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.”

Another Gallup poll, out this morning, shows that 41 percent of those surveyed think low-income Americans are paying their fair share of taxes. That figure is up from last year, when 32 percent of respondents thought poor people were paying the right amount. Thirty-nine percent of those surveyed think lower-income Americans are paying too much in taxes: last year, 51 percent of Americans felt that way.

Via AmericaBlog.

“The sleeping giant is now awake”

“I’m sorry I didn’t do more to stop the madness”

“Sleep? I’ll Sleep When Conservatives Run Congress”

“No Taxation Without Deliberation”

“No Taxation Without Deliberative Representation”

“No Spending Without Deliberation”

“No Spending Without Deliberative Representation”

Despite the fierce verbiage, there seems to be some timidity among event organizers. Local Tea Party blogger “cinnfullyconservative” warns: “Beware of the anti-tea party saboteurs!” Word — from Michele Malkin and other rightwing bloggers — is that clipboard-wielding nogoodniks are planning to “infiltrate tea party events and try and collect information from participants.” Cinnful’s advice:

If you are asked to sign something at the rally, please make sure the people asking have the proper credentials.

Nothing says “Revolution! Nuff said” — as one sign idea reads — than “Can I see your ID card, please?”

[T]he wisdom of the economic policy can be debated, but the politics is pretty clear enough.  People close to Pawlenty say he has not decided whether to run for national office, but they concede that he pays attention to his national profile and wants to leave the option open.

He’s now going to be able to say: While Washington spent trillions, I led the way on tax cuts.

The American Recovery and Reinvestment Bill (pdf) includes a few initiatives that could bring relief to many areas of the state. Here are some highlights:

Minnesota Rep. James Oberstar, chair of the House Committee on Transportation and Infrastructure, was “pleased to see that many of the recommendations he and his committee have made have been adopted in this draft of the bill.” The transportation section includes $90 billion “to create jobs rebuilding our crumbling roads and bridges, modernize public buildings, and put people to work cleaning our air, water and land.”

Greater Minnesota might see some relief through new agriculture programs. Nationwide, agricultural research facilities would see $209 million. Minnesota’s emerging biofuels industry could get a portion of $8 billion in loans for renewable energy, and rural businesses could take advantage of $100 million in grants and $2 billion in loans.

With numerous commuter rail and light rail lines planned for the Twin Cities, part of $1 billion set aside for transit construction spending could speed up those plans.

The Minnesota State Colleges and Universities system should pay attention to the plan’s $79 billion in state fiscal relief “to prevent cutbacks to key services” and a $15.6 billion infusion into the Pell grants program. Biomedical research, a key driver in Minnesota’s economy, would get a $2 billion boost, with $1.5 billion targeted at increasing employment in that sector. Another $600 million would go to pandemic influenza research. University biomedical research facilities would get $1.5 billion for updates and improvements.

Breaks for those of us who aren’t biomedical researchers or college students? Minnesotans making less than $200,000 a year would see a tax cuts of $500 for individuals and $1,000 for married couples. People who bought homes after April 2008 would see a $7,500 tax refund as part of a move to stimulate the real estate market.

The poll of 500 respondents, conducted Wednesday, found 49 percent wanted a combination of tax increases and budget cuts, while only 41 percent wanted just budget cuts and 4 percent only tax increases. Interestingly, 48 percent of Republicans approved of the combined strategy.

A majority, 53 percent, said that the wealthy should shoulder the burden, and only 12 percent thought there should be lower taxes on the wealthy.

Poll respondents overwhelmingly rejected a sales tax on food and clothing (81 percent) and also rejected public funding for a Vikings stadium (75 percent).

Previously, employers could decline and surviving same-sex partners would have to pay tax on the inheritance of the deceased partner’s retirement savings. Legally married heterosexual couples automatically avoid that tax penalty.

National LGBT rights groups hailed the move. “This legislation secures much-needed protection for lesbian and gay couples,” said Human Rights Campaign President Joe Solmonese. “Our community faces unique challenges in preparing for retirement because we are denied Social Security spousal and survivor benefits. Protecting our hard-earned retirement savings is even more crucial to us, and until now, the tax code made it that much harder.”

Republicans may have done crack oppo-research on Al Franken, but they couldn’t have also arranged for uncannily targeted third-party ad buys on local TV news … could they?

On WCCO-TV’s 10 p.m. news Wednesday, Amelia Santaniello teased there’d be a story on Al Franken’s tax woes after a commercial break. First ad up (watch it here) shows stormy seas from a what looks like the point of view of a drowning person – barely above the surface of the waves. Ominous words come at you:

IF YOU’RE NOT PAYING YOUR TAXES

IT’LL CATCH UP TO YOU

AND IF YOU IGNORE IT

IT’LL ONLY GET WORSE

At this point a wave washes over and all you see are bubbles as you go down. A 1-800 number appears on the screen with a command to call “if you have a tax debt over $10,000.” Only then did the spot depart from what looked like a devastating attack ad, which in any case segued seamlessly into ‘CCO’s report.

That’s the finding by Susan Pace Hamill, a University of Alabama law professor whose expertise comes in the field of taxation — and divinity. She wrote a wrote a book about state tax policies and how closely those policies match the Judeo-Christian standards. As Certain As Death: A Fifty-State Survey of State and Local Tax Laws found that no state has lived up to biblical standards of taxation, and that the Southern states were the worst offenders in terms of taxing the poor in favor of the rich.

Despite conservatives who deride Minnesota’s tax environment, our state has the holiest tax code of any state in the U.S. The New York Times wrote last week, “[J]ust one state, Minnesota, came within reach of the principles she identified, because its tax system is only slightly regressive and it spends heavily on helping the poor, especially through public education.” Public education was a key indicator for Hamill’s research.Hamill looks to biblical principles for her research. In a paper published in the Virginia Tax Review, she outlined her theological interpretations of taxation. “While protecting all people regardless of their level of income, wealth, and power, Judeo-Christian standards of justice express special concern for those with little wealth and power, and require those at higher levels of income and wealth to endure real economic sacrifices beyond their voluntary efforts of beneficence and charity.”

In other words, according to her findings, a progressive tax policy is the most Judeo-Christian, and flat taxes and tax cuts for the rich are immoral.

Hamill says that while the Bible finds the type of redistribution of wealth under socialist or communist immoral, the balance still tips toward progressive taxation. “Despite the very real limits that clearly distinguish faith-based ethics from liberal-leaning, intellectually-based secular ethics, these limits cannot be used to support an individualistically centered and exclusively free-market-oriented community and economy,” Hamill writes. “In striking this balance, a community grounded in Judeo-Christian values ensures that adequate tax revenues guarantee everyone, not just those at high levels of income and wealth, a reasonable opportunity to reach their God-created potential.”

And the money generated from taxes doesn’t just go to basic services. “Tax policy guided by Judeo-Christian ethics raises a level of revenues that greatly exceeds the funding essential to cover the functions of the minimum state.”

Minnesota has several Judeo-Christian organizations who follow tax policy, but instead of finding Minnesota to be in tune with biblical standards, they deride Minnesota’s tax structure. The Minnesota Family Council, known for its opposition to rights for lesbian, gay, bisexual and transgender Minnesotans as well as opposing reproductive choice, has taken a strong stance on the state’s tax structure, often calling for tax cuts, opposing tax increases and criticizing government spending.

Minnesota Majority, another group opposed to LGBT rights and reproductive choice, takes an even stronger stand on taxes, a stand that Hamill would likely say is immoral. “Our nation’s current progressive tax system effectively represents a version of the “taxation without representation” situation that our founders so vehemently opposed,” says the group’s website. “It is clearly unfair to provide the same power of the vote – and therefore the same voice in government – to all citizens while requiring some citizens to relinquish a higher percentage of their income than others.”

Those same founding fathers who “would vehemently oppose” a progressive tax structure were also Christian men, according to Minnesota Majority. “Our nation’s founders understood that our inalienable rights came from God,” says one page of the website. “At the dawn of our nation, God was considered to be the source of moral values – that which was considered to be moral or immoral transcended personal or societal opinion,” says another.

According to Hamill’s research, if those founding fathers were men of God, then the only moral tax code they would support would be a progressive one, one that Minnesota’s tax structure most closely resembles.

Missing from one Judeo-Christian website? A discussion of poverty and the poor. The word “poverty” occurs only once on the Minnesota Majority website, and the word “poor” happens only once in the context of people with little means (for comparison, the word “homosexual” occurs 118 times).

And while many social and fiscal conservatives argue that charitable giving is the solution to the problems facing society, Hamill argues that Judeo-Christian standards disagree. “The Bible commands that the law promote justice because human beings are not good enough to promote justice individually on their own,” she told the Times. “To assume that voluntary charity will raise enough revenues to meet this standard is to deny the sin of greed.”