IRS v. The Church, Part Two

A couple days ago, I attempted to post about a church who had gotten into hot water with the Internal Revenue Service over a sermon that was given by a visiting minister. Unfortunately, I ran short on time and was not able to complete it. I indicated that I would complete it at some future time, and that time is now. However, I've decided to abbreviate my post and just give you some relevant links so that you can check it out for yourself.

 

The first link is to an old American Radio Show program, hosted by Dave Champion, which aired back in May of 2003. His guest that day was Peter Kershaw, author of In Caesar's Grip. This book address how churches have converted themselves into "corporate religious institutions" by signing up for 501c3 tax exempt status.

Hour 1 (RealAudio)

Hour 1 (MP3)

The second link is to an actual web page on the IRS's web site that explains the 501c3 exemption, better known as Publication 557. In particular, I want to draw your attention to two separate sections. The first section states:

Application for Recognition of Exemption

This discussion describes certain information to be provided upon application for recognition of exemption by all organizations created for any of the purposes described earlier in this chapter. For example, the application must include a conformed copy of the organization's articles of incorporation, as discussed under Articles of Organization later in this chapter. See the organization headings that follow for specific information your organization may need to provide.

 

Form 1023.   Your organization must file its application for recognition of exemption on Form 1023. See chapter 1 and the instructions accompanying Form 1023 for the procedures to follow in applying. Some organizations are not required to file Form 1023. These are discussed later in this section.

 

Form 1023 and accompanying statements must show that all of the following are true.

1. The organization is organized exclusively for, and will be operated exclusively for, one or more of the purposes (charitable, religious, etc.) specified in the introduction to this chapter.
2. No part of the organization's net earnings will inure to the benefit of private shareholders or individuals. You must establish that your organization will not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests.
3. The organization will not, as a substantial part of its activities, attempt to influence legislation (unless it elects to come under the provisions allowing certain lobbying expenditures) or participate to any extent in a political campaign for or against any candidate for public office. See Political activity, next, and Lobbying Expenditures, near the end of this chapter.

Political activity.   If any of the activities (whether or not substantial) of your organization consist of participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for public office, your organization will not qualify for tax-exempt status under section 501(c)(3). Such participation or intervention includes the publishing or distributing of statements.

 

Whether your organization is participating or intervening, directly or indirectly, in any political campaign on behalf of (or in opposition to) any candidate for public office depends upon all of the facts and circumstances of each case. Certain voter education activities or public forums conducted in a non-partisan manner may not be prohibited political activity under section 501(c)(3), while other so-called voter education activities may be prohibited.

Seems pretty clear to me. The IRS is saying to those who incorporate under the state and seek tax exempt status will be prohibited from certain activities. Remember, if you are subject to the state, you don't have rights, you only have privileges and benefits which can be terminated without notice and at will.

 

Continuing with Publication 557, the next section I want to look at states:

Organizations Not Required To File Form 1023

Some organizations are not required to file Form 1023.

 

These include:

• Churches, interchurch organizations of local units of a church, conventions or associations of churches, or integrated auxiliaries of a church, such as a men's or women's organization, religious school, mission society, or youth group.
• Any organization (other than a private foundation) normally having annual gross receipts of not more than $5,000 (see Gross receipts test, later).

These organizations are exempt automatically if they meet the requirements of section 501(c)(3).

I wonder why that is? Trust me, this publication doesn't give a complete picture. I'm not claiming to be an expert on 501c3 organizations and church to state relationships, but I know when something smells fishy. For a church to declare it's 501c3 tax exempt status, it moves itself from "outside" to "inside" the government's purview. Why would anyone do that?

 

Also note that the Publication leads the reader to believe that churches are required to file Form 1023 through the language used ("charitable, religious, etc."). It's only later and the publication that we discover that when it said "religious," it didn't intend to include "Churches, interchurch organizations of local units of a church, conventions or associations of churches, or integrated auxiliaries of a church, such as a men's or women's organization, religious school, mission society, or youth group." What other "religious" entities are left if we exclude all of these? This publication is deliberately written to mislead the reader into believing it applies to him.