Image: Ben McLeod

Americans United for the Separation of Church and State is urging the Internal Revenue Service to fix problems with its enforcement of laws against churches endorsing political candidates. In January, a Minnesota District Court judge ruled that the IRS did not have the proper procedures in place to investigate Living Word Christian Center, an investigation involving controversial church finances first reported by the Minnesota Independent in 2007.

“Given the pervasiveness of church politicking violations, as well as efforts by some organizations in recent years to encourage houses of worship to blatantly violate federal law,” the AU wrote to the IRS, “having a clear and valid enforcement regime is absolutely essential for the ongoing protection of religious liberty.”

Besides LWCC — whose pastor, Mac Hammond, endorsed Rep. Michele Bachmann from the pulpit in 2006 — another Minnesota church has been under investigation, but that probe was dropped this year due to enforcement problems.

Warroad Community Church pastor Gus Booth twice endorsed Sen. John McCain in 2008. Because the IRS did not have proper standing, the agency was forced to cease its investigation.

Americans United’s letter told the IRS that the ability to investigate churches for unlawful politicking is vital to the health of religion in the United States:

Americans United has long recognized that religion flourishes best when the wall between church and state is vigilantly maintained. Church politicking embroils houses of worship in divisive battles, pitting congregants against each other and their clergy.

The IRS limitation on partisan politicking is an important legal requirement that ensures that houses of worship, like all other non-profit organizations, do not embroil themselves in partisan disputes.

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.”

Here, presented for the first time, is Bachmann’s complete six-minute speech from that night. Captured by Ken Avidor of Dump Bachmann — the king of the Bachmann documentarians in the blogosphere — it offers a remarkable portrait of the Minnesota congressional representative who has been thrust into the spotlight in the past week by her assertion that Barack Obama and numerous unnamed members of Congress were “anti-American.”

In a church setting, Bachmann is extremely candid about the right-religious basis of her politics and her political career.  A full transcript of her remarks is reproduced below; here are some highlights:

It’s the job of Christians to wage war on ‘radical Islam’ in God’s name: “We are sitting right now at a time in our history when we’re going to be dealing with some of the most important issues of our time. Number one being, which your pastor is going to be talking about in the next few weeks, radical Islam. How will our nation deal with this threat of radical Islam? There’s so much at stake, but we listen to the Lord and we decide we’re going to suit up, we’re going to sign up, we’re going to be hot for God, and we’re going to do what He is calling us to do! And we’re going to watch out and see what He is going to perform in our midst.”

God told Bachmann to get into politics, and later to run for Congress: “Twenty-two months ago, He called me to run for United States Congress. And my husband thought, you need to do this. This is a big deal to do something like this. So we set aside three days where we fasted and we prayed, and long about the afternoon of day two, we knew. We knew that we knew that we knew. This was it. And so we jumped in, and little did we know that out of 435 seats for Congress, this race would turn in to being one of the top three in the country.”

God wants you to be hot: “I’m 50 years old. I came to know Him when I was 16. For 34 years, I’ve been hot! And you want to be hot! Because when you are hot for Jesus Christ, there is nothing that is like that life! It is the most exciting life! When you are praying in the spirit, when you are meditating on his word, when you are fellowshipping with white-hot believers, He turns your life around. And it isn’t just for you. It’s for the world! He changes the world through hot people!”

Transcript
… So many of you share that love with me. You know, you see of all these video games that are out there now, and DVDs, and it’s all about virtual reality. You know, one thing that’s so great about being in Living Word is we know what real reality is. Real reality is the life in the spirit, and Christ Jesus. That’s what we experience every day. Who needs virtual reality when you’ve got real reality, when you’re in the spirit of God?

And that’s what I’m here to tell you about. It’s His sure calling. Pastor Mac has an awesome sermon, and I want to give testimony to the sermon you’ll be hearing today. Because he’ll start out talking to you about how God doesn’t want us to be lukewarm. Amen? He says be hot or cold. Can you imagine, he would tell the world to be cold before being lukewarm? Imagine that.

When He gave me His calling, when I received Jesus when I was 16, the one thing that I knew that I knew that I knew is the difference between not knowing Him, being cold and being hot. And you know, today if you watch TV, you’ll see young people on TV, and they’ll say “she’s hot.” Or they’ll say “he’s hot.” And what are they talking about? They’re talking about the outward, about how someone looks on the outside. What does God say when He looks at you, or when He looks at me? He wants to say: “She’s hot!” “He’s hot!” Because we are hot for Him! On the inside! Amen!?

I’ll tell you one thing, just from experience. I’m 50 years old. I came to know Him when I was 16. For 34 years, I’ve been hot! And you want to be hot! Because when you are hot for Jesus Christ, there is nothing that is like that life! It is the most exciting life! When you are praying in the spirit, when you are meditating on his word, when you are fellowshipping with white-hot believers, He turns your life around. And it isn’t just for you. It’s for the world! He changes the world through hot people! And He will continue to use you to change the world.

He’s done that for me. He will do it for you. I tell you what — the Lord has changed me just by allowing me to surrender to His will. I didn’t want to go to law school. I had no desire to go to law school. And He said to me one night in college, He said, Michele, if you will be steadfast and diligent, I will take you to law school. Oh, okay, Lord. All right.

And so I went to law school. The first Christian law school in the United States, Oral Roberts University down in Tulsa, Oklahoma. Now Regent Law School. I went there. And the Lord brought me to my husband. My girlfriend and I were praying one night in college, and all of a sudden the Lord gave each one of us, as we were praying, the same vision — which is odd — at the same time. And the vision was of me getting married in a farm valley to a guy sitting here in the front row.

And I thought to myself, Oooh. I don’t even like this guy. What’s this about? And so, put that vision on the shelf. At the same time, the Lord gave him a vision. He was a farmboy. He was out fixing a fence on the farm, and the Lord gave him a vision of marrying me out in that same valley on the farm. And he thought, Oooh, I’m 22. I don’t want to get married. I don’t think I even like her. And so he put that vision on the shelf.

And so we decided we’d just obey God. And so we obeyed God and we honored Him in our relationship. And pretty soon some romantic things started happening. And then we got married. And now it’s been 28 years, and I think it might work out. What do you think?

He put a calling on our heart. He put a calling on Marcus’s heart to meet people’s needs. He has a Christian counseling clinic here in the Twin Cities. Bachmann and Associates Christian Counseling. That’s his calling, to meet people’s needs on an emotional level.

He’s put a call on my heart to be involved in the law. But a few years ago, he put a call on our heart to have me go into politics. Politics? Why would I — five kids, 23 foster kids, counseling clinic, I’ve got a law career. What is that all about? Well, we were faithful and we said okay and we jumped in. He’s used me in a few different ways.

Twenty-two months ago, He called me to run for United States Congress. And my husband thought, you need to do this. This is a big deal to do something like this. So we set aside three days where we fasted and we prayed, and long about the afternoon of day two, we knew. We knew that we knew that we knew. This was it. And so we jumped in, and little did we know that out of 435 seats for Congress, this race would turn in to being one of the top three in the country. And that how this race turns will probably determine what majority is in Congress this fall. [sic]

We are sitting right now at a time in our history when we’re going to be dealing with some of the most important issues of our time. Number one being, which your pastor is going to be talking about in the next few weeks, radical Islam. How will our nation deal with this threat of radical Islam? There’s so much at stake, but we listen to the Lord and we decide we’re going to suit up, we’re going to sign up, we’re going to be hot for God, and we’re going to do what He is calling us to do! And we’re going to watch out and see what He is going to perform in our midst.

And that’s what it’s all about when He makes our calling sure. It isn’t about us. It’s about Him. And it’s about freeing each one of us up to do His will for His glory so that He will be magnified! And that’s His calling. It’s sure. I commend to you to listen carefully to the truth of His word that He will bless you with as your pastor comes and speaks to you this morning.

Thank you for giving me this opportunity to fellowship with each one of you today. Thank you.

Specifically, the IRS is looking for detailed information regarding favorable loans the church made to Hammond of almost $2 million and payments the church made to Hammond to rent a hangar for the church’s jet.

An IRS court filing said: “LWCC’s response confirmed that LWCC leases planes owned by Hammond, and pays Hammond to hangar these planes,” the filing said. “LWCC’s response also indicated that it had loaned money to Rev. Hammond, and subsequently forgave portions of this debt. The IRS concluded this leasing arrangement and these loans warranted further examination.”

Also at issue, according to Living Word’s attorneys, are significant changes to the structure of the IRS since the early 1980s relating to churches. Living Word contends that the IRS did not follow appropriate procedures related to IRS investigations of churches. Judge Jeffrey Keyes said, “I see this as a case that could be moving up through the courts.”

While Living Word complied with some aspects of the investigation, it has declined to provide the IRS information pertinent to the case. The IRS served Living Word a summons in March and the church did not comply. A magistrate judge ordered the church’s attorneys to appear in court Thursday and argue their case.

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

Pickhardt also pointed out that the requested documents would expose church donors to government intrusion.

Pickhardt recounted the background behind the investigation — that a speech by U.S. Rep. Michele Bachmann at the church, and Hammond’s endorsement of her, triggered an initial investigation. Subsequent media investigations then highlighted the financial practices of the church (which were originally reported by the Minnesota Independent).

The lawyer for Living Word argued that, thanks to a series of legal changes, including an important one in 1984, churches have special rights in IRS investigations.

In 1984, Congress changed the structure of IRS enforcement to include a two-level process for investigating possible infractions by churches. The IRS must first conduct an inquiry, asking individuals and entities to produce certain information, and then, based on that information, could carry out an examination of church records, otherwise known as an audit. The law change was made to minimize government intrusion into religion and religious organizations.

The change also said that examinations, and the related demands for information from churches, needed to be issued by someone with a high-level of authority within the IRS, such as a regional commissioner.

Of the change, the IRS said (PDF):

Congress, when it enacted IRC 7611, tried to minimize the potential for church-state confrontations in Service examinations of churches by adopting detailed procedures to be followed whenever the Service was involved in what the statute characterized as a “church tax inquiry.” These procedures emphasized the need for a speedy determination of a church’s tax liabilities without unnecessary examination of church records.

Another change in 1998 restructured the IRS from a system of regional commissioners to a categorical system of taxpayer directors. For instance, previous to 1998, the Midwestern states would have had a commissioner who would have looked into a variety of cases. After 1998, there were directors responsible for enforcement for each type of taxpayer. In this case, the director of exempt organizations oversees tax compliance for all churches in the nation. There’s another director for large and medium businesses, another for wages and investments, and so on.

Living Word argued that the director who issued the summons for church financial statements did not have a high enough level of authority to issue the summons and that’s why the church did not comply. It was the director of exempt organization examinations who issued the summons, and that position is fourth in line on the IRS chain of command.

“Our argument is that [authority] wasn’t delegated correctly” since the IRS restructuring and that the summons should have gone to a higher level for review, said Pickhardt.

The attorney for the IRS, Robert Fay, said that isn’t the case. Courts have recognized that government agencies have deference in how to implement statutes, and the IRS restructuring in 1998 effectively replaced the commissioner system with a system of directors who wield the same level of authority as commissioners once did.

Judge Keyes noted that there is virtually no case law governing this issue. “I’m surprised that in the last 10 years this issue hasn’t been raised before.”

The judge gave lawyers for both sides two weeks to submit a statement about the issue of authority before he issues a judgment on whether Living Word will be required to comply with the summons.

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.

In October 2006, Hammond invited Bachmann to speak at his church — a speech that generated a degree of embarrassment for both Hammond and Bachmann.

Hammond endured complaints from watchdog groups for endorsing Bachmann from the pulpit, telling his congregation, “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, and I want her to share her testimony with you tonight.”

The problem: Pastors can’t endorse candidates in church and Hammond didn’t even live in Bachmann’s district. He still doesn’t.

Bachmann’s “I am a fool for Christ” speech continues to inspire liberal bloggers’ lampooning.

News of Hammond’s endorsement generated a number of tips to the Minnesota Independent (then Minnesota Monitor) about some of the church’s questionable financial dealings.

Hammond has flown 13  times, mostly between Anoka and Destin, Fla., where he maintains one of his vacation homes.  He also has logged flights to Albuquerque, Phoenix, Tulsa and Fort Worth.

The flight distance is equivalent to more than two spins around the Earth, or almost a third of the way to the moon.  Hammond has previously defended owning a plane, saying, “The only way we could [visit other churches nationwide] was to have our own airplane.” 

Hammond owns two airplanes, but he leases them back to Living Word Christian Center for more than his monthly payments on them.

Minnesota Monitor obtained the information via the website fboweb.com, which provides tracking information for flights. 

The group of parishioners gave Hammond a standing ovation as he introduced himself via satellite feed.  As Hammond defended himself against charges of corruption and financial impropriety, the crowd would occasionally shout “Amen!” in response to Hammond’s statements that God wanted his followers to be prosperous.

Following Hammond’s sermon, Pastor Steve Aleksuk followed with a strong affirmation of Hammond.

“You need to stand up to what the truth is,” he admonished the gathered congregation.  “The Holy Ghost will reveal scripture to hungry-hearted persons that others will not understand.”

Saying that if Hammond was dishonest “his sin should’ve found him out by now,” Aleksuk urged the congregation to support Hammond.

“Pray for yourselves,” he said.  “Pray for your pastor.  Lift him up.  Pray for him to prosper.”

See “I would almost welcome an audit.”

Rhetorically, he asked, “Is this a self-serving message?  Not at all.”

In a detailed and often defiant hour-long sermon, Hammond claimed that his dealings with the church have been directed by scripture and by God, and that God’s “Holy Ghost siphon” was directing money from sinners to his church, and to him.

Hammond took pains to note that he “[chose] not to believe the media is abusing its authority,” adding that “They’re going to have a hard time figuring out what kind of church we are.”  However, he was harshly critical of the idea that “spirituality and materialism don’t go together.”

“It takes wealth, folks, to establish God’s covenant on Earth,” he said.  “It takes money to buy airtime.  It takes money to be influential.  If you have no money, you can’t even love, because love is about giving and not being a burden.”

Hammond dismissed claims that he was drawing funds illicitly from the church, saying, “I don’t set my own compensation.  That’s set by an independent board.”  He added that before he left board meetings, he always admonished members of the board to comply with IRS guidelines.  He also claimed that his compensation package had been run by a Washington-based law firm that specializes in ministerial compensation, but he did not identify the firm specifically.

Hammond added, “In a perverse sort of way, I would almost welcome an IRS audit.  I’ve labored for twenty-five years to dot every i and cross every t.”

more insideHammond also disagreed with the meaning of events that resulted in complaints being filed by Citizens for Responsibility in Washington (CREW). 

Hammond characterized $1.9 million in personal loans as “simply vehicles of compensation used by the board,” and said he had paid all loans back by 2005. 

He also defended his purchase and subsequent lease-back of airplanes to the church, saying the demands on his time from other churches meant that “The only way we could [visit other churches nationwide] was to have our own airplane.” 

Hammond acknowledged that he was leasing the plane back to the church for more than he was paying monthly for the plane, but said the lease had been established at “fair market value,” and allowed him to take advantage of tax breaks for depreciation on the airplane.  He also said that the money he made on the deal was simply part of his compensation.

Hammond also chided the media for claims that the church had purchased him two condos in Florida.  “I don’t own two condos in Florida.  That is an inaccuracy.  Better than that, I own two houses, Amen!”

Hammond said he had made the purchases as “investments,” and claimed that the property value had doubled.  He made similar claims about a hangar purchased by the church.

Hammond defended himself against charges that he was being greedy, noting that he was “the largest contributor in the history of this church.”  He claimed that since 2001, he and his wife have donated $2 million to the church.

But Hammond was unapologetic for earning a significant salary from the church.

“I am very, very well compensated.  God has provided for me in a way that is super-abundant,” he said. 

Hammond closed with a carefully calibrated shot at the media.

“I believe the media wants to tell the truth.  But the media has such a power over public opinion that it can be a real temptation to manipulate the truth just enough to serve an agenda.”

Hammond closed his sermon to a standing ovation, and the passing of the collection basket.

See “At Club 3 Degrees, Support for Hammond

Hammond’s own words: