The Freedom From Religion Foundation has sued the IRS for not auditing the tax-exempt status of churches that are openly supporting candidates in elections in violation of IRS 501(c)(3) rules that govern such bodies. You can read the lawsuit here.
This is a topic that I addressed a month ago in the context of “Pulpit Freedom Sunday”, in which about 1,500 pastors openly challenged the IRS by explicitly endorsing political candidates in their churches, with some sending the IRS tapes of them doing so.
I am not hopeful that this suit will succeed. There is a good chance that it will be dismissed on the grounds that the FFRF has no standing to sue since it is hard to show how they were harmed in any tangible way by the churches’ actions. The second is that even if they win the standing argument, the courts may rule that the First Amendment’s Establishment Clause protections for religion trump IRS regulations. In fact, the churches seem to think they have a good case which is why they dared the IRS to come after them.
I think the problem is the widespread abuse of the entire not-for-profit exemptions. It turns out to be extraordinarily easy to declare oneself to be a not-for-profit and avoid paying any taxes. As this article in Bloomberg News shows, even multibillion dollar enterprises like the American Bureau of Shipping that earns over $30 billion in revenues and makes $600 million in profits and that to all intents and purposes operates just like any other business and pays their top executives millions of dollars and give them lavish perks avoid paying a cent in taxes because they are supposedly non-profit. Did you know that the National Football League and the National Hockey League also operate as non-profits, despite earning billions of dollars and paying their top executives millions of dollars?
The best solution may be to eliminate entirely the tax exemptions for non-profits. It will cause some hardships in the long run to some worthy charitable organizations but after some time, a new equilibrium will be reached.