Censorship By Taxation

There’s a lively debate going on right now about the free-speech rights of churches and how those rights are restricted by the federal tax code. The group Americans United for Separation of Church and State (AU) regularly files complaints with the Internal Revenue Service (IRS) against churches which it believes to be engaging in illegal partisan activity. The targets of these complaints seem to be white churches which support Republicans and black churches which support Democrats. Americans United also issues helpful public warnings against church involvement in politics. This is all part of “Project Fair Play,” an endeavor which AU began in 1996 in order to educate churches about the anti-partisanship provisions of the tax law. AU’s educational efforts are backed up with the threat of tattling to the IRS.

Unfortunately, most of those fighting this censorship are playing into the hands of Americans United by responding too narrowly to this challenge. Specifically, defenders of the political freedom of churches, in their commendable effort to fend off AU’s attacks, are seeking to exempt churches from censorship laws applicable to all nonprofits, whether religious or secular. This allows AU to assume the posture of demanding equal justice – churches must obey the same laws as everyone else! In fact, it is AU which began the controversy by singling out churches and religious groups for IRS harassment. The best response to such harassment would be repealing the censorship laws altogether, rather than seeking a narrow exemption from these laws for the benefit of churches.

A review of history shows that the ban on partisanship by nonprofits is itself a product of partisan pique, and that both the lobbying and partisanship bans are open to administrative abuse. Americans United ought to be fully aware of this, because as a nonprofit group it has had experience in partisan and lobbying activities, as well as IRS retaliation for these activities.

Fighting discrimination with discrimination

Nonprofit organizations, including secular groups, face a wide range of federal restrictions on their First Amendment rights. A provision of the income tax law provides that tax-exempt charitable organizations cannot “participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” A nonprofit group (more specifically, a so-called 501(c)(3) organization) which violates this requirement loses its exempt status, and contributions to such a group cease being tax-deductible.

In addition to the ban on partisanship, federal law imposes other limits on the political expression of nonprofits. 501(c)(3) organizations cannot devote a “substantial” part of their activities to “carrying on propaganda, or otherwise attempting to influence legislation.”

Conservative Protestant evangelicals, mainly in response to AU’s harassment of “partisan” churches, seem inclined to support a minor change in the tax laws to restore some free-expression rights to their churches. Their hopes are pinned on a bill which has been introduced annually for the past couple of years by Congressman Walter Jones (R-NC). In its present incarnation (as of August 2005), the bill is called the Houses of Worship Free Speech Restoration Act. The bill, H. R. 235, would allow politically-partisan “homil[ies], sermon[s], teaching[s], dialectic[s], or other presentation[s] made during religious services or gatherings.” However, it would not protect churches which make partisan appeals to the general public, nor would it affect the lobbying restrictions applicable to churches.

The narrow scope of the Jones bill may be due to a realistic assessment of the mood of Congress. A more ambitious earlier version of the bill, voted on in 2002, would have given churches blanket permission to engage in partisan activity so long as that activity wasn’t “substantial,” the same standard used to evaluate nonprofit lobbying. This earlier bill failed to get a majority (which would not have sufficed, since the bill had been introduced under suspension of the rules, requiring a 2/3 vote).

Because the most recent version of Jones’ bill, like his earlier versions, would only liberalize the law as to churches, while leaving in place the restrictions on other nonprofit organizations, Americans United is able to take the high ground of nondiscrimination, as it does in one of its position papers:

“The church politicking bills favored by the Religious Right seek to change the law to allow only houses of worship to engage in partisan political efforts. This creates an uneven playing field, in which secular charities would be denied a legal benefit offered to ministries of the same tax status. This favoritism raises serious legal questions about the constitutionality of these proposals. ”

The constitutional objections to these bills are overblown. The tax laws already treat churches differently than other nonprofits, for example by exempting them from certain reporting requirements and by denying them certain lobbying privileges made available to secular nonprofits (see below). However, AU’s point has some validity: Why should the free expression of secular nonprofits be hampered to a greater extent than the free expression of churches? The answer to AU’s objection, of course, is that Congress should restore free expression rights to all nonprofits.

Americans United ignores the discreditable secular origins of the partisanship restriction

Americans United, in one of its pamphlets, praises the anti-partisanship provision of the tax code:

“Contrary to the claims of many in the Religious Right, the IRS is not singling out houses of worship for special regulation. Thousands of educational, scientific, charitable and literary organizations hold the 501(c)(3) status, and all must abide by the legal requirement barring involvement in elections.

“Why does this rule exist? The answer is obvious upon a moment's reflection: Non-profit organizations receive tax exemption because their work is charitable, educational or religious. That tax benefit comes with conditions. One requirement is that tax-exempt organizations refrain from involvement in partisan politics. This is a reasonable rule, since tax-exempt groups are supposed to work for the public good, not spend their time and money trying to elect or defeat candidates.”

Understandably, AU’s pamphlet doesn’t explain the specifics of how the partisanship restriction came into existence, because that story doesn’t jive with simplistic generalizations about a desire to protect the “public good.”

The restriction had the insidious design of suppressing the free speech of secular nonprofit organizations. When the ban on partisan activity was slapped on nonprofits in 1954, Congress was not responding to pressure from Americans United to curb the alleged partisan excesses of the churches. As James Davidson explained in an article in the journal Review of Religious Research, it was Lyndon Johnson, then a powerful U. S. Senator, who added the ban on partisanship ban to the tax code. Two secular nonprofit groups – the Committee for Constitutional Government and H. L. Hunt’s Facts Forum - were supporting Johnson’s political opponents in Texas. Johnson struck back by adding the partisanship ban as a floor amendment to a tax bill. Davidson summed up: “Johnson was not trying to address any constitutional issue related to separation of church and state; and he did not offer the amendment because of anything that churches had done.”

So it would seem that the federal tax code’s censorship provisions were targeted at secular groups which threatened the power-that-be. The effect on churches represents strictly “collateral damage;” churches weren’t the target when these censorship clauses were added. Today’s debate, however, centers almost exclusively on the effect of these clauses on churches, not the broader effect on all nonprofit groups, secular and religious alike.

Although Americans United didn’t inspire the Johnson Amendment, perhaps it was a leading supporter and cheerleader of the measure? AU was on the scene in 1954, when the Johnson Amendment, this essential buttress of the wall of separation between church and state, was added to the tax code. Strangely, though, in light of the vital importance the organization later assigned to the Johnson Amendment, I couldn’t find any evidence that Americans United promoted the measure.

Americans United, in its early years – back when it called itself Protestants and Other Americans United for Separation of Church and State (POAU) – didn’t focus on revoking the tax-exempt status of churches on account of their political activities. POAU’s Manifesto, published in 1947 and pledging to work against the political agenda of the Roman Catholic Church, did not mention the subject of partisanship and tax exemptions. In its early years, POAU worked to take away the tax exemption for churches’ commercial activities, but not to take away their tax exemptions on account of partisanship.

Journalist Harold Fey, in an adulatory, authorized history of Americans United published in 1974 (With Sovereign Reverence ), did not even include the Johnson Amendment in his history or in an Appendix entitled “A Chronology of Significant Events,” which covered the years 1947 to 1973.

The future special counsel to POAU, Paul Blanshard, never got around to demanding a revocation of the Catholic Church’s tax exemption in his lengthy 1949 polemic, American Freedom and Catholic Power. Blanshard criticized the political activities of the Catholic Church, but the only tax benefit he wanted to strip from it was the property tax exemption for certain real estate. It’s not that Blanshard had any libertarian objections to government regulation. After all, his proposals for curbing the power of the Catholic Church included regulating the curriculum of parochial schools and enforcing the compulsory sterilization laws in spite of Roman Catholic objections.

Vague legislation and arbitrary enforcement

Congress enacted the restriction on nonprofit lobbying in 1934, twenty years before it banned nonprofit partisanship. Congress was trying to codify a Treasury Department regulation. The lobbying restriction was explained by Senator David Reed of Pennsylvania, who said that it was aimed at preventing the tax deductibility of “selfish [contributions] made to advance the personal interests of the giver of the money.” Senator Reed acknowledged that the amendment was broader than the evil aimed at, but he said that the committee drafting the law couldn’t find any better language. That’s why the law ends up punishing organizations that engage in lobbying to promote their purely moral convictions, even if the groups’ members don’t stand to benefit financially.

A nonprofit organization violates the law if it a “substantial” part of its activities consists of lobbying. Unless the organization chooses to subject itself to a strict percentage formula for measuring lobbying activity – and churches are specifically denied this option – then the definition of “substantial” is up to the IRS and the courts. The meaning of “substantial” is unclear, as even the IRS acknowledges in one of its publications: “Whether an organization’s attempts to influence legislation constitute a substantial part of its overall activities is determined on the basis of all the pertinent facts and circumstances in each case.” A report issued in June, 2004 by the staff of the Congressional Joint Committee on Taxation says: “Because there is no statutory or regulatory guidance clarifying this standard [of “substantial”], it is not clear whether the determination is based on the organization’s activities, its expenditures, or both.”

In his 1977 book Why Churches Should Not Pay Taxes, United Methodist Church minister Dean M. Kelley pointed out the obvious: That the lack of clear definition of the word “substantial” has a “chilling effect” on all 501(c)(3) groups, not just on churches.

The ban on partisanship is absolute, so there’s no need to worry about the vagueness involved in determining “substantial” involvement. The vagueness problem haunts the partisanship ban, however, because the scope of the ban is often difficult to ascertain. In a newspaper column, Americans United executive director Barry Lynn assured his readers that “[t]ax-exempt organizations, including churches, are free to speak out about pressing issues and social justice.” However, “[c]hurch resources and church personnel may not be used to advance a candidate’s campaign.” How, then, can the IRS tell when a 501(c)(3) group has crossed the line between “speak[ing] out about pressing issues and social justice,” which is legal, and expressing a preference among political candidates, which is illegal? What looks like social – justice advocacy to the group concerned might look like partisanship to someone else.

For instance, what if a nonprofit group issues a public statement saying that, because a particular religion is dangerous to the community, political candidates who belong to that religion must be examined carefully? What if this statement is issued in the context of a political campaign where one candidate belongs to the suspect religion and his opponent does not? Would that qualify as nonpartisan social-justice advocacy, or as partisanship?

A nonprofit group did precisely what I have described back in 1959 and 1960. The organization in question was Americans United – then known as Protestants and Other Americans United for Separation of Church and State (POAU). Responding to the Presidential candidacy of Roman Catholic Senator John F. Kennedy, POAU took out a newspaper ad declaring that Roman Catholic candidates should be “scrutinized with particular care.”

Such candidates, said the ad, should be asked whether they agreed with the Roman Catholic hierarchy concerning public schools, aid to parochial schools, and American diplomats at the Vatican. Kennedy’s opponent, Vice President Richard Nixon, was never catechized by POAU about whether he agreed with the positions of the Quakers, with whom Nixon was affiliated. After Senator Kennedy had made clear that he shared POAU’s attitudes on key church/state issues, POAU shifted to a very supportive attitude. During the Kennedy administration, POAU special counsel Paul Blanshard said that “[i]f Kennedy sticks to his guns, he’ll be re-elected with ease by Protestant voters.”

POAU never lost its tax exemption on account of its intervention in the 1960 Presidential campaign and its aftermath. One can only imagine what the organization would do today if a “fundamentalist” church singled out one Presidential candidate for special scrutiny, and later commended that candidate to “Protestant voters” when he proved himself politically acceptable.

While avoiding trouble under the partisanship ban in the tax code, POAU ran afoul of the lobbying ban. In 1969, after years of getting numerous complaints about the group, the IRS reclassified POAU as a 501(c)(4) organization, meaning that donations to it were no longer tax-deductible. The reclassification was based on allegations that POAU had engaged in “substantial” lobbying. POAU had been advocating a “political doctrine,” according to the IRS – namely, the doctrine of strict separation of church and state. The IRS cited POAU representatives’ frequent appearances before Congress in support of their separationist agenda.

With its tax exemption revoked in retaliation for the exercise of its First Amendment rights, POAU had an opportunity to speak out against the speech-suppressing provisions of the tax code. Instead, the POAU organ, Church and State, complained that the wrong groups were getting suppressed. An editorial said that the Roman Catholic Church and the National Council of Churches engaged in blatant lobbying activities without losing their exemptions. “If the Catholic Church and other religious lobbies lose their tax exemptions,” said the editorial, “then we have no complaint.” Thus, POAU was willing to accept punishment for exercising its First Amendment rights so long as its clerical foes were punished similarly. The religious groups mentioned in the editorial did not lose their tax exemption, and in 1980, POAU (which had by then become plain old Americans United for Separation of Church and State) won its own exemption back.

In light of its own history, Americans United can hardly deny that the censorship provisions of the federal tax code are vague, subject to varying interpretations, and capable of being applied arbitrarily.

IRS censorship of churches is a problem because of unconstitutional federal laws restricting the free expression of nonprofit groups. Americans United singles out churches for special censorship under these laws. The proper response by the churches to such discriminatory harassment on the part of Americans United would be to fight for repeal of the censorship laws. Such an effort would not only attract allies among the secular-minded, it would disarm Americans United of its hypocritical “equality under the laws” argument.