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 All Saints Church: Tax Procedure in a Case about the Mixing of Religion and Politics

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September 26, 2006

I was an appellate attorney in the Tax Division at the United States Department of Justice. The Tax Division would represent the IRS in any enforcement proceeding regarding the All Saints Church summons. I left the Department of Justice in 2001 and was never involved in any proceeding regarding All Saints Church.

All Saints Church has recently indicated that it will refuse to respond to a summons by the IRS seeking documents related to possible violations of All Saints Church's tax-exempt status. The IRS is investigating whether All Saints improperly intervened in the Presidential campaign by giving a sermon critical of President Bush. Churches, like other 501(c)(3) tax-exempt organizations, are required to refrain from participating or intervening in an election on behalf of a candidate.

All Saints claims that the IRS's actions are improper and amount to a violation of All Saints Church's First Amendment rights. What is going on here? Why is a church refusing to comply with an IRS summons?

As part of a compliance initiative designed to reign in improper attempts by tax-exempt 501(c)(3) organizations to intervene in candidate campaigns, the IRS opened an investigation into activities by All Saints Church. The IRS expressed concern regarding a sermon given at All Saints Church that criticized President Bush on the eve of the 2004 election. As part of the investigation, the IRS did what it usually does: It requested documents from the taxpayer. According to press reports, All Saints Church refused to comply. The IRS then issued a summons asking for the information. Once again, this is common procedure when a taxpayer refuses to comply with the request. All Saints has now decided not to comply with the summons. This also often occurs. While I personally think this is a strategic mistake here, it is a method by which the taxpayer can contest the IRS's action.

The IRS will now likely file a motion in court to compel All Saints Church to comply, and All Saints Church will have an opportunity to respond. Neither the IRS's actions, nor All Saints Church's refusal to comply is very remarkable.

The problem for All Saints, however, is that enforcement of the summons is not a decision on the merits. Instead the summons is enforced if the IRS's actions comply with a four-part test set out in United States v. Powell, 379 U.S. 48 (1964). Under the Powell test, the IRS must show that 1) it has a legitimate purpose in requesting the information, 2) the inquiry is relevant to that purpose, 3) the information is not in the Commissioner's possession, and 4) the proper administrative steps have been taken with regard to the issuance of the summons.

In my view, the IRS's summons clearly meets the 4-part test. The IRS has a legitimate interest in ensuring that 501(c)(3) organizations comply with the statutory requirements. Its request is relevant for that purpose. The Commissioner does not have the relevant information, and the Commissioner appears to have complied with the statutory requirements. (I concede that All Saints Church could try to raise its First Amendment claim at the summons stage. As discussed later, I think the First Amendment argument is the weaker of All Saints Church's two arguments).

The summons from the IRS also appears to be perfectly reasonable (the summons is available on All Saints Church's web site). It requests information that would be both hurtful and helpful to the church's case. It appears the IRS is doing what it is supposed to be doing – gathering information to determine whether further action is warranted.

All Saints argues that the summons is overly broad and burdensome, but these claims seem a little far-fetched. For example, All Saints claims that since it prays for President Bush every Sunday, the request for all communication that references candidates is overly broad and burdensome. The summons, however, specifically excludes general prayers for national leaders. We should not be demonizing the process or the IRS here. The IRS is enforcing the law. The IRS should be provided with the necessary information to proceed so that it can make an informed decision whether it believes All Saints Church violated its (c)(3) status. Who knows, the information provided by All Saints Church might encourage the IRS to close the case.

There is a second question, and the more important one, which is whether All Saints Church has actually violated the Code. All Saints first argues that the IRS's actions are a violation of its First Amendment rights. As I have argued elsewhere, All Saints Church is just wrong in this regard. (See Donald B. Tobin, Political Campaigning by Churches and Charities: Hazardous for 501(c)(3)s; Dangerous for Democracy, forthcoming Georgetown Law Journal). All Saints Church receives significant benefits from its tax-exempt status, and it does not have a right to that status. It can choose to intervene in an election all it wants, but it cannot do so and maintain its 501(c)(3) status.

All Saints Church's alternative argument, and in my view the better one, is that it did nothing wrong, and that the sermon did not violate the political campaign ban. That is presumably what the IRS is trying to determine by issuance of the summons. Section 501(c)(3) provides that a 501(c)(3) organization may not participate in or intervene in a campaign on behalf of a candidate for public office. The question for the IRS is whether the sermon given by All Saints violated that provision. This is where I think All Saints should wage its fight. (I concede that my strategy might be different if I thought the summons would produce very damaging information, but there appears to be no indication that All Saint's is worried about this at all.) It is an open question whether the sermon crossed the line, and All Saints Church's best option is to insist on its innocence and file suit if the IRS actually revokes its status. Whether All Saints crossed the line or not, however, will have to wait for another weekly comment.