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Feb 06 2014

Church Intervenes in FFRF Lawsuit

One of the lawsuits the FFRF has going is against the IRS for failing to enforce the law that forbids churches (and every other non-profit organization) from endorsing candidates in elections. The federal judge in that case has allowed a church to intervene and add itself as a defendant in that case.

Section 501(c)(3) of the Internal Revenue Code exempts entities that are organized and operated exclusively for religious, charitable, scientific, or other specified purposes from having to pay federal income taxes. A condition of this exemption is that the entity not participate or intervene in any political campaign on behalf of, or in opposition to, any candidate for public office. 26 U.S.C. § 501(c)(3). The plaintiff in this case, the Freedom from Religion Foundation, alleges that the Internal Revenue Service has a policy of not enforcing this condition to tax-exempt status against churches and religious organizations. At the same time, the Foundation alleges, the IRS enforces the condition against other tax-exempt organizations. The Foundation, which is itself a § 501(c)(3) organization, contends that the IRS’s policy of disparate treatment violates its rights under both the Establishment Clause and the equal-protection component of the Due Process Clause of the Fifth Amendment. For relief, the Foundation seeks a declaratory judgment stating that the IRS’s alleged policy of providing preferential treatment to churches and religious organizations is unlawful, as well as an injunction requiring the IRS to abandon that policy. The IRS denies that it has a policy of not enforcing § 501(c)(3)’s electioneering restrictions against churches and religious organizations.

Before me now is a motion to intervene filed by Father Patrick Malone and the Holy Cross Anglican Church. The church is a tax-exempt organization that does not obey the electioneering restrictions of § 501(c)(3). In particular, Father Malone, the vicar of the church, regularly makes statements during worship services and church gatherings in which he urges members of the congregation to vote for or against certain candidates for public office. Id. ¶¶ 11–12, 20. So far,however, the IRS has not taken any action in response to the church’s activities. Id. ¶ 29. But the church and Father Malone are concerned that if the Foundation obtains the relief it seeks in this lawsuit, then the IRS will be required to “punish” them for having engaged in political activity. Id. ¶¶ 25–26. Thus, the church and Father Malone claim that they have an interest in this suit and seek to intervene as defendants. They seek intervention as of right under Federal Rule of Civil Procedure 24(a)(2) or, in the alternative, permissive intervention under Rule 24(b)(1)(B). If allowed to intervene, the movants would argue that they have a legal right to participate in political campaigns without forfeiting their tax-exempt status. The movants contend that their position is supported by the Religious Freedom Restoration Act (“RFRA”) and the Free Speech, Free Exercise, and Establishment Clauses of the First Amendment.

Still, in litigating this lawsuit, the Foundation will advance legal arguments that if accepted would impair or impede the movants’ interests. The Foundation intends to argue that any policy of non-enforcement of § 501(c)(3)’s electioneering restrictions against churches and religious organizations violates the Establishment Clause. The movants contend that the IRS’s enforcing those restrictions against churches and religious organizations would violate the Establishment Clause. So if the Foundation prevails, a cloud would be cast over the movants’ argument that the Establishment Clause prevents the IRS from enforcing the electioneering restrictions against churches and religious organizations. The movants should be permitted to intervene in this case for the purpose of protecting their argument.

This is really interesting. It transforms the case a bit. Rather than being a challenge to the IRS’ non-enforcement of that law, it now becomes a case about whether the electioneering restrictions in the IRS code are constitutional at all. And frankly, I’ve got mixed feelings on that question. I don’t really see a good argument for why non-profits should not be allowed to endorse candidates, whether they are churches or not. And there’s so many loopholes in the law that it’s essentially worthless. The churches, and lots of other non-profits, do endorse candidates even if they don’t do it explicitly, and everyone knows it. They do it by putting out “voter guides” with a list of issues that they care about and a rating of the candidates on those issues. It’s an endorsement without an endorsement.

19 comments

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  1. 1
    John Horstman

    Yeah, I’d rather resolve the issue by simply holding churches to the exact same standards as any non-profit in order to maintain non-profit, tax-exempt status, while letting any/all non-profits endorse candidates.

  2. 2
    Pierce R. Butler

    I don’t really see a good argument for why non-profits should not be allowed to endorse candidates…

    Do you actually want to see non-profits (Red Cross, Girl Scouts, Keep America Beautiful, et al) taken over by/turned into political campaign surrogates???

  3. 3
    Drew

    Do I have this right?

    The church is arguing that imposing a criterion upon them barring political speech to maintain tax exempt status violates the Establishment cause. Is the church arguing that the establishment clause gives them a constitutional right to be tax exempt?

  4. 4
    Trebuchet

    I wondered briefly about the political orientation of the church in question, but then realized that “Anglican” is a dead giveaway. The official “Anglican” (Church of England affiliate) church in the USA is the Episcopal Church. Congregations calling themselves “Anglican” in this country are those that have split from the main body over issues such as ordination of gays and women. So it’s a right-wing outfit.

    See also http://en.wikipedia.org/wiki/Anglican_realignment.

  5. 5
    eric

    I think adding the church as defendent is probably good for the case, in that it will elevate the importance of the case and put greater pressure on the courts to solve the discrepancy one way or the other. However one feels about the restriction, the unequal application of the restriction has to stop.

    I don’t really see a good argument for why non-profits should not be allowed to endorse candidates, whether they are churches or not.

    What’s wrong with the original and obvious reason? We, as taxpayers, have decided we don’t want our tax money going to support partisan political machines. If a candidate wants to run for office, they don’t get to do it on my tax dime. When active, partisan political entities get a tax break, the effect is candidates running for office on my tax dime.

    So I support the restriction. I agree there are so many loopholes that this one restriction on its own is practically worthless, but I think the solution we should be driving for is less loopholes, not less restrictions.

  6. 6
    Gregory in Seattle

    On the one hand, it is now well established common law that corporate entities have the same first amendment rights as individuals. It is also well established common law that people (and therefore corporate entities) cannot be coerced into “voluntarily” not exercising their constitutional rights. Therefore, tax exempt status in return for not exercising a constitutional right would seem to be unconstitutional, and the restriction should be overturned entirely for all 501(c)(3) corporate entities.

    On the other hand, if such a ruling were given, every single PAC, election campaign and political party would immediately redefine themselves as a 501(c)(3) under the guise of “public education” or somesuch, allowing them to rake in vast amounts of contributions tax free while allowing fat cat donors to write those contributions off as tax deductible donations to a non profit. Plus, there is the scenario that Pierce gives where existing non-profits become shell organizations for political power.

    This will be a very dangerous quagmire, no matter what path the court takes.

  7. 7
    Crip Dyke, Right Reverend Feminist FuckToy of Death & Her Handmaiden

    The messier this becomes, and the more “subsidy” through tax deduction is discussed, the more likely we are to have a discussion on actual public funding of elections. That discussion must be had. I look forward to it.

  8. 8
    D. C. Sessions

    On the other hand, if such a ruling were given, every single PAC, election campaign and political party would immediately redefine themselves as a 501(c)(3) under the guise of “public education” or somesuch, allowing them to rake in vast amounts of contributions tax free while allowing fat cat donors to write those contributions off as tax deductible donations to a non profit.

    Hate to break the news to you …

  9. 9
    flex

    Well, the argument is that non-profits under the 501(c)(3) laws are designated as non-political organizations organized to provide charity or other services to compliment government funded activities. The idea behind this is that a soup kitchen, local theater group, or humane society is not run to make anyone rich, but does provide a service which benefits their communities.

    The 501(c)(3) law is explicitly for non-political groups because a non-taxed dollar to those groups is helping them develop their communities or meeting a need within their communities more than a taxed dollar would. It is equivalent to giving every 501(c)(3) group a 30% (or better) donation from the government to promote their activities. Better than a government subsidy because giving a non-political organization a tax break also simplifies the book-keeping both for the government and the non-political group.

    The reason non-political groups are allowed this government subsidy (through a tax-exempt status) and not political groups is two-fold. One, political groups usually are not providing a service to the community in the same sense. Two, if you subsidize one political group by giving them tax-free status, all political groups will have to get tax-free status, including those political groups you don’t like. So the compromise, many years ago, was to subsidize (through tax-relief) non-political organizations which are not in a business to generate a profit.

    There are a couple of loopholes which should be examined more closely.

    First, there are non-profits covered under the 501(c)(3) law which really are profit-generating organizations. A number of hospitals fall into this category, but they are not alone. How do you tell a $10B non-profit hospital chain that they shouldn’t pay their CEO a $2M/yr salary? The vast majority of 501(c)(3) organizations do not abuse the system this way, but there are a few outliers.

    Second, churches in the US are a) ostensibly organized to build community and spread charity, and b) too numerous for the IRS to evaluate individually. So churches have traditionally been grandfathered into the 501(c)(3) legislation even though there has been a tradition of political activism by churches since before the country was founded. And again, many churches refrain from getting too involved in political activism because they know it will likely cause a schism in their membership, and they don’t want that.

    Of course, there is another tax-exempt category for organizations which want to engage in politics. They can try to get 501(c)(4) status. A 501(c)(4) group is only taxed on the money spent directly on political activity and money donated to a 501(c)(4) is only deductible to the limit of non-political activity.

    If a church registered as an 501(c)(4) organization, and kept strict records on the amount of time/money spent on political activism, my understanding is that they would only be taxed on that amount. The money spent to build a new church, home(s) for the clergyman, church vehicles, etc., would be tax free, only the money spent on direct political activity would taxed, and what is the value of a minister spending 2 minutes telling his congregation to vote for a particular candidate? If you say his time is worth $100/hr, and the cost of using the building is $200/hour, and the tax rate is 30%, that two minutes means sending a $3 check to the IRS. And probably $99.90 (or more) of every $100 donated by the churchgoers would be deducible on their taxes.

    But from what I’ve heard about of the books of most churches (and my experience is entirely anecdotal) they don’t really have a good grasp of their balance sheets.

  10. 10
    D. C. Sessions

    The messier this becomes, and the more “subsidy” through tax deduction is discussed, the more likely we are to have a discussion on actual public funding of elections.

    We’ve had it. It’s unConstitutional.

    According to the SOTUS, public money spend funding elections (remember, money is speech) dilutes the political speech of private parties and thus denies them their First Amendment rights [1]. Arizona lost that one at the Supreme Court, and it looks as though we’re also going to lose the one coming up which challenges independent redistricting commissions. It appears that the Constitution requires that the Legislature, and not any independent commission, draw district lines.

    [1] I don’t see how that can mean anything but that there is a First Amendment right to buy elections if you have enough money, BTW.

  11. 11
    fmitchell

    In a post-Citizens-United world, allowing non-profits to freely endorse elections would, as others have noted, give PACs free rein to flood the airwaves with endorsements and grease as many palms as possible. (Honestly, I don’t care how much money PACs take in; it’s what they do with it that concerns me.)

    I think one can draw a fine line between providing accurate and verifiable information about candidates when asked and campaigning actively on their behalf. Whether the Roberts court can and will do so is another story.

  12. 12
    Gregory in Seattle

    @D. C. Sessions #8 – Some political organizations can operate as a 501(c)(4) corporation, which allows limited political participation: it is designed for civic leagues, entities that promote civic participation or social welfare issues within a community, and some local employee associations. Political participation is limited to preparing and distributing voter information guides, holding forums and candidate debates, and so on.

    Overtly political groups — candidate campaigns, ballot measure supporter and opponents, parties, caucuses and PACs — typically fall under the jurisdiction of local, state and federal election laws rather than the US Tax Code. Some organizations, however, can file to be recognized as 527 tax-exempt organizations, which is a category of partially tax-exempt political organizations that advocate specific policy positions and mobilize voters to support or oppose issues. However, even 527 corporations are prohibited from coordinating with election campaigns or candidates.

    A ruling to abolish the political prohibition for 501(c)(3) corporations will almost certainly the same prohibition for all tax-exempt groups. The aftermath will make Citizens United look like a carefully reasoned argument for corporate restraint.

  13. 13
    eric

    flex:

    If a church registered as an 501(c)(4) organization, and kept strict records on the amount of time/money spent on political activism, my understanding is that they would only be taxed on that amount. …But from what I’ve heard about of the books of most churches (and my experience is entirely anecdotal) they don’t really have a good grasp of their balance sheets.

    My experience with my family’s traditional church is that it’s easy to do but you actually have to want to do it. The basic solution is: you set up separate sub-corporations under the church, one for your nonpolitical charity work and one for your political campaiging, and you run them as separate and distinct (with their own books etc). You don’t make the money fungible, so if a donation comes in for the charity, you can’t use it for the political stuff or even the “umbrella corporation” stuff like building maintenance. The church my grandparents, parents, etc. attend set this structure up a long time ago to keep their charity and proselytization activities separate, and it works for them.

    But then again, they wanted to keep the charity work separate so as not to use charity donations for proselytiztation. I suspect the churches making the biggest complaints about wanting to endorse candidates are the opposite; they want the money fungible, so they can extract donations for one stated purpose but use them for another.

  14. 14
    grumpyoldfart

    As if the Government is going to do anything to upset the churches. No matter what the ruling, the IRS will never prosecute. Never.

  15. 15
    d.c.wilson

    I don’t really see a good argument for why non-profits should not be allowed to endorse candidates, whether they are churches or not.

    Can’t say I like the idea of organizations like the Red Cross or the Salvation Army using people receiving aid from them as a captive audience for a political speech. Or for those that receive money from the government, making deals to endorse a politician in exchange for more funding.

  16. 16
    kevinalexander

    Churchill said that democracy is the worst form of government, except for all the others that have been tried.
    The biggest failing of democracy is elections. If the results aren’t dictated from Moscow they’re paid for ahead of time by Wall Street.
    There doesn’t seem to be any way to fix the problem so I say get rid of elections. Lotto Democracy. There’s no other way to get a truly representative government.

  17. 17
    eric

    There doesn’t seem to be any way to fix the problem so I say get rid of elections. Lotto Democracy. There’s no other way to get a truly representative government.

    That doesn’t make a representative government, what that does is give the civil service huge power. Because none of their bosses now have a clue, and can be manipulated quite easily by the careerists. What you’re suggesting is analogous to: “this king is bad…let’s replace him with his 10-year-old son.” You don’t actually think the son is going to be the one ruling the country after the replacement happens, do you?

    Now, having just complained about lotto democracy, I will point out that it’s close to how the court system works. (But there again, courts and prosecutors have a lot of control over how a case turns out.)

  18. 18
    eric

    Can’t say I like the idea of organizations like the Red Cross or the Salvation Army using people receiving aid from them as a captive audience for a political speech. Or for those that receive money from the government, making deals to endorse a politician in exchange for more funding.

    I prefer closing the loopholes too (as opposed to letting charities act politically). However, I guess if we get stuck with “charities can do it” then the next best option is to insist that charities report where their money goes. Good charities already tell you what percent goes to the actual recipients vs. to overhead. So you make a third category and make them report what percent of their gross take goes to recipients, overhead, and poltical action.

  19. 19
    democommie

    “A ruling to abolish the political prohibition for 501(c)(3) corporations will almost certainly the same prohibition for all tax-exempt groups. The aftermath will make Citizens United look like a carefully reasoned argument for corporate restraint.”

    Except labor unions and teh GAY, and teh NAACP and them other commie front groups.

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