1. Where do the restrictions on religious organizations’ participation in the political process come from?
The Internal Revenue Code prohibits intervention in political campaigns by organizations that are exempt from federal income tax under section 501(c)(3),1 including religious organizations. The restrictions are one of the conditions of maintaining tax-exempt status. Although other restrictions – including state and local laws regulating various political activities as well as federal laws, such as the Federal Election Campaign Act – also may affect participation by religious organizations in the political process, the Internal Revenue Code prohibition is the primary focus of this publication.
2. Has this prohibition on political campaign intervention always been part of the Internal Revenue Code?
No. The prohibition on political campaign intervention did not become part of the Internal Revenue Code until 1954, when an amendment to section 501(c)(3) was introduced by then-Senator Lyndon B. Johnson during a Senate floor debate on the 1954 Internal Revenue Code. The prohibition was added to the Code without hearings, testimony or comment by any tax-exempt organizations. Although there is no legislative history to indicate definitively why Johnson sought enactment of the political campaign intervention prohibition, neither is there any evidence that the prohibition was targeted at political campaign intervention by religious organizations.2
3. Are religious organizations singled out by the political campaign intervention prohibition in the Internal Revenue Code?
No. All organizations that are recognized as exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code are subject to the prohibition against political campaign intervention. Thus religious organizations are not treated more harshly than schools, hospitals, social services agencies, colleges and universities, scientific organizations, museums or other charitable organizations exempt under section 501(c)(3) of the Code. None of these organizations may intervene in political campaigns.
4. Doesn’t the First Amendment to the U.S. Constitution protect the right of religious organizations to engage in political activity?
The First Amendment provides that “Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof …” Although the Internal Revenue Code prohibition against political campaign intervention may burden the exercise of religion to the extent that a religious organization must choose between the receipt of the benefits of tax exemption and intervention in a political campaign, not every burden on religious exercise is constitutionally prohibited. To date, courts have been unsympathetic to First Amendment challenges to the political campaign intervention prohibition. Most recently, the Court of Appeals for the D.C. Circuit upheld the constitutionality of the political campaign intervention prohibition as applied to a church, concluding that the prohibition did not violate either the Establishment Clause or the Free Exercise Clause of the First Amendment.3
BRANCH MINISTRIES v. ROSSOTTI CASE
Four days before the 1992 presidential election, the Church at Pierce Creek (“Church”) in Binghamton, N.Y., placed a full-page advertisement in USA Today and The Washington Times. The ad began with the heading: “Christians Beware: Do not put the economy ahead of the Ten Commandments.” The ad cited biblical passages, and stated that Gov. Bill Clinton supported abortion on demand, homosexuality and the distribution of condoms to teenagers in public schools. The ad concluded with the question: “How then can we vote for Bill Clinton?” At the bottom of the ad, in fine print, the following notice appeared: “This advertisement was co-sponsored by The Church at Pierce Creek, Daniel J. Little, Senior Pastor, and by churches and concerned Christians nationwide. Tax-deductible donations for this advertisement gladly accepted. Make donations to: The Church at Pierce Creek.”
Following the special church audit procedures, the IRS revoked the Church’s section 501(c)(3) tax exemption on the grounds that it violated the political campaign intervention prohibition. The Church challenged the IRS in court, claiming that revocation of its tax-exempt status violated section 501(c)(3), both the Free Speech and Free Exercise clauses of the First Amendment, and the Religious Freedom Restoration Act. The Church also claimed that it had been singled out for prosecution on account of its political views. The district court dismissed the case, concluding that the IRS had authority under the Internal Revenue Code to revoke the Church’s tax-exempt status, and that revocation of the Church’s tax-exempt status did not violate the Religious Freedom Restoration Act or the Free Speech or Free Exercise clauses of the First Amendment. The court also concluded that in revoking the Church’s tax-exempt status the IRS had not engaged in selective prosecution or viewpoint discrimination.
The Church appealed the decision of the district court. The U.S. Court of Appeals for the D.C. Circuit affirmed the district court’s decision on every count. Among other things, the court of appeals noted that the Church had an alternative means of engaging in political activity because the Church could establish a related, separately incorporated organization under section 501(c)(4)* of the Code, and that organization could express opinions about candidates and even establish a PAC through which political contributions might be made. Of course, no tax-deductible Church funds could be used to support the political activities of the section 501(c)(4) organization or its PAC.
* Section 501(c)(4) organizations are exempt from taxation but contributions to them are not deductible.
1 To qualify for 501(c)(3) tax-exempt status under the Internal Revenue Code, an organization must meet the following requirements:
• The organization must be organized and operated exclusively for religious, educational, scientific or other charitable purposes;
• Net earnings may not inure to the benefit of any private individual or shareholder;
• No substantial part of the organization’s activities may involve attempts to influence legislation;
• The organization may not intervene in political campaigns; and
• The organization’s purposes or activities may not be illegal or violate fundamental public policy.
IRS Publication 1828, Tax Guide for Churches and Religious Organizations 3 (Rev. September 2006) [hereinafter “Pub. 1828”]. The IRS has noted that “[c]hurches that meet [these requirements] are automatically considered exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS.” Id.On the other hand, “[u]nlike churches, religious organizations that wish to be tax-exempt generally must apply to the IRS for tax-exempt status unless their gross receipts do not normally exceed $5,000 annually.” Id. at 3.
2 Hypotheses about the origins of the political activity prohibition abound. See, e.g., Judith Kindell & John Reilly, Election Year Issues, FY 2002 IRS Exempt Organizations Technical Instruction Program 448-451 (August 2001) [hereinafter “Election Year Issues”]; Deirdre Halloran & Kevin Kearney, Federal Tax Code Restrictions on Church Political Activity, 38 Cath. Law. 105, 106-108 (1998), which suggests that the prohibition represented LBJ’s response to support provided by certain tax-exempt organizations to Dudley Dougherty, LBJ’s challenger in the 1954 primary election. The most comprehensive article on the history of the 1954 amendment is probably Patrick L. O’Daniel’s More Honored in the Breach: A Historical Perspective of the Permeable IRS Prohibition on Campaigning by Churches, 42 B.C.L.Rev. 733 (2001).
3Branch Ministries v. Rossotti [hereinafter “Branch Ministries“], 211 F.3d 137 (D.C. Cir. 2000).