U.S. Reps. Betty McCollum and Keith Ellison urged the IRS Friday to provide guidance to same-sex couples when filing their federal taxes, which McCollum said should have been provided by the agency years ago.

McCollum, along with 74 members of Congress, signed a letter that says the agency has a responsibility to provide information for same-sex couples, who encounter complicated tax statuses because of inconsistencies in tax law between the states and federal government.

Same-sex couples who have legal relationships in at least 15 states through marriage, civil unions and domestic partnerships aren’t recognized by the federal government because of the Defense of Marriage Act. That makes filing taxes much more complicated for those couples.

In fact, in some states, the IRS is inaccurately penalizing same-sex couples. In Nevada, Washington and California, which have community property deduction laws, the IRS has improperly assessed fines against couples who claim that deduction, because the IRS systems don’t recognize what would otherwise be a legal deduction.

“The LGBT community still faces discrimination in this country and that is unacceptable. In this case, it’s even more disturbing when this discrimination comes from our federal government,” McCollum said in a statement Friday. “The IRS has the ability to provide federal tax guidance to same-sex couples, and it should have done so years ago. The LGBT community deserves to be treated fairly and equally by the U.S. government not only for federal tax purposes but in any other situation.”

The letter presses the IRS to come up with a set of guidelines to aid same-sex couples in filing their taxes.

“The IRS has the ability to provide specific guidance to ease the complexity and uncertainty surrounding these couples,” the letter states. “While full equality cannot be achieved without repealing DOMA, this guidance will provide significant relief to hundreds of thousands of taxpayers, and save critical resources by avoiding unnecessary audits and inappropriate enforcement actions.”

McCollum Ellison letter on LGBT taxes –

Mac and Lynne Hammond. Photo: LWCC.org

Updated: Property owned by Living Word Christian Center has gone into foreclosure, according to the Hennepin County Sheriff’s office. On July 28, four parcels of land owned by the Brooklyn Park mega-church was bought at a sheriff’s sale for $5.1 million. Pastor Mac Hammond, who preaches a “prosperity gospel,” has been plagued by financial problems over the last few years. The church took millions from a man who was later convicted of fraud, and the IRS opened an investigation into the church’s finances stemming from favorable financial dealings between the church and Hammond.

County records show that TCF National Bank, which is also the mortgage lender to LWCC, bought the property. Per Minnesota law, Living Word has until July 28, 2011, to redeem the property by securing new financing. The church bought property in 1995 for $3.5 million. It’s unclear from county records whether the foreclosed property is the land on which the church itself sits; Living Word has not responded to the Minnesota Independent’s request for comment on the foreclosure or the church’s financial future.

Update: LWCC told the Minnesota Independent on Tuesday that they sold the property in 2006 and that Hennepin County records are misleading. Said Amy Rotenberg, “Living Word Christian Center actually sold that property to another entity and has had no continuing interest in it since 2006.” We’ll update this story should those records be modified.

Also, according to Rotenberg, “The church is not currently facing any financial issues.” She said, “We won our battle with the IRS” and that the church’s defense of the $2.2 million donated before Gerard Cellette was convicted of fraud should not be seen as a “financial problem.”

In early 2008, the church began to fall behind on its budget by $40,000 to $70,000, prompting Hammond to sell off his jet and forcing the church to cut its hour-long television broadcast to a half hour.

In May, the church was served with papers demanding the return of $2.2 million in money it received from Gerard Cellette, who had been convicted of fraud. Cellette ran a Ponzi scheme and lawyers for the victims were attempting to collect the money from Living Word for remuneration.

The church said in a statement in May that it felt it shouldn’t have to give the money back to the victims because of its status as a church. “This lawsuit, on behalf of Mr. Cellette’s investors, to take back the funds from LWCC and repay the investors is unfair. Our church is essentially being asked to be the guarantor to principally out-of-state, sophisticated investors that made bad investments with Mr. Cellette.”

It’s not the first time the church has invoked religious privilege following questions about its finances.

In 2007, the Minnesota Independent reported that Living Word had arranged favorable loans for Hammond and that Hammond had bought a stunt plane from the church and then leased it back to the church. That reporting led to an IRS investigation, and in 2008 the church sued to block the IRS from investigating.

The IRS wanted a look at Hammond’s and Living Word’s financial books, but Hammond invoked religious privilege.

“This case is about the First Amendment, the free exercise of religion and separation of church and state,” Walter Pickhardt, attorney for the church, said at the time. “Living Word did cooperate but the IRS didn’t follow correct procedures. It was an overbroad request.”

A judge ruled that the IRS did not follow the proper procedures in its investigation and the agency dropped its investigation.

In 2006, the church gained notoriety when Hammond took to the pulpit to endorse Rep. Michele Bachmann for her first election to Congress. Hammond’s backing prompted complaints to the IRS and raised eyebrows, since Hammond didn’t live in Bachmann’s district.

Hammond’s financial troubles come after years of financial growth for the church and for Hammond personally. The “prosperity gospel” Hammond preaches asserts that financial gain is a sign of God’s love. The church has several prayers about becoming debt-free.

“We, the body of Believers of Living Word Christian Center, declare we have been carved out for an end-time expression of El Shaddai, the God of abundance and no lack,” reads one such prayer on the church’s website. “We are taught how to live independent of this world system and how to have dominion over it, therefore, in Jesus’ name, we declare we are debt-free! The spirit of debt is destroyed over our lives and over this local church because of the anointing. We are the lender and not the borrower, the head and not the tail.”

Hammond isn’t the only prosperity preacher to have faced money troubles. As Christianity Today reporter Bobby Ross, Jr., notes, more than a few such figures are now struggling financially.

According to The Tennessean, Laurie Cardoza-Moore sent a fundraising appeal to members of the PJTN network asking them donate $500 to Bachmann’s campaign. Non-profits are prohibited from fundraising for candidates.

“The IRS takes the position that sending a fundraising e-mail for a candidate or a candidate’s campaign is considered intervention in a political campaign,” Marc Owens, a former IRS official, told the Tennessean.

In Bachmann’s first campaign for Congress, an appearance at Living Word Christian Center landed that church in hot water when Pastor Mac Hammond endorsed Bachmann from the pulpit.

Photo: Lori Howard, iStockphoto

Six members of You Can Run But You Cannot Hide International, a controversial ministry that holds Christian assemblies in public schools, are ordained as ministers, tax documents show. The members’ status raises questions about their activities in public schools as well as whether they are qualified to take advantage of tax breaks normally afforded to pastors and priests.

Some of the members listed as ministers are employed in the ministry’s punk band that brings its Christian message to public schools, possibly in violation of the constitution’s principle of separation of church and state.

Of the six ordained members, the documents reveal, five have been given a clergy housing allowance: tax-free payments by the ministry to support rent or mortgage payments. A church operating as a nonprofit must file IRS form 990, which must list any minister housing allowances as part of the employee’s compensation in order for the members to take the allowance as part of their income.

Jake MacAuley, also known as Jake McMillian, sidekick to ministry leader Bradlee Dean on the group’s radio show and a co-minister, was paid the allowance in the amount of $12,976 in 2008, the only year for which tax documents are available. According to another section of the 990 form (PDF), at least four other unnamed members of the ministry received a similar allowance totaling $54,532 in 2008.

The federal government has laid out specific guidelines on the definition of clergy for the housing allowance. A minister must: perform “sacerdotal functions” such as marriages, funerals and the sacraments of the faith; must conduct worship services; must control or maintain the organization; must be considered a spiritual leader; and must be ordained, licensed or commissioned.

It’s unclear how You Can Run fulfills all of those requirements. A request for information from the ministry has not been returned.

Perhaps more unclear is how You Can Run can consist of ordained ministers in order to get tax breaks while also claiming that it’s not performing religious functions in public schools.

Dean has repeatedly said that the group rejects the constitutional separation of church and state and frequently notes that it evangelizes at public high school assemblies. When asked by the Minnesota Independent whether the group preaches the gospel at schools, Dean said: not necessarily. “Seventy-eight percent of the American people are professing Christians,” he said. “Are they, in their line of work, to wear ‘I am a Christian’ shirts?”

In a lengthy piece in the Weekly Standard, the group said the only Christian message is in their music — the rest of their message’s focus is on morality. When speaking to supporters, however, Dean often states unequivocally that the ministry is bringing the message of Christ to public school students. In an April 2009 radio interview, one of YCR’s band members said, “We are speaking to kids in our schools about the Constitution, suicide prevention and our own testimony of how Christ turned our lives around in public schools so we can get the light into kids’ hands in public schools.”

The group, which says its goal is to reach 1 million young people through its ministry, has also garnered significant political support from politicians, including former Secretary of State Mary Kiffmeyer, gubernatorial candidate Rep. Tom Emmer, congressional candidate Allen Quist and U.S. Rep. Michele Bachmann.

“I don’t want to say a minister couldn’t go into a school to do a secular assembly,” said Alex Luchenitser, senior litigation counsel for Americans United for the Separation of Church and State. “But obviously, ministers are not allowed to go into public schools to preach.”

But, he said, “The fact that they are ordained ministers is more evidence that they are doing religion in the schools.”

Clergy housing allowance “wildly abused”

Robert Baty, a former IRS appeals officer who has been following the uses and abuses of the clergy housing allowance, says YCR may be conforming to the law.

“They may well be ‘ordained, commissioned and/or licensed’ ministers in their religious group,” he said. “It doesn’t take much to get ‘ordained, commissioned, and/or licensed’ in many religious groups these days. And if that be the case, the organization paying them may well qualify as ‘religious’ enough so as to be able to designate all or part of their income as income tax–free housing.”

Baty pointed to Revenue Ruling 70-549, which greatly expanded who could take the tax benefits afforded to the clergy. He says the ruling was the “result of the pressure put on the IRS by George Bush, Sr., and [Texas Congressman] Omar Burleson” at the request of a Christian university.

“As a result, employees at private schools like Pepperdine can register as ministers and claim the housing allowance, regardless of the fact that they may be getting paid to coach basketball or lead the marching band — as opposed to a rock band [in the case of You Can Run],” said Baty.

Annie Gaylor of the Freedom from Religion Foundation said the You Can Run 990 disclosure demonstrates that the “parish exemption is wildly abused and out of control.”

Gaylor’s group is targeting the exemption in federal court, arguing that clergy are allowed enormous tax breaks not afforded to other classes of Americans and that it is an unconstitutional endorsement of religion. FFRF filed suit in late October in the California Eastern District Court against Timothy Geithner, Secretary of Treasury; Douglas Shulman, Commissioner of the Internal Revenue Service; and Selvi Stanislaus, executive officer of the California Franchise Tax Board.

“All other taxpayers pay more because clergy receive this privileged benefit, not available to any other class of American,” said Gaylor.

In a press release surrounding the lawsuit, the group added, “Most notorious, clergy may ‘double-dip’: deduct their mortgage payments and real estate taxes from income tax, even though they paid for these with tax-exempt dollars, amounting to a government subsidy solely for clergy.”

Bradlee Dean

A former IRS attorney, who spoke with the Minnesota Independent on the condition of anonymity, said You Can Run’s tax forms do raise some concerns but there’s not enough information available to determine whether the allowances made are inappropriate.

“No one can qualify for [the housing allowance] unless they are licensed or ordained ministers,” said the former attorney. “Of course, the IRS is lax in enforcing it.”

“I doubt that all five of the members of You Can Run But You Cannot Hide would meet that requirement. I mean some of these guys are musicians,” the source said.

The former attorney also said that based on the 990 it didn’t appear that the group “played an integral part of any church or organized denomination.”

All the experts the Minnesota Independent spoke with cautioned that information is limited when it comes to tax information about religious organizations. In fact, the IRS gives religious organizations special treatment, shielding much of their information from public scrutiny and creating significant hurdles for the IRS to investigate possible abuses.

But despite those imitations, Luchenitzer agreed that the outward appearance of You Can Run is troublesome.

“Are they just five people who just decided to get together or are they ordained by an organized religious body? If it’s the former, it’s probably not what the IRS intended,” he said.

Image: Ben McLeod

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.”

Image: Ben McLoed

Religious right leaders are celebrating the postponement of an IRS complaint against a Warroad, Minn., pastor alleging he violated tax laws when he twice endorsed Sen. John McCain from his pulpit in 2008. The IRS says a procedural move forced them to close the case, but have the option to open it again in the future.

“Both Hillary and Barack favor the shedding of innocent blood (abortion) and the legalization of the abomination of homosexual marriage,” Booth said in a May 2008 sermon at Warroad Community Church. “We need to vote for the most righteous of candidates. And it doesn’t take a brain surgeon to figure that out. The most righteous is John McCain.”

Booth admitted that he knew he was violating the law in a letter to the IRS and in another letter to Americans United for Church and State, which initiated a complaint against the church. Because Booth’s church enjoys an exemption from paying federal and state income taxes, the church is not allowed to endorse candidates.

Booth allegedly violated the law again during the James Dobson–inspired Pulpit Freedom Sunday, when churches were encouraged to break the law by endorsing McCain from the pulpit. Booth again sent a letter to the IRS flaunting his law-breaking sermon.

The IRS began a case against the church, but the agency said in a letter to Booth (pdf) dated July 7 that due to “a pending issue regarding the procedure used to initiate the case,” they have closed the file. However, the letter said that the agency “may commence a future inquiry… after it resolves that procedural issue.”

The Minnesota Family Council says that the IRS is being a bully and that churches should have the right to endorse candidates and keep their tax-free status.

“Pastors should be free to speak or not to speak in opposition to or support of political candidates according to the dictates of their consciences,” said Family Council president Tom Prichard. “They shouldn’t have their free speech rights, guaranteed under the U.S. Constitution, undermined by the IRS. Yet that appears to be what the IRS is trying to do in this instance,” concluded Prichard.

But the group that filed the complaint, Americans United, said churches are not free to be partisan — and shouldn’t be. “Booth is free to endorse anyone he wants to as a private citizen,” the Rev. Barry Lynn of Americans United said when the group filed the complaint. “But when he is standing in his tax-exempt pulpit as the top official of a tax-exempt religious organization, he must lay partisanship aside.”

Flickr: respres

A housing program blamed in part for high default rates on government-backed loans, derided as a “scam” by the Internal Revenue Service and targeted for years for elimination by the agency that ran it looked like it finally had reached its end this fall, after Congress finally banned it. But now, in a sign that some lessons of the housing crisis have yet to be learned, a movement is afoot to bring it back.

The program is called seller-funded down payment assistance. When U.S. Department of Housing and Urban Development Secretary Shaun Donovan told Congress last month that dramatic growth in seller-funded down payment assistance programs in recent years had added to high default rates on Federal Housing Administration-backed loans, it might have seemed like the final blow. The programs, initially intended to help low and moderate income people buy homes, had long been under fire, the subject of complaints from HUD, the General Accounting Office, and the IRS. And with FHA default rates threatening to trigger yet another taxpayer bailout, policymakers have plenty of motivation to steer clear of any lending approaches deemed risky or problematic.

       

Illustration by: Matt Mahurin

But supporters of seller-funded down payment assistance aren’t giving up. Despite Donovan’s stance, they’re still supporting a bill to revive the program — a measure now before the House Financial Services Committee. Sponsored by Rep. Al Green (D-Tex.), the bill has 17 co-sponsors, among them powerful lawmakers such as Rep. Maxine Waters (D-Calif.). Backers include builders and realtor groups, the Mortgage Bankers Association, and the Congressional Black Caucus. Committee Chairman Barney Frank, D-Mass., told the Wall Street Journal last year he wants to reform the program, not kill it. And supporters are continuing to pressure HUD to preserve it.

“We do agree there were problems with the previous program,” said David Ledford, senior vice president for housing policy at the National Association of Home Builders. “But we still support the legislation. HUD was somewhat at fault for not properly monitoring it. It can be done more carefully, and with tighter controls. But HUD is just throwing up its hands and saying things turned out badly and we shouldn’t do it at all.”

But Ledford’s views aren’t widely shared by many in the mortgage industry, and they simply don’t reflect reality, according to the program’s numerous critics. FHA’s seller-funded down payment assistance should have ended years ago, given ample evidence of its problems, said Guy Cecala, publisher of Inside Mortgage Finance, a Bethesda, Md. company that covers the lending industry. The GAO concluded that homes purchased using the programs were appraised at and sold for 2 to 3 percent more than comparable homes bought without the assistance. The IRS in 2006 revoked the tax-exempt charitable status of providers of seller-funded down payment assistance – and called the programs “scams.” HUD’s Inspector General and the FHA itself have complained the programs raise home ownership costs and lead to more foreclosures, saying homeowners using the assistance were two to three times more likely to default on payments than other borrowers.

Both the FHA and HUD allow homebuyers to receive downpayment money from third parties, such as relatives, employers, government agencies and independent nonprofits. But unlike much of the rest of the mortgage industry, the FHA also allowed homeowners to get downpayment help from nonprofits or charities funded in part by sellers. And that’s where the problems came in.

In a speech last summer, former FHA Commissioner Brian Montgomery called seller-funded down payment assistance programs “circular financing schemes.” Property sellers often raised the sales price of a home to cover the cost of downpayment “gift,” the GAO noted. The charity or nonprofit that supplied the down payment money was reimbursed by the seller for it, along with service costs and fees, once the deal closed. Borrowers unwittingly paid for it all. Critics contended some charities existed solely to funnel the downpayment money from the seller to the buyer. The program was especially popular with builders.

The Mortgage Lender Implode-O-Meter, an influential financial blog leading a blogosphere campaign against reinstating the downpayment program, explained that buyers qualified for FHA loans using grant letters from the charities as proof of downpayment. As far as the FHA was concerned, the grant was a charitable donation that came from an independent nonprofit, and not the seller.

Suckers!…Of course the losers in this scheme are the FHA (the taxpayer –who actually has to insure these loans), and ultimately the borrower — who is probably already underwater and overextended.

After buyer lawsuits, rising defaults, and other controversies, Congress finally ended the practice as part of the mortgage rescue package approved last summer, and the programs were banned as of Oct. 1. The bill to revive them is a long shot to eventually become law, given the past controversies. But the fact that a campaign even exists means one of the biggest lessons of the financial meltdown – that buying homes with no money down isn’t exactly a great idea – seems to be lost, at least on some.

“It’s a program that HUD doesn’t really want, the mortgage industry doesn’t really want and most community groups don’t really want,” Cecala said. “It’s got such a lousy track record. That anyone would want to resurrect it at all is astonishing.”

Added Cecala: “The fact that Congress would even consider this… are these guys serious? Did they do any research on this at all? It should have a skull and crossbones on it.”

Dean Baker, co-director of the Center for Economic Policy and Research, who warned before the financial crisis of a growing housing bubble, expressed similar sentiments. “I’d say it’s a bad idea that won’t go away,” Baker said. “I think it’s basically crazy. Arguably one of the lessons we were supposed to have learned is that we shouldn’t have been pushing homeownership, everywhere and always.”

“It’s a long shot to become law, but I wouldn’t rule it out. You have some big groups pushing it on the other side.”

Seller-funded down payment programs drew little attention earlier in the decade, when the FHA had a much smaller share of the mortgage market, and when helping low-income borrowers get into homes was an aggressive public policy goal, noted Patricia McCoy, a University of Connecticut law school professor who specializes in banking and securities regulation.

But use of the programs increased sharply, after the subprime meltdown led to an expansion of FHA-backed lending. And last month, HUD Secretary Donovan told Congress that while loans with seller-funded down payment assistance represented only 12 percent of the FHA portfolio at the start of 2008, they accounted for 30 percent of all foreclosures completed that year. He said the end of the program “should substantially reduce FHA losses on new originations in the years ahead.”

Some large down payment assistance providers, however, are countering with a campaign that contends the ban is hurting working class Americans, who want to buy homes but can’t come up with steeper downpayments because of tightened lending standards. A website sponsored by the bill’s supporters refers to the measure as “DPA Reform” and includes a running tally of the number of Americans denied access to homeownership since the programs officially ended.

Ann Ashburn, president of AmeriDream, a Gaithersburg, Md. provider, said in a statement last fall that “eliminating charitable down payment assistance will slam the door on over 100,000 teachers, firefighters, working families and others who rely on these programs annually to become homeowners.”

AmeriDream spokesman Henry Fawell said the company is “cautiously optimistic” about prospects for reviving the program. Helping buyers with downpayments would benefit the economy as a whole and could jump start the housing market, he said. Vacant homes are scarring neighborhoods with blight, but many borrowers can’t come up with downpayments on their own to buy them, he said.

Fawell acknowledge problems with the programs in the past, but said the new bill addresses them by including requirements for higher credit scores, fees for riskier borrowers, and penalties for inflated appraisals. “We have support on both sides of the aisle,” Fawell said.

The bill’s co-sponsors include one Republican, Rep. Gary Miller of California, a former builder.

With the Obama administration busy handling banks stress tests, bailouts and financial regulatory reform, the bill to reinstate seller-funded down payment assistance isn’t facing much active lobbying opposition. And down payment providers and housing lobbyists have a long history of successfully fighting off attempts to end the programs. HUD began trying to do so back in 1999 and again in 2007, when it was successfully sued by AmeriDream and by the Nehemiah Corp. of America, another large provider. Barely 24 hours after Congress approved the ban last summer, Rep. Green introduced a measure to bring it back.

One possibility is that supporters could slip in reinstatement of the program into a larger housing bill. But Cecala, of Inside Mortgage Finance, thinks it’s still a hard sell. Putting people in homes with no money down is a widely discredited idea, he said. Although civil rights groups still support the programs, the thinking has changed regarding the best approach to help minority borrowers.

“The Community Reinvestment Act and other programs are a much more sustainable way to get people into homes as opposed to subprime and no-downpayment FHA loans,” Cecala said. “But they also are a lot more work for both the lenders and borrowers.”

In the meantime, Ledford, of the builders’ association, said his group is working with HUD to see if first-time homebuyers can apply some of the new $8,000 tax credit toward downpayments. HUD is trying to make sure some of the same circular financing problems that plagued the seller-funded down payment assistance program wouldn’t affect that proposal, he said.

It seems that when it comes to seller-funded down payment assistance, the fight never really ends

James Dobson (left): A mass legal revolt from the pulpit?

In 2006, Pastor Mac Hammond stood up before his Living Word Christian Center audience in Brooklyn Park and said, “I can tell you personally that I’m going to vote for Michele Bachmann, because I’ve come to know her, what she stands for.” That speech prompted the attention of the Internal Revenue Service for violation of the church’s tax exempt status. The IRS sent the church a letter telling the church it cannot endorse politicians from the pulpit. Despite ample evidence that suggested Hammond knew that what he was doing was illegal, the case was closed.

Now an Arizona-based front group for the religious empire of James (Focus on the Family) Dobson, the Alliance Defense Fund, is encouraging en masse violation of the IRS rule that prohibits clergy from endorsing political candidates. They’re asking ministers of kindred spirit across the country to endorse presidential candidates on Sunday, September 28.

Dubbed the “Pulpit Initiative,” the gambit represents a bet on lax enforcement by the IRS and, ultimately, a free-speech-based challenge to the law by a very conservative US Supreme Court.

Since 1954, churches have been prohibited from explicit involvement in political campaigns. To date, only one church in the last 50 years has lost its tax exemptions. That occurred in 1992, when an outfit called Branch Ministries took out full-page ads in the Washington Times and USA Today proclaiming, “Christian Beware” and warning that Bill Clinton espoused “policies that are in rebellion to God’s Laws.” Federal courts upheld the revocation of Branch Ministries’ tax status.

The ADF says the Pulpit Initiative is to encourage pastors to reclaim “their right to speak Scriptural truth from the pulpit” and to confront “an atmosphere of intimidation and fear for any church that dares to speak Scriptural truth about candidates for office.” The group says it has recruited churches in every state to endorse candidates on the chosen date.

But some clergy and former IRS officials say that ADF is violating the law just by organizing this sort of mass lawbreaking event.

“In the course of organizing and publicizing this event, ADF’s staff of attorneys is inducing churches to engage in conduct designed to violate Federal tax law in a direct and blatant manner,” wrote Mortimer M. Caplin, IRS commissioner during the Kennedy administration; Marcus S. Owens, former head of the IRS’s tax-exempt division; and Cono R. Namorato, the former head of the IRS office of professional responsibility. “This activity — coordinating mass violation of Federal tax law — is clearly ‘incompetent and disreputable conduct’… In our view, these ADF efforts present a direct threat to the integrity of our tax system.”

Beside Hammond’s 2006 endorsement of Bachmann, a northern Minnesota church made news this summer for endorsing Sen. John McCain for president — and flaunting it in the face of the IRS. Rev. Gus Booth, a pastor in Warroad, Minn., and Republican party activist, said in a May sermon, “If you are a Christian, you cannot support Hillary Clinton or Barack Obama. Both Hillary and Barack favor the shedding of innocent blood [abortion] and the legalization of the abomination of homosexual marriage.”

In a letter in his church bulletin, Booth wrote of the IRS, “I am letting you know that I will not be intimidated into silence when I believe that God wants me to address the great moral issues of the day, including who will be our next national leader.”

According to IRS data, it’s not just the religious right that runs afoul of the IRS. Of the 42 churches that were sent letters by the IRS in 2004, 18 endorsed a GOP candidate, 12 a Democratic and one a Green Party candidate. In 11 instances, the IRS did not determine a party affiliation.

A church in Southern California made news in 2004 when its pastor offered an anti-war sermon and the IRS pursued the case. The church insisted that it did not endorse a candidate. The IRS agreed and dropped the case.

The IRS has also gone after an entire denomination. The tax agency is investigating the United Church of Christ because of a speech that Obama gave at that group’s national meeting last year. Obama is a member of the UCC. That investigation was dropped with no penalties imposed.

The IRS is also investigating a Hartford, Conn., UCC church that Obama spoke at earlier this year.

In a letter sent to supporters on Saturday, Pastor Mac Hammond of Living Word Christian Center wrote that “enemies of the gospel, often politically motivated,” are behind an ongoing Internal Revenue Service probe of the church. Hammond and Living Word are the target of an IRS audit investigating allegations of excessive compensation as well as of favorable loans and leasing arrangements that Hammond secured through the church.

“We believe that this investigation of the IRS is completely unfounded and politically motivated,” wrote Hammond in the four-page letter (PDF). “There is a very clear effort, national in scale, to discredit, defame, and intimidate ministries and preachers of what has come to be called the “prosperity message” – which in actuality is nothing more than the gospel – the good news that God is good and
our covenant of blessing will provide increase in every area of our life.”

He continued, “Those behind these attacks we will, for the moment, only identify as enemies of the gospel, often politically motivated. They are fearful not only of the moral imperative communicated by these ministries, but the growing wealth and influence of those constituencies. In the natural world, money is power and influence, so a wealthy church (individually and collectively) is without question going to gain increasing visibility and influence in its city, state, and nation. The opponents of Christian ideology rightly understand that to limit our influence, they must limit our growing wealth – and to accomplish this goal, they must undermine and corrupt the commitment of the donor base.”

Hammond also reiterated that he has no qualms about the wealth he has made as pastor. “The media allegations mean little or nothing if you keep the larger context in mind: Our individual level of wealth, according to God (Eph. 3:20) can potentially exceed what we can even ask or think, limited only by the power of faith that works in us,” he said. “I refuse to ever be embarrassed or apologetic for the level of God’s blessing upon my life, and believe every day that my preaching will have the same effect upon your life.

“Regardless of the fact that it is the will of God for us to prosper and the level of that prosperity to be determined only by our faith, the Internal Revenue Service has assumed the rather questionable responsibility of deciding how much compensation a minister should receive,” he wrote. “It seems an apparent violation of the separation of church and state.” It’s an ironic coda to a controversy that started when Hammond endorsed Rep. Michele Bachmann during her October 2006 appearance at his church.

The church has resisted demands by the IRS to open its books for an audit, and the agency filed a petition in United States District Court ordering the church to comply. Earlier this month, a magistrate ordered Living Word representatives to appear and explain their refusal to comply with the IRS. In response to a summons in March, a church attorney told the IRS they would not comply until “an appropriate high-level IRS official” using “reasonable belief” requested information.

At issue are financial dealings detailed in documents obtained by the Minnesota Independent in early 2007.

According to the documents, which involved a loan application in 2003 and contained more than 100 pages of pictures and detailed descriptions of the church’s real estate assets, financial transactions and administrative history, Hammond owned two airplanes, one bought from Living Word for $1.06 million on credit supplied by Living Word. He leased the planes back to the church at a total annual rate of more than $893,000. The church asserted that “the aircraft are important to the efficient management of its ministry at the present time.” Living Word also rented a hangar to store the planes, and it paid for the expenses of the planes as well.

In addition, Living Word made several loans to Hammond since 2000 totaling at least $1.9 million: Two were for the planes, three were unsecured, and one enabled Hammond to purchase a house in Florida.

Reporting by the Minnesota Independent also triggered an IRS investigation of Hammond and Living Word in 2006 after being the first to report that Hammond endorsed then-State Sen. Michele Bachmann for Congress from the pulpit.