Being “Tax-Exempt” Doesn’t Guarantee “Free Speech”

9 November 2008

A few weeks ago, 33 pastors, backed by the Alliance Defense Fund, decided to endorse candidates from the pulpit in direct contravention of 501(c)(3) laws.  Their argument?  Constitutionally protected free speech.

I’m seeing the same meme show up in comments.  Let’s get something straight: no law is telling any church what their leaders can or cannot say.  But tax laws restrict what kinds of things an organization can say in order to qualify for tax-exempt status.  If you want to have completely free speech, don’t ask the taxpayers for a handout in the form of tax exemptions.  The Treasury needs to remain impartial, particularly with respect to candidates for public office.

Another important reason for this rule is that the government wants to be sure that political contributions are always taxable.  Taken to an extreme, if pastors were allowed to endorse candidates and engage in any political discourse they liked, then candidates could set up shell churches, get 501(c)(3) tax exempt status, and have their supporters donate to these churches and get a Schedule A charitable deduction for, you guessed it, a political contribution.  And one more thing — the church would be exempt from disclosure rules too.  The only way to prevent these abuses is to draw a bright line between tax-exempt organizations and influencing legislation and endorsing (or opposing) candidates.

Accepting tax-exempt status means that you tell the government — and the people — that your organization is going to act in the general welfare.  By applying for a tax exemption, your organization gives up the right to make certain forms of speech.  Want to say whatever you want?  Don’t be tax-exempt.  Want to be tax-exempt?  Leave politics out of the sermon.



Goals of This Blog

7 November 2008

The first aim of my work was to provide a resource to a large population of individuals who want to issue a formal complaint to the IRS about the LDS Church’s involvement in Proposition 8, but didn’t know how. I posted two other thoughts on why I felt the Church was more hypocritical than many of its counterparts with respect to both supporting “traditional marriage” and overturning a legitimate California Supreme Court ruling. There wasn’t any particular relationship between these ideas, other than my dismay at the Church’s role in the passage of Proposition 8.

As the interest in this blog grows, another goal has appeared: we must demonstrate broad taxpayer concern about the LDS Church’s substantial activities to influence legislation — Proposition 8. While it indeed may not directly lead to revocation of the Church’s tax status, I am hopeful that our work may have three useful consequences, no matter what the IRS decides.

First, submission of an unprecedented number of complaints may convince the IRS to investigate the matter and clarify the “no substantial part” test and whether churches’ instructing their members to engage in substantial activity to influence legislation means those members act as agents of the church. Under certain tests, an expenditure of $20 million qualifies as “substantial”, and such an expenditure by church members at the direct instruction of church leaders may constitute prohibited activity. And, are members of a church, who attend services, donate money to the church, and obey church leaders in conducting their personal lives, agents of that church when they engage in substantial activity to influence legislation at church leaders’ instructions? These gray areas would benefit from clarification, and a large number of complaints may lead to that.

Second, a massive peaceful outcry against the Church’s activities may convince Church leaders that its political activities have a negative impact on the Church’s reputation in the world. The LDS church works hard to maintain a positive, uplifting image, through its humanitarian work, the appearance of its buildings, the conduct of its members, and even uplifting television and radio advertising.
By maintaining respectful but vocal discourse opposing the Church’s political activities, particularly in a way that demonstrates that the Church’s reputation has been damaged, Church leaders may be less likely to engage in political activism in the future.

Finally, sufficient interest in this activity could lead to support for amending state and federal regulation of tax-exempt entities. Perhaps this does not merit revocation of the LDS Church’s 501(c)(3) status today, but perhaps the Church’s activities have highlighted the issue in an unprecedented way. Now, there may be enough support to change tax law so that endorsement of and opposition to ballot initiatives are prohibited, just as these entities are prohibited from endorsing or opposing a particular candidate. (This idea will get a new post.)