If Trump is serious about lifting the prohibition against political activities on the part of churches, then they must be taxed. Churches, as well as other charitable organizations, are prohibited from engaging in political activities. This is not a gag on freedom of speech. Rather, it is a condition on receiving an exemption from income tax and a well established principle of law.
In 1934, Congress amended the statutory predecessor of §501(c)(3) to include the restriction that no substantial part of an organization’s activities may constitute carrying on propaganda, or otherwise attempting, to influence legislation. The intent of the Finance Committee was to stop deductible contributions for legislative ends.
The prohibition of §501(c)(3) organizations from engaging in political activities came into being in 1954, when Lyndon Johnson proposed an amendment to the tax code in order to deny tax exempt status to not only those organizations “…who influence legislation but also to those who intervene in any political campaign on behalf of any candidate for public office.” Congress had previously contemplated inserting language in the code that would have prohibited organizations from participating in “partisan politics” back in 1934, but a draft provision was deleted, because it was thought to be overly broad. Nevertheless, that same year, Congress did amend the code to restrict lobbying activities.
In Regan v. Taxation With Representation of Washington, the Supreme Court upheld the congressional limitation on §501(c)(3) lobbying activities because an organization’s First Amendment rights are preserved through its ability to speak through an affiliated action fund. The Court stated “the IRS…requires only that the two groups be separately incorporated and keep records adequate to show that tax deductible contributions are not used to pay for lobbying. This is not unduly burdensome.”
In Branch Ministries v. Commissioner, the District Court of DC upheld the revocation of a church’s tax exemption under §501(c)(3), because the church had expressed its concern about the moral character of a candidate in the 1992 presidential elections. The church had placed advertisements in USA Today and the Washington Times, stating amongst other things that “…Clinton is promoting policies that are in rebellion to God’s laws,” and “tax deductible donations for this advertisement gladly accepted.”
The Internal Revenue Code treats churches differently from other tax-exempt organizations. While a church may file for Section 501(c)(3) status, it is not required to do so in order to be tax-exempt. A church may simply hold itself out as a church and claim exempt status pursuant to Section 508(c). However, partisan political activities are a direct violation of Section 501(c)(3). The Court noted that the
…plaintiffs have failed to establish that the revocation of the Church’s Section 501(c)(3) tax-exempt status substantially burdened its right to freely exercise its religion…The fact that plaintiffs may now have less money to spend on the religious activities as a result of their participation in a partisan political activity, however, is insufficient to establish a substantial burden on their free exercise of religion. [emphasis added]
There are situations where an organization may engage in advocacy which is essentially political, or where the political actions of others can be attributed to an organization.
In its 2002 Continuing Professional Education Manual, the IRS discussed the possibility that advocacy of an issue might cross the line into “participation or intervention” in a political campaign:
The concern is that an IRC 501(c)(3) organization may support or oppose a particular candidate in a political campaign without specifically naming the candidate by using code words to substitute for the candidate’s name in its messages, such as “conservative,” “liberal,” “pro-life,” “pro-choice,” “anti-choice,” “Republican,” “Democrat,” etc., coupled with a discussion of the candidacy or the election. When this occurs, it is quite evident what is happening– an intervention is taking place…the fundamental test that the Service uses to decide whether an IRC 501(c)(3) organization has engaged in political campaign intervention while advocating an issue is whether support for or opposition to a candidate is mentioned or indicated by a particular label used as a stand-in for a candidate.
The IRS realizes that staff of public charities may become involved in political campaigns and may even endorse candidates. To avoid attribution, charities should ensure that their staff understand the rules, particularly since the use of a nonprofit’s “financial resources, facilities, or personnel” is indicative that the actions of the individual should be attributed to the organization.
The CPE Manual states:
The prohibition against political campaign activity does not prevent an organization’s officials from being involved in a political campaign, so long as those officials do not in any way utilize the organization’s financial resources, facilities, or personnel, and clearly and unambiguously indicate that the actions taken or the statements made are those of the individuals and not of the organization.
There may also be situations where candidates speak at charitable events in their capacity as public figures. Once again, the IRS CPE Manual provides guidance:
Candidates may also be invited to speak at events by IRC 501(c)(3) organizations in their capacity other than as a candidate. Many candidates are public figures for reasons other than their candidacy. For instance, a number of candidates either currently hold or formerly held public office or may be experts in a non-political field. A candidate also might be a public figure as a result of a prior career, such as an acting, military, legal, or public service career. When a candidate is invited to speak at an event in a capacity other than as a candidate, it is not necessary for the IRC 501(c)(3) organization to provide equal access to all candidates. However, the IRC 501(c)(3) organization must ensure that the candidate speaks only in the other capacity and not as a candidate, that no mention is made of the individual’s candidacy at the event, and that no campaign activity occurs in connection with the candidate’s attendance at the event.
One example of the IRS position on organizational endorsements is a public statement which was negotiated with Jimmy Swaggart Ministries as a condition for recovering its tax-exemption:
When a minister of a religious organization endorses a candidate for public office at an official function of the organization…the endorsement will be considered an endorsement by the organization since the acts and statements of a religious organization’s ministers at official functions…and its official publications are the principal means by which a religious organization communicates its official views to its members and supporters.