Election Law @ Moritz


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Edward B. Foley
Free & Fair is a collection of writings by Edward B. Foley, one of the nation's preeminent experts on election law.

Weekly Comment

The IRS and Secret Campaign Regulation

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November 22, 2005

During the 2004 Presidential campaign, 501(c)(3) organizations, including religious institutions, were extremely active in attempting to influence the election. The IRS recently sent letters to All Saints Church in Pasadena, CA, and the NAACP, indicating that the IRS was examining whether the organizations violated their (c)(3) status by giving speeches critical of President Bush.

The organizations involved and others have cried foul. They argue that the IRS should not be subjectively analyzing the content of these speeches, and that the IRS is engaged in a political attack against opponents of President Bush. Critics note that the IRS appears not to have initiated an inquiry into a letter that Reverend Michael J. Sheridan, the Bishop of the Catholic Dioceses of Colorado Springs, sent to parishioners that favored President Bush. 1

Because the IRS does not make taxpayer inquiries public, and, absent litigation, does not publicize or explain the reasons for its decisions in a particular case, it is impossible to tell whether these criticisms are in fact accurate. But the fact that these decisions are not public increases the chances that the rules will not be applied in a fair, non-biased fashion. In my view, the decision whether a 501(c)(3) intervened in a campaign on behalf of a candidate for public office should be moved outside the IRS and into a forum where taxpayers can both file complaints against (c)(3)s and where the decisions regarding who is investigated and why is transparent.

For now, however, the IRS is responsible for the initial decision whether to investigate an organization and whether to revoke its (c)(3) status. It is not easy to draw the line between intervening in a campaign (which is prohibited) and speaking out on issues of public concern (which is not). To date, the best information available on how to draw the line between intervention in a political campaign and general policy discourse comes from a Technical Advice Memorandum 8936002 (TAM) issued by the IRS. 2  The TAM involved ads by an organization promoting world peace that ran during the Reagan/Mondale presidential campaign. According to the TAM,

The ads stressed the liberal posture on such war and peace issues as nuclear war, the defense budget, and 'star wars', urging listeners to get involved with rallying calls such as the following:

  1. 'Think about it when you vote this November....America can change course....the choice is ours.'
  2. 'Let's choose leaders who will lead us away from a nuclear nightmare not into one.'
  3. 'When I hear talk of winnable nuclear war, of doubling the defense budget, of spending billions to turn the heavens into a battleground, I don't like it.
  4. 'This November....vote....Our future depends on it.'
  5. 'Choice is ours this fall....Something has to change....Let's lead America away from a nuclear war not into one.

The ads in question discussed issues that were clearly contrary to the policies of the Reagan Administration. The ads urged the public to "vote," and suggested "something has to change." It would be hard to view the ads as anything but an attempt to encourage people to vote against President Reagan. The ads, however, did not mention either Mondale or Reagan by name.

Despite what appears to be a clear attempt to influence an election, the TAM notes that the organization "probably did not intervene in a political campaign on behalf of or in opposition to candidate for public office." This TAM left many in the non-profit community secure that organizations could discuss political issues in a very political way without jeopardizing their 501(c)(3) status.

If this type of communication isn't intervention in a political campaign, what is?

In Branch Ministries v. Rossotti, 211 F.3d 137 (D.C. Cir. 2000), the IRS successfully revoked a church's tax-exempt status because the church ran newspaper ads urging Christians to vote against then candidate Governor Clinton. Branch Ministries, however, was an easy case. It was explicit political intervention.

Therefore, political intervention is presumably more intervention than the TAM and as much intervention as Branch Ministries.

The All Saints Church sermon, the NAACP speech, and the pastoral letter by Bishop Sheridan all were partisan and clearly designed to encourage members to vote for certain candidates. In the All Saints Church and NAACP examples, the speakers were implicitly encouraging people to vote for Kerry. Bishop Sheridan's letter was a clear call to vote for Bush. (See All Saints Church Sermon, NAACP Speech, Bishop's Letter)

If all three speeches clearly urged listeners to vote a certain way, why are all three not being investigated? Or if all three are being investigated, then shouldn't the public and other 501(C)(3)s be aware of that fact so they could ensure that they acted appropriately. For example, one response to the criticism of selective enforcement would be that Bishop Sheridan's communication was in fact being investigated.

But assuming for the moment that All Saints and the NAACP are under investigation and the Colorado Springs 's Dioceses is not, is there any justification for this distinction? In my view, the Bishop's letter is further toward Branch Ministries than the All Saint's sermon and similar to Bond's speech at the NAACP. Reverend Sheridan basically told followers that they had a moral duty as Catholics to vote for Bush, and Bond noted that members were ready to work for regime change here at home.

One answer could be that the IRS has a political vendetta, and that the Bush Administration is doing this to attack its enemies. My initial reaction was that these allegations are ridiculous and that the career employees at the IRS would not engage in such political manipulation. I concede that after the Plan B affair at the FDA and the Valerie Plame incident, it is harder to trust that these decisions are being made in a non-partisan way. Nonetheless, I do not believe that there is such a vendetta. My experience is that the IRS employees in the exempt-organization branch are top-notch and non-political. I am further convinced that the IRS set up procedures that were designed to ensure non-partisan consideration of these issues. The fact that some perceive this to be a vendetta is problematic for the IRS, and part of the problem arises from the fact that the IRS must keep information regarding taxpayer inquiries private. We therefore have no idea what criteria the IRS is using to make its decision, and have no idea if that criteria is being applied in a fair and balanced way.

If there is a disparity between these cases and there has been no political vendetta, 3  than why would the IRS investigate All Saints and the NAACP and not the Diocese of Colorado Springs?

I think the answer may be that the IRS is using a bizarre failed test to evaluate intervention. It may be borrowing from failed campaign finance doctrine. Based on communication made public by All Saints, it appears the IRS has determined that the use of a candidate's name, plus criticism of that candidate, is enough to warrant action. This would be similar to the failed "magic words" test used by the Court in the campaign finance context after Buckley v. Valeo, whereby only communication that used certain words would be considered express advocacy. The "magic words" test was a bright-line rule that could easily be avoided by simply choosing your words carefully. In this case, the IRS might be applying a test that finds political intervention only if a candidate's name is used. In other words, the "magic words" in this test would be the candidate's name plus criticisms of the candidate.

In the TAM discussed above, just as in the Bishop's letter, the ads never mentioned either Mondale or Reagan. In fact, if I were a lawyer representing the Diocese of Colorado Springs, I would argue the Bishop's letter is no different than the situation in the TAM (although I think the Bishop's letter is more forceful than the situation in the TAM). All Saints and the NAACP cannot make such an argument if the use of the candidates name is a dividing factor. The All Saints Church sermon referred to both Bush and Kerry by name.

If this is the dividing line, than the IRS has created a crazy distinction. Section 501(c)(3)s will simply engage in political communication, but will just use different terminology.

In the end, these ruminations are just that. We have no idea how the IRS is making these decisions. And that is the big problem. These decisions need to be moved out of the IRS and into a forum where taxpayers can both file complaints against 501(c)(3)s and where the decisions regarding who is investigated and why are transparent.

The decision whether an organization should lose its tax-exempt status for intervening in a political campaign is an important one. Ultimately, tax-exempt organizations can appeal the IRS's action to Federal district court and the IRS's reasoning on that particular case will then be public. But this process fails to ensure that tax-exempt organizations are treated equally. Court action allows us to see why the IRS took action in a particular case, but it does not tell us whether the IRS is applying that logic to all non-profits. In addition, most of these conflicts never go to court, so non-profits are thus deprived of helpful guidance regarding whether their activities constitute political intervention. An open and non-partisan process should be put in place to deal with this issue. Campaign regulation is too controversial a topic to be done in secret.

The (c)(3)s in these cases, however, are not without blame. The IRS has issued guidance and warnings indicating that (c)(3)s should not intervene in political campaigns. When 501(c)(3)s take actions that are clearly designed to influence elections -- as did the Catholic Bishop's, the NAACP, and the All Saints' pastor, they should not be surprised when the IRS comes calling. In my view, we need a better system. But (c)(3)s also need to realize that if they want the benefits of (c)(3) status, they should not try to influence people to vote for particular candidates.


1. The letter did not mention President Bush by name, but as discussed later, clearly indicated that Catholics should vote for the pro-life candidate for President.

2. TAM's are not binding on the IRS and are not precedent. They are advice from the National Office to IRS employees. They do, however, provide practioners with guidance regarding the IRS position in certain cases.

3. Again, I concede that the IRS may be auditing the Catholic Church and we may not be aware of that fact.