Churches and other religious organizations jeopardize their tax- exempt status when they or their leaders cross the line into political activity prohibited by federal law and Internal Revenue Service regulations, tax attorneys say.
The IRS is investigating the United Church of Christ over a speech presidential candidate Barack Obama gave last June at the denomination's national meeting. Obama is a UCC member.
The issue resurfaced recently amid controversy about certain remarks made by the Rev. Jeremiah Wright, the retired pastor of Trinity United Church of Christ in Chicago, Obama's home church.
In a Feb. 25 letter to the denomination, the IRS said "a reasonable belief exists" that the UCC has engaged in political activities that could jeopardize its tax-exempt status as a church. The letter also claimed that Obama volunteers staffed tables outside of the meeting venue to promote the senator's campaign.
UCC leaders have denied wrongdoing, noting that Obama was addressing his own church family to discuss his personal faith. A UCC official announced before the speech that it was not a campaign event, and that electioneering would not be tolerated inside the venue.
A church that took out newspaper ads criticizing President Bill Clinton in 1992 lost its federal tax exemption.
However, the Alliance Defense Fund, a national conservative legal organization, is pushing for churches to defy the IRS and speak out on election-related issues in September.
Tulsa tax attorney Phil Haney, who represents several churches and religious organizations, said that initiative may provide an interesting test case.
"I've seen some rumblings of that," he said. "I suppose the tension here is between tax legislation and constitutional issues."
He said another consideration may center on regulation of the behavior of groups that have been granted tax-exempt status, while some believe that behavior is permitted by the U.S. Constitution.
Haney said churches are virtually the only charities that do not have to go to the IRS for a tax-exempt designation.
He said that "Section 508" churches can function as such without an IRS determination letter, which gives the federal agency no designation to revoke. He also said donations to such churches are generally deductible if the church provides receipts, behaves like a church, and meets certain other IRS requirements.
"There are some interesting issues there," Haney said.
Oklahoma IRS spokesman David Stell said churches may not participate in a political campaign for or against a candidate, including publishing or distributing statements.
"A candidate may be invited to speak to members of the church or religious organization, as long as an equal opportunity is provided to other candidates seeking the same office, the church or religious organization explicitly indicates it is not supporting or opposing any candidate, and no fundraising occurs," Stell said.
Religious groups may also distribute voter guides, he said, as long as they are not biased in favor of or against a candidate.
Churches and related groups may also advocate for or against issues and, to a limited extent, ballot questions or legislation, he said.
"Churches and religious organizations may conduct educational meetings, prepare and distribute educational materials, or otherwise consider public policy issues in an education manner," Stell said. …