A great deal of confusion exists as to what churches may and may not do when it comes to political speech. The biggest confusion I run across is a belief that it is illegal for churches to be politically active, somehow based on a “separation of church and state.” This is not true. Churches, as private entities, cannot violate a supposed “separation of church and state.” Additionally, churches are always free to speak up on any issue, including politics. The only area in which churches should practice caution is if they are organized as a non-profit organization and wish to maintain that tax exempt status unchallenged. If so, there are IRS regulations to be aware of, which I will discuss below. But, churches that do speak up are in no way doing anything illegal or underhanded. In fact, there are many legitimate legal challenges to the few restrictions that do exist.
Of course, there are a myriad of reasons why a church may wish to remain neutral on political issues or to protect its tax-free status. Depending upon a church’s financial arrangements, their tax exempt status could be very important to them. Additionally, some may deem it wiser to avoid the time it takes to respond to a potential IRS audit. I do not wish to appear accusatory if churches and their pastors are guarded in their political activities.
However, there is a world of difference between believing that churches are prevented from speaking out politically and that a church may only face tax consequences, as any other similar non-profit organization. Additionally, the conduct a church may not engage in is much narrower than commonly perceived.
First Amendment and the Establishment Clause
The First Amendment to our constitution states that:
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.
This right was made applicable to the states through the Fourteenth Amendment. And there it remains—the restriction on the “establishment of religion” is applicable to Congress and the states only. We citizens may freely speak out and exercise our religious beliefs. Churches, as private organizations, and certainly their individual congregational members, cannot violate the Establishment Clause.[1]
There may be other applicable laws, such as prohibitions on “fighting words”[2] or state campaign laws. But, generally speaking, churches, their staffs, and especially their congregations do not give up any of their free speech rights because of their religious motives.
The issue that churches face is not that they are violating some imagined separation of church and state by engaging in politics. Rather, churches that have been organized as 501(c)(3) organizations for tax purposes may lose that designation and be taxed on their political expenditures and income if they endorse or oppose a specific candidate for office or if they engage in substantial lobbying. I will explain these limitations below so that church members can be aware of them. Churches seeking individual tax advice should speak with an attorney regarding their situation.
501(c)(3) Explained
Section 501(c)(3) of the Internal Revenue Code exempts certain non-profit organizations from paying taxes on their income.[3] These are commonly referred to as “501(C)(3)’s”, and churches are automatically considered 501(c)(3)’s. This tax section goes on to say that “no substantial part” of the organization’s activities can be “carrying on propaganda, or otherwise attempting, to influence legislation”, nor can it “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.”[4] These limitations are commonly referred to as the “Johnson Amendment”.
“Influencing Legislation” (a.k.a. “Lobbying”)
The IRS states that a church has engaged in lobbying “if it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation.”[5]
“Legislation” includes “action by Congress, any state legislature, any local council, or similar governing body, with respect to acts, bills, resolutions, or similar items (such as legislative confirmation of appointive office), or by the public in referendum, ballot initiative, constitutional amendment, or similar procedure. It does not include actions by executive, judicial, or administrative bodies.”[6] Lobbying also does not include such activities as passing out educational materials on public policy issues.[7]
Churches may still engage in lobbying, provided it is not a substantial part of their activities. This “substantial part test” considers “a variety of factors”, including the time and resources spent by the church.[8] For most churches, their religious ministries will far outstrip their time spent lobbying.
Intervening in Political Campaigns
While lobbying is a matter of degree, 501(c)(3)’s are completely prohibited from intervening in political campaigns by either endorsing or opposing a candidate[9]. Even so, “[t]he line between what is prohibited and what is permitted can be difficult to discern.” Churches may not make statements that endorse or oppose a candidate, nor may they make campaign contributions.[10] However, “[t]hey may conduct political activities not related to elections, such as issue advocacy and supporting or opposing appointments to nonelective offices.”[11] Non-partisan voter guides are also acceptable, along with voter registration and voter drives.[12]
Pastors remain free to personally endorse or opposed candidates, make personal campaign contributions, and to engage in lobbying, provided that they clarify that they are speaking for themselves and not for their church.[13]
Consequences of Violating the Johnson Amendment
Congress has additional requirements of the IRS before it can examine churches. Specifically, before an inquiry, “an appropriate high-level Treasury official [must] reasonably [believe], on the basis of facts and circumstances recorded in writing, that an organization claiming to be a church or convention or association of churches may not qualify for exemption.”[14] Then IRS must then send written notice to the church explaining the inquiry subject matter and reasons for concern.[15] The church may respond to these concerns.[16] If it does not sufficiently address them, the IRS must provide a second written notice to the church before examining the church’s records and activities.[17] “This notice must include a copy of the inquiry notice, a description of the records and activities the IRS seeks to examine, an offer for a conference to discuss and resolve concerns, and copies of IRS documents collected or prepared for the examination that are subject to disclosure under the Freedom of Information Act and tax laws.”[18] This process must be completed within two years of the examination notice.[19]
A church that violates section 501(c)(3) may lose its tax-exempt status and “eligibility to receive tax-deductible contributions. In addition, it may become subject to an excise tax on its political expenditures. This excise tax may be imposed in addition to revocation, or it may be imposed instead of revocation.”[20]
As for the loss of tax-exempt status, the Alliance Defending Freedom (“ADF”), a “legal ministry that advocates for the right of people to freely live out their faith,”[21] believes that a church may only lose its tax exempt status for a very short time period, and even if a church’s tax exempt 501(c)(3) letter is revoked, a church may once again be automatically considered tax exempt under the tax code if it agrees to abide by section 501(c)(3).[22] The ADF goes on to note that, for most churches, “a temporary loss of tax exempt status would have very little impact. […] Only ‘income’ can be taxed by the IRS, but all donations to the church are ‘gifts,’ which are not considered income under the tax code. […] Only church ‘income’ from other non-gift-related sources, such as business-related income, is subject to federal income taxation. For most churches this would be a small amount — if any at all.”
As to the imposition of an excise tax, “churches are not subject to excise taxes on excessive lobbying.”[23] As for an excise tax on campaign activity, it “would be difficult for the IRS to calculate and would probably not be very great in amount if applied to a pastor’s sermon (e.g. the amount of electricity for the time of the activity, assuming no direct funds were expended).[24]
Finally, as for an impact on church members:
Only those church members who “itemize” their deductions (roughly 30 percent of church-goers nationwide) could be affected by the possible loss of tax exempt status. Those who take the “standard” deduction (roughly 70 percent of church-goers nationwide) would not be affected at all because they do not itemize their contributions to the church as deductions. There is an argument to be made that those who “itemize” may still consider their contributions tax deductible, as churches are automatically tax exempt under the Internal Revenue Code. For instance, if a church loses its tax-exempt status for the pastor speaking from the pulpit, there is an argument to be made that because the church is automatically exempt under section 508(c)(1) (A) of the Internal Revenue Code, the tax-exempt status is only lost for the day the sermon was preached, and any contributions made at other times would still be deductible. It is important to note that this argument has not been tested and taxpayers should seek professional advice before claiming any such deduction for itemization.
History of lack of enforcement
From 1954 to 2000, no church lost its tax-exempt status. In 2002, the IRS indicated that only two churches had lost their § 501(c)(3) status due to campaign intervention.[25] In 2004, the IRS began a new program called the Political Activities Compliance Initiative (“PACI”).[26] It was continued in 2006.[27] Over those two election cycles, no church lost its tax exempt status.[28] A handful received written advisory opinion or were assed an excise tax.[29] The program was not continued in 2008.[30]
These prohibitions on churches’ political speech have been challenged by numerous legal scholars as unconstitutional violations of the Free Speech Clause, the Free Exercise Clause, the Establishment Clause, the Equal Protection Clause, the Federal Religious Freedom Restoration Act, and the unconstitutional conditions doctrine.[31]
This creates an uncertain situation for churches. The Johnson Amendment is considered tax law and, as such, it cannot be preemptively challenged. Despite IRS campaigns such as the afore mentioned “Political Activities Compliance Initiative”, as well as Christian campaigns such as ADF’s “Pulpit Freedom Sunday”, no further action has been taken against churches. Until a court case can be brought, the prohibition against speaking out stands.
Why we should be concerned
Churches have historically been exempted from taxes. In fact, “[o]ne of the earliest examples of tax exemption may be found in Sumerian history, 2800 B.C.”[32] In the United States, our Supreme Court has noted that church tax exemption “covers our entire national existence and indeed predates it.”[33] When the Sixteenth Amendment beginning federal income tax was first adopted, that same year the Revenue Act of 1913 contained an exemption for churches.[34] Indeed, “[i]t was not until 1934 that the first restriction was placed on church tax exemption beyond the normal eligibility requirements to be recognized as tax-exempt.”[35]
This recent limitation church speech may be a small when properly understand, yet “[o]ne lesson of history is that small incursions on freedom are to be resisted lest they grow greater.[…] Churches have played an important — no, an essential — part in the democratic life of the United States.[…] In a secular age, Freedom of Speech is more talismanic than Freedom of Religion. But the latter is the first freedom in our Bill of Rights.”[36]
Conclusion
To summarize, churches have always been free from taxes and free to speak up on all issues, including political ones. It is only recently that churches have been required to abstain from certain political speech and activities in order to preserve their tax-free status. Churches that value their tax-exempt status or that are adverse to IRS attention should review the limited areas in which they may not speak. However, their congregations should be reassured that it is not in any way illegal for their church to be politically active, if it choses to be so. Additionally, all of us, as individual citizens, may always speak out on political issues, even if our motives are purely religious. The First Amendment Establishment Clause prevents the government from imposing religion on its citizens, not the other way around.
[1] Governmental employees or churches fulfilling governmental roles will need to be more cautious to separate their private and professional speech. This article will not address these limitations.
[2] Chaplinsky v. New Hampshire, 315 U.S. 568, 571-572 (1942) (“There are certain well-defined and narrowly limited classes of speech, the prevention and punishment of which have never been thought to raise any constitutional problem. These include the lewd and obscene, the profane, the libelous, and the insulting or “fighting” words those which by their very utterance inflict injury or tend to incite an immediate breach of the peace. It has been well observed that such utterances are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality.”)
[3] 26 USC §501(c)(3)(2014).
[15] Churches and Campaign Activity at 4.
[20] Tax Guide for Churches at 15.
[24] Speak up: Pulpit Freedom Sunday FAQs.
[25] Churches and Campaign Activity at 1-2 (“One of these is the Church at Pierce Creek in Binghamton, New York, which took out newspaper advertisements opposing a presidential candidate four days before the 1992 election. The identity of the second church is not clear.”).
[26] Erik Stanley, LBJ, The IRSI, and Churches: The Unconstitutionality of the Johnson Amendment in Light of Recent Supreme Court Precedent, 24 Regent U. L. Rev. 258-59 (2011-2012).
[29]Id. at 259 (“In 2004, PACI investigated 110 nonprofit organizations, including 47 churches. 133 Of the churches that were examined, thirty-seven were found to have violated the Johnson Amendment and were either given a written advisory opinion or assessed an excise tax; no church lost its tax- exempt status. The 2004 PACI was successful in the IRS’s view, and it recommended that the program be continued for the 2006 election cycle. In 2006, PACI handled 237 referrals but only selected 100 for investigation, including 44 churches. When the 2006 PACI report was issued in March 2007, sixty cases remained open; however, the IRS reported that four churches received written advisories and that ten churches had their files closed because political intervention was not substantiated. Once again, no church had its tax-exempt status revoked.”)
[32] John W. Whitehead, Tax Exemption and Churches: A Historical and Constitutional Analysis, 22 Cumb. L. Rev. 521, 524 (1992).
[33] Walz v. Tax Comm’n, 397 U.S. 664, 678 (1970).
[34] Erik Stanley, LBJ, The IRSI, and Churches, 24 Regent U. L. Rev. at 241-42.
[35] Erik Stanley, LBJ, The IRSI, and Churches, 24 Regent U. L. Rev. at 242-43.
[36] Canyon Ferry Rd. Baptist Church of E. Helena Inc. v. Unsworth, 556 F.3d 1021, 1036-37 (9th Cir. 2009) (Noonan, J., concurring).
Independent Thoughts 