Not all 501(c)(3)’s are created equal

Not all 501(c)(3) tax-exempt organizations are created equal. For the purposes of this post, we need only consider two types: those which are churches or directly related to churches, and those which are not. Some comments have incorrectly asserted that pro-gay organizations which donated to oppose Proposition 8 should also lose their tax-exempt status for attempting to influence legislation. Non-church 501(c)(3) organizations are entitled to elect to engage in even substantial lobbying activities (except promoting or opposing a candidate), provided they pay tax on excess lobbying expenditures under Sections 501(h) and 4911 of the Internal Revenue Code Title 26.

This is why the law reads “… 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))…”

I expect that non-church groups, such as Lambda, GLAAD, and the L.A. Gay and Lesbian Center, which opposed Proposition 8, made appropriate 501(h) elections if they did in fact engage in substantial activities attempting to influence legislation. Churches, like the LDS Church, are disqualified from making that election under Subsection (h), and are therefore more restricted in their ability to attempt to influence legislation.

501(h)(5) reads:

(5) Disqualified organizations

For purposes of paragraph (3) an organization is a disqualified organization if it is—
(A) described in section 170 (b)(1)(A)(i) (relating to churches) …
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7 Responses to Not all 501(c)(3)’s are created equal

  1. catia says:

    How about the churches who opposed 8 then? Wouldn’t they fall in the same category of LDS and lose their tax exempt status? If so, do we really want to go there?

  2. lds501c3 says:

    It all depends on the word “substantial.” To my knowledge, no church other than the LDS church issued a direct instruction from its top leaders to its members to give money and time to the cause, or supported it in the magnitude of the LDS Church. Again, remember that we are not talking about there being a blanket prohibition on supporting or opposing legislation, but rather engaging in substantial activity to influence legislation.

  3. Jason L. says:

    “Substantial” must be defined. You are talking about a total of no more than 6 months of the LDS church’s entire history of asking members of their faith to defend a moral issue. Doesn’t sound so substantial now does it?

    [Editor: Actually, the Church has been active on this issue for over a decade — at least as far back as 1997.]

  4. Nichole says:

    On their website, protectmarriage.com, provides a set of guidelines for churches to legally participate in lobbying from the Alliance Defense Fund. On page 6 of those guidelines it states “an insubstantial amount is generally considered 5 to 15 percent of a church’s funds” (http://www.protectmarriage.com/files/churches_and_politics.pdf). In attempting to research the Mormon church’s involvement I read that they not only preached about voting for Prop 8, but were the reason $20 million dollars was donated to support Prop 8. Unless the church has funds that range in the $133 billion, I would say they violated even the guidelines that were put out to help them participate. The monetary support has to be looked at in addition to the amount of time spent asking members of their faith to vote on a civil issue. Therefore, even though it was “no more than 6 months of the LDS church’s entire history”, their total actions were substantial.

    [Editor: $20 million is 5% of $400 million, and 15% of $133 million, not billion. I would expect the LDS Church does have an annual budget in excess of either of these amounts.

    My argument is more nuanced. In my view, $20 million is substantial, irrespective of the percentage of the budget it comes from, and the actions of tithe-paying Church members who are instructed to give by Church leaders should be considered as actions of the Church, just as in the rules for non-church entities. Moreover, the IRS and Congress have never defined “substantial” and left that to the courts; a small number of cases have defined it in these percentage terms, but that does not mean that the definition is set in stone.]

  5. Nichole says:

    Editor – Thank you for the correction on my math. I agree that regardless of their net worth their total actions were substantial.

  6. toby darling says:

    When you looked at who sponsored the ads the knights of columbus name appeared.

  7. It amazes me how quick we are to forget the teachings in the King James Holy Bible! Do you not know Sodom and Gomorra were destroyed? Do you even know what you beleive in? There is nothing political about keeping the commandments!!
    Either you belive what is taught or you do not!!

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