The Internal Revenue Service’s investigations into alleged tax violations by two Minnesota-based churches, Living Word Christian Center (LWCC) and Warroad Community Church, have been thwarted by internal procedural problems.
These cases highlight the special tax-exempt status churches receive by law, but they also underscore problems at the IRS. In effect, the IRS has been unsuccessful in investigating allegations of tax violations by churches because years of conflicting congressional action have made it impossible for the IRS to follow its own rules.
And while the IRS has undertaken the potentially months-long process to reform its broken system, the religious right is seeking to exploit it by encouraging churches to flout the law and endorse candidates from the pulpit next month.
During the 2008 election, Warroad Community Church pastor Gus Booth, a Republican activist, apparently broke tax laws that prohibit electioneering by tax-exempt churches when he endorsed John McCain for president and trashed Barack Obama and Hillary Clinton from the pulpit. Last month the IRS suspended its investigation into the church, citing “a pending issue regarding the procedure used to initiate the case.”
In a similar case, the Minnesota Independent (then the Minnesota Monitor) identified questionable accounting practices by the Brooklyn Park–based Living Word Christian Center in 2007, which eventually led to an IRS investigation. But in January of this year, a U.S. District Court judge in Minneapolis also rejected an IRS summons to Living Word Christian Center because of procedural errors.
In both cases conflicting congressional actions prevented the agency from following its own rules.
In 1984, Congress passed the Church Audit Procedures Act to make it harder for the IRS to investigate church abuse of tax law. Among its provisions: An IRS official making a case against a church must hold a rank “no lower than that of a principal Internal Revenue officer for an internal revenue region.”
But thanks to a 1998 act of Congress, the Internal Revenue Service Restructuring and Reform Act, internal revenue regions (and their principal officers) were abolished, and the IRS was divided into sections servicing different categories of taxpayers, including individuals, businesses, and tax-exempt organizations like churches.
This change directly benefited Living Word Christian Center: It won its case in January because the IRS official charged with investigating the allegations wasn’t legally authorized to do so. Similarly, with no one on staff to legally investigate Warroad Community Church, the IRS suspended its investigation.
Reforms proposed by the IRS, entered into the Federal Register in early August, would clear up the contradiction, making the agency’s Director of Exempt Organizations the primary authority for investigating possible violations of tax law by churches. But the process of adopting those changes will be lengthy, involving a public comment period and hearings.
In the meantime, a group of churches plans to violate the law while there’s no one at the IRS to investigate.
On Sunday Sept. 27, the Alliance Defense Fund, a Focus on the Family–affiliated legal group, is encouraging pastors to endorse candidates from the pulpit. This year will be the second year of ADF’s “Pulpit Initiative.” Last year 33 churches participated, including Warroad Community Church.
The ADF’s Eric Stanley said that the campaign “is really part of a long, sustained campaign” to get a court challenge to IRS laws governing electioneering.
“We feel very confident that when we do, it will not take long for a federal judge to strike down this unconstitutional restriction on churches’ rights.”
Rob Boston, communications director of Americans United for the Separation of Church and State, writes that the new IRS rules should give churches participating in Pulpit Freedom Sunday a reason to pause.
“The fact that the IRS has issued these new rules is a sign that it wants to have a mechanism in place that will enable it to investigate churches that openly flout the law by endorsing or opposing candidates,” he wrote on the group’s blog. “Far from rolling over, it looks to me like the IRS is girding for battle. Churches that choose to follow the ADF down this misguided path can’t say they weren’t warned.”














12 Comments »
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[...] IRS Loopholes Gets Minnesota Churches Off Tax-Violation Hook Categories: Church Tax, Minnesota Tax Posted By: taxnick Last Edit: 24 Aug 2009 @ 01 28 PM [...]
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[...] Minnesota Independent: [...]
Comment posted August 24, 2009 @ 10:37 pm
Too good not to share.
http://www.dickipedia.org/dick.php?title=Michele_Bachmann
Comment posted August 25, 2009 @ 5:56 am
It’s time to right a wrong that has gone on too long and tax the church!
Comment posted August 25, 2009 @ 8:58 am
The only thing not taxed on churches is their “offerings” and their sanctuary. Everything else gets taxed, just like everybody else.
Isn’t it amazing, that there is no investigation into those churches where the churches not only endorsed, but allowed Hillary Clinton to adopt her new southern drawl and deliver campaign speaches from their pulpits. The Loonattic Left wants their cake and wants to eat it too.
Comment posted August 25, 2009 @ 9:50 am
What amazing legislative ingenuity. Only Position X can bring an investigation, so let’s also make sure the Position X is eliminated.
Comment posted August 25, 2009 @ 10:26 am
“he endorsed John McCain for president and trashed Barack Obama and Hillary Clinton from the pulpit”
So I guess Rev. Wright’s tax-exempt status is still safe….
http://www.youtube.com/watch?v=hAYe7MT5BxM
Comment posted August 25, 2009 @ 10:30 am
What is the most amazing thing is that a 501(c)(3) organization such as the Minnesota Independent, which routinely trashes candidates (Republican candidates only), which has former employees admitting that it is just a mouthpiece for the Democrats, used to trash any and all Republican candidates, can actually bring itself to criticize other 501(c)(3) organizations.
Andy, have you reported yourself to CREW lately?
Comment posted August 25, 2009 @ 12:56 pm
Whew, I’m sure glad the Clintons never stumped in any African-American churches in the 90’s or during the 2008 primaries!
Comment posted August 25, 2009 @ 4:44 pm
“…the religious right is seeking to exploit it by encouraging churches to flout the law and endorse candidates from the pulpit next month.”
Oh really?
Or could it be that since Democrats blocked The Houses of Worship Act in Congress in recent years, pastors have taken it upon themselves to seek a judicial overturning of the 1954 LBJ Amendment which — without debate — removed free speech from church ministers? Seems the First Amendment does not actually exclude pastors from free speech or religious expression
Comment posted August 26, 2009 @ 10:13 pm
The loophole needs to be closed, there are too many brain dead morons who let their church tell them who to vote for and blindly follow. Minnesota Family Council voting guides, anyone?
Comment posted September 5, 2009 @ 10:40 pm
This would be hilariously funny if the underlying Constitutional issue raised by the LBJ Amendment, IRC 501(c)(3), were not so serious. Of course, even if it were Constitutional and not subject to political abuse, as it has been, rather than an IRS Rule or Regulation, which Congress “approves” by silently, anonymously, and cowardly allowing to have the force of law by not voting to change, any procedure that can be used by the IRS, or any other government official or agency, to attack a church, or any other person or entity, for publishing facts, or expressing opinions based thereupon, and especially any based upon religious beliefs, a right guaranteed by the same First Amendment that guarantees free exercise of religion and freedom of speech and press, Congress should stand up and pass or defeat a law, standing alone and not buried in some other unrelated bill, on a record vote, assigning decisions on any such investigations it thinks, and says straight out that it thinks, are Constitutional and proper, not to some anonymous beaurocrat but to someone directly appointed by the President and confirmed by Congress, and require any such subpoenas to be issued only by a real federal judge, which can then be challenged by a motion to quash or for a protective order.
IRC 501(c)(3) was slipped into the Code by Lyndon B. Johnson without debate as a vehicle to allow him to use the IRS to attack his political enemy H. L. Hunt. Plans to abuse it by both parties, and by liberals and conservatives, have come to light, and some abuses have occurred, just as many across the political spectrum have reasonably feared. Look at the people and groups across the political spectrum who have expressed genuine and reasonable concerns about chilling effects on core Constitutionally protected speech.
The tax-exempt status of churches, except for unrelated business income, is not a gift by Congress or the IRS but a necessary correlative of the God-given natural rights explicitly referred to in the Declaration of Independence and the Federalist Papers, the Framers’ explanation of the Constitution and Bill of Rights, which the Framers originally thought unnecessary because they had not given the government any power, including the power to tax, which the Supreme Court later noted was the power to destroy, over churches or over church members as such. Any attempt to infringe upon or limit those rights, including the right of pastors, like anyone else, to speak out on moral and political issues, granted by God and guaranteed by the Constitution and Bill of Rights, is tyrannical usurpation, illegal, and void.
Much of our law is traceable directly to the Bible, and its adoption as secular law to influence exercised through hte churches. The political campaign to abolish slavery originated in the churches. Child labor and safety laws were promoted in churches. The long-overdue Civil Rights Act of 1964, insofar as it outlawed the second-class status of black people, and in many other respects, was long overdue, and much of the work of getting it passed was quite rightly done from the pulpits of churches and the sermons of pastors. Just as contributions to the ACLU and Americans Unjited for Separation of Churhc and State, or Al Gore’s environmental groups are tax deductible, those to churches and groups more friendly to them, regardless of political orientation, or whether you, I, or any politician agree or disagree with them, should be if we want to even pretend equal protection of the law and upholding the First Amendment’s speech and religion clauses.
Since this problem will recur and continue, and yet evade review as long as the reorgnaizaiton of the IRS leaves this so-called “loophole”—you know what a loophole is, don’t you: it’s a rule of law that favors the other side that your side didn’t know or forgot about!–and theraafter until the IRS picks on some small church that can’t afford to fight them to intimidate others–and eventually enough people join and help them, the solution would appear to be for the courts to recognize this “evading review and capable of repetition” and “chilling effect upon free speech and free exerize of religion” problem and hear a Declaratory Judgment and Permanent Injunction suit challenging the law without the plaintiff having to risk devastating legal consequences by violating it in order to get into court.
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