of any candidate for any public office. [6] The proposal was made as a floor amendment to the Internal Revenue Code and passed without explanation.

The Provision

As previously stated, IRC [sections]501(c)(3) prohibits political activity by religious organizations and was enacted as an amendment to the Code in 1954. The consequences are so severe that even one instance of noncompliance could result in revocation of an organization's tax-exempt status. To avoid loss of tax-exempt status for federal income tax purposes, religious organizations must not participate or intervene in any political campaign on behalf of or in opposition to any candidate for public office at the local, state or federal level [IRC [sections]501(c)(3)]. This provision of the IRC includes two limitations relating to religious organizations: (1) they may not engage in substantial efforts to influence legislation, and (2) they may not participate or intervene in any political campaign. These organizations may involve themselves in issues of public policy, so long as the involvement does not result in attempts to influence legislation that constitutes a substantial part of their activities. [8]

No doubt, massive violations occurred for many years after the political activity provision was enacted. However, until the 1990s, the IRS virtually ignored all violations. In the 1988 presidential campaign, not only did Jesse Jackson and Pat Robertson, two ordained ministers and leaders of religious organizations, seek the office, but these candidates received zealous support from many religious organizations. Although these men brought attention to the involvement of religion and politics, there is no indication that their running brought additional IRS scrutiny of the political activity provision. However, in a 1992 news release, the IRS indicated that it intended to pay much closer attention to compliance by tax-exempt organizations. Consequently, the 1990s found religious organizations faced with IRS sanctions including loss of tax-exempt status because of political activities. In the1992 news release, the IRS specifically identifies five prohibited activities. [11]

* Endorsement of candidates

* Making donations to a candidate's campaign

* Engaging in fund raising on behalf of a candidate

* Distributing statements supporting or opposing a political candidate

* Becoming involved in any other activities that may be beneficial or detrimental to any candidate.

During the 1996 campaigns, the IRS again issued a news release warning tax-exempt organizations to stay out of politics. The IRS warned charities that they could lose tax-exempt status for engaging in prohibited political activities and that contributions to such organizations would not be deductible by donors for federal income tax. [12] Compliance relating to the political activity provision is hindered because of the three primary difficulties.

1. It is difficult to separate activities of organization and its members. For instance, if a pastor gives an endorsement to a particular candidate, some might view it as the church's endorsement or if a director of a ministry contributes to a political campaign, some might view it as a contribution from the organization.

2. Separating candidates from political issues is an extremely fuzzy area. Religious organizations may fear that speaking out on abortion or other social issues during election years may be construed as political activity if the organization's stance disagrees with a particular candidate's position.

3. Determining what constitutes participation is difficult. Inviting political candidates to speak at meetings or services, as well as distributing voter guides, have been the center of controversy for several religious organizations.

Illustrative Cases of Noncompliance

To better understand the types of situations, in which religious organizations may be in violation of the political activity provision, several illustrations of noncompliance are discussed below. These illustrations also present some consequences of the violations.

In a 1972 case, Christian Echoes National Ministry Inc. V United States [470 F.2d 849 (10th Cir. 1972)] [4], the IRS revoked the tax-exempt status of the religious organization due to political activity. The focus of this case was primarily on the organization's efforts to influence legislation in the area of conservative Christian principles and for intervening in political campaigns. Although the organization did not formally endorse specific candidates, the Court stated that the organization "attacked President Kennedy ..." and "urged followers to defeat Senator Fulbright and attacked President Johnson and Senator Hubert Humphrey." The ministry challenged the IRS, but the IRS's position was upheld in court.

In 1992, the IRS determined that evangelist Jimmy Swaggart had violated the political activity provision of the Code. Swaggart's trouble stemmed from his support of Pat Robertson's candidacy for presidency of the United States during the 1988 presidential campaign. Swaggart endorsed Robertson by statements made from the pulpit and in an article he wrote and published in The Evangelist, the official magazine of Jimmy Swaggart Ministries. Jimmy Swaggart Ministries publicly acknowledged that it had not been compliant with the provisions applicable to political activities. Although the IRS did not revoke the ministry's tax-exempt status, as a condition of its continued exempt status, the ministry agreed to refrain from certain political activities in the future. [5] Jimmy Swaggart Ministries did not challenge the IRS decision.

As a result of political activity during the 1992 presidential election, a New York Christian church had its tax-exempt status revoked by the IRS. Ads placed in USA TODAY and The Washington Post four days before the 1992 presidential election asserted that candidate Bill Clinton supported abortion on demand, homosexuality; and the distribution of condoms to teenagers. The ads declared, "Bill Clinton is promoting policies that are in rebellion to God's laws." The ads claimed to be co-sponsored by The Church at Pierce Creek, its senior pastor, concerned Christians and churches nationwide. Upon appeal, the decision by the IRS was upheld by Federal Judge Paul Friedman. [3]

During the 1996 campaign, the Federal Election Commission (FEC) sued The Christian Coalition for illegal partisan political activity resulting from the distribution of leaflets and voter guides in 1990, 1992 and 1994 congressional campaigns and the 1992 presidential campaign. [9] The suit stemmed from accusations brought by Democratic Party organizations. The FEC alleged that the Coalition used general corporate funds to advocate the election or defeat of certain candidates through a speech and certain direct-mail communications, specifically voter guides and Congressional Scorecards that aided particular candidates in their campaign efforts. The Coalition argued that many of the questionable actions were done in the personal capacities of the president and executive director of the organization and that unless the directors expressly indicated that they were acting on behalf of the Coalition, the actions were those of private individuals. The court did not accept that formulation. Although the Christian Coa lition had most of the claims against it rejected by U. S. District Judge Joyce Hens Green in 1998, it does face civil penalties for violations relating to the 1994 election campaigns of Rep. Newt Gingrich and Oliver North. The Christian Coalition had applied for tax-exempt status several years earlier, but the IRS denied its application before this case was settled. The Christian Coalition recently filed suit against the IRS claiming it was discriminated against because of its conservative stances. The coalition based its suit on the court decision, which rejected most of the claims against it, and maintains that the IRS has granted tax-exempt status to several liberal political groups. [16]

After the 1998 elections, the Americans United for Separation of Church and State (Americans United) United formal complaints against eight churches that it believed violated the political activity provision. Americans United filed its complaints as a result of The Christian Coalition placing "voter guides" in houses of worship. Americans United, by the end of 1998, had reported 25 houses of worship, religious nonprofit groups, and broadcast ministries to the IRS because of questionable political activities. [2] During the summer of 1999, the tables were turned on Americans United. Six Republican senators sent a letter to Attorney General Janet Reno asking for an investigation of Americans United, suggesting that the organization may have attempted to "disenfranchise religious voters by intimidating people of faith into not participating in the political process." [1]

The Political Activity Environment

Political activity by religious organizations has severe ramifications. A slap on the wrist might require the organization to make public apologies for minor infractions; a more severe penalty might involve monetary sacrifices; the extreme penalty would be the loss of tax-exempt status. The number of violations or severity of violations does not evaluate political activity; organizations with even subtle or inadvertent violations run the risk of losing their tax-exemption.

Examples of past questionable activities by religious organizations abound, and both sides of the political arena, have cried foul to the Internal Revenue Service and the Federal Election Commission--the two watchdog agencies for political activity by tax-exempt organizations. The Republican chairman of the House committee sought an audit of a Buddhist temple in California after it hosted a Democratic fund-raiser featuring Vice President Al Gore. Former Representative David Skaggs (D-Colorado) said he referred two conservative organizations to the IRS after the groups reportedly sent out a mailing signed by GOP presidential candidate Bob Dole. [13] As stated earlier, six Republican Senators contacted Attorney General Janet Reno suggesting that she open an inquiry of a nonprofit educational corporation that may have tried to intimidate religious voters from going to vote. Based on these practices, it appears that there will be continued scrutiny of political activity.

Lessons Learned

Accounting professionals who advise persons of responsibility in religious organizations, should inform them of activities that might jeopardize their tax-exempt status as a result of political activity. Listed below are several examples of activities that may be deemed to violate the political activity provision followed by activities that would probably not be deemed violations.

Potential Violations

* The organization sends a questionnaire to candidates to solicit their positions on issues and then uses the responses to prepare and distribute a voters' guide that evidences a bias on certain issues.

* The organization publishes and distributes to the public a voters' guide that includes voting records of politicians on a particular issue when the issue represents a partisan purpose.

* The organization rates and publishes the ratings of candidates.

* The organization gives written or oral endorsement of a candidate.

* The organization participates in fundraising for a politician or contributions to a political campaign.

Probable Non-violations

* The organization includes in a non-partisan newsletter on developments considered to be of important social interest to its members.

* The organization conducts public forums or debates and includes all candidates; topics cover a broad range of issues; questions are prepared and presented by a non-partisan panel; and each candidate receives a equal opportunity to present his or her views on the issues.

* Leaders or members of the organization pray for those in authority.

* Leaders of the organization encourage members (in a non-partisan manner) to vote.

Should religious organizations become involved in politics? Proponents of separation of religion and government would say that there should be total separation of church and state, and that any political activity by religious organizations should, at least, prevent tax-exempt status. The other viewpoint is that religion and government cannot be totally separate. Some argue that religious organizations, by nature, have a political dimension. Others suggest that political judgments are inevitably permeated with moral and religious assumptions. [7] Some politicians might say, "it depends on how you define pulpits" and "it depends on how you define involve" and "it depends on how you define politics." It appears that the IRS will not be lacking cases to investigate after this election and as each case is settled, the courts may create some specificity concerning the issue of political activity and tax-exempt status.

Patricia H. Mounce, Ph.D., CPA is an associate professor of accounting at Mississippi College in Clinton, MS. She holds a Ph.D. in accounting from the University of Mississippi.

Shawn Mauldin, Ph.D., CPA /PFS, CMA, CFP is the department head of accounting and business law at Nicholls State University. He holds a doctorate in accountancy from the University of Mississippi and has authored numerous accounting, taxation, and business-related articles published in academic and practitioner journals.


(1.) Araujo, D. 1999. "Senate Conservatives Attack Americans United." Free Inquiry. (Fall): 32.

(2.) Boston, R. 1999. "Pulpits, Politics and Penalties." Church and State. (January): 4-7.

(3.) Branch Ministries, Inc. v. Rossotti, 40 F.Supp.2d 15 (D.D.C. 1999).

(4.) Christian Echoes National Ministry, Inc. V. United States, 470 F.2d 849 (10th Cir. 1972)

(5.) Church & Clergy Tax Developments for 1992. 1993. Church Law & Tax Report. (January/February): 6.

(6.) Senator Lyndon B. Johnson (Texas) Congressional Record -- Senate Amendment to the Internal Revenue Laws: 100, Pt. 7 (2 July 1954) p. 9604.

(7.) Dulles, A. 1992. "Religion and the Transformation of Politics., America. (October 24): 296.

(8.) Department of the Treasury -- Internal Revenue Service. 1994. Tax Guide for Churches and Other Religious Organizations Draft, Publication 1828. Washington: U. S. Government Printing Office. (July 26).

(9.) Federal Election Commission vs. The Christian Coalition 179 FRD 22 (DDC)

(10.) H.R. No. 1860, 75th Congress, 3rd Session as reprinted in 1939-1 (Part 2) C.B. 742.

(11.) IRS News Release IR-92-57.

(12.) IRS News Release IR-96-23.

(13.) Margasak, L. and Solomon, J. 1999. "White House, Lawmakers Spur IRS Audits Through Referrals." The Lexington Herald. (November 16)

(14.) Mounce, Patricia H. 1998. "Income Tax Provisions Applicable to Churches: An Investigation of Compliance by Church Administrators." Ph.D. Dissertation. The University of Mississippi

(15.) "Political Activities by Churches: The IRS is Warning Churches to Refrain from Participation in the 1992 Election." 1992. Church Law and Tax Report. (September/October): 2

(16.) Szabo, Liz. 2000. "Christian Coalition sues IRS over denial of tax-exempt status." The Virginian-Pilot. 2/26/2000
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Author:Mounce, Patricia H.; Mauldin, Shawn
Publication:The National Public Accountant
Geographic Code:1USA
Date:Oct 1, 2000
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