The Law and Local Churches

IRS documents show powers
over non-profit church groups

When people read papers like this that advocate something different from mainstream thought, there is a tendency to say, "How do we know it is true?" Or, "If it is true, why doesn't everyone else know about it and do it?" These questions are good. People need to study and think about uncommon ideas before implementing them. They need to see proof. But they must also ask, whose job is it to make positive changes that go against the mainstream of society?

Let us think about an example. For almost 1,200 years, it was considered dangerous to let the common man read the Bible. Should not such a large, complex and holy book be taught only by the trained, professional priests? That was the thinking of that time. So how did the idea that everyone should read the Bible become common today? Existing heads of state and churches rarely ever implement changes of this magnitude on their own. These changes usually take someone to start them, then many more others to realize their importance and diligently pursue them. John Wycliffe translated the Bible from Latin to English in the 1300s. The idea stayed alive for 200 years and finally burst out all over with the invention of printing and the many Bible translations in the 1500s. The preface of Wycliffe's 1388 Bible said: "Scripture must become the common property of all; a government of the people, by the people, and for the people." This latter idea took about 400 hundred years to catch on—in the United States!

Free churches are a good idea that has worked before and needs to be widely implemented again. But big government, big business, big religion or big education will not promote them. A few individuals and independent church congregations are promoting free churches. Someday there may be hundreds of books, web sites and services helping local congregations form this way.

But for now, individuals forming congregations will have to make their decisions based upon the evidence that they acquire from those who research the issue and their own studies and experience. Some of this evidence comes right out of government publications. Notice the following quotes from the IRS (Internal Revenue Service - the taxing authority in the U.S.A.) Handbook 7.8.2 Exempt Organizations Technical Guidelines Handbook. Please do not be "scared off" by the legal case citations (consisting of a name, followed by "v.", then followed by another name, then followed by a bunch of letters). These provide a way for people to actually look up the court case in a law library and know that they are dealing with a real decision and not just someone's idea.

[7.8.2] 3.6.2 (02-23-1999) Compliance with Statutory Requirements
1. Any religious organization, including a church, must satisfy the statutory requirements to be exempt under IRC 501(c)(3). As explained by the court in Christian Echoes National Ministry, Inc. v. United States, 470 F.2d 849 (10th Cir. 1972), cert . den., 414 U.S. 864 (1973), in which the court upheld denial of tax exemption to a religious organization engaged in substantial legislative activity, "[i]n light of the fact that tax exemption is a matter of grace rather than right, we hold that the limitations contained in Section 501(c)(3) withholding exemption from nonprofit corporations [that engage in substantial lobbying] do not deprive Christian Echoes of its constitutionally guaranteed right of free speech. The taxpayer may engage in all such activities without restraint, subject, however, to withholding of the exemption, or, in the alternative, the taxpayer may refrain from such activities and obtain the privilege of exemption."

Notice that for religious organizations (which would include non-profit corporations and associations), 501(c)3 tax exemption is not considered a right; it is a privilege.

[7.8.2] 3.6.6 (02-23-1999) Actions Distinguished from Beliefs
1. The constitutional protections afforded religious beliefs do not prevent government from regulating conduct or actions when it has a compelling interest to do so. Thus, the First Amendment does not prevent the government from requiring compliance with general laws designed to effectuate an important governmental policy or objective even though compliance may be contrary to an individual's sincerely-held religious beliefs.

4. A notable recent application of this doctrine is Bob Jones University v. United States, and Goldsboro Christian Schools v. United States, 461 U.S. 574 (1983), in which the Supreme Court upheld revocation of the exemption under IRC 501(c)(3) of religious and educational institutions on the grounds that its religiously motivated policy forbidding interracial dating violated a fundamental public policy against racial discrimination. The Court concluded that educational institutions that practice racial discrimination based on religious beliefs are not charitable in the generally accepted legal sense and thus do not qualify for federal tax exemption.

Please note the IRS removed tax-exempt status from this church school organized as a non-profit corporation not because it broke a law that people are required to follow, but because it acted against "an important governmental policy or objective". There is no law against parents teaching their children not to date interracially—there are only laws against public corporations forbidding it. Bob Jones University accepted students of all races, but had a policy against interracial dating. Whether you or I agree that this is the teaching of the Bible is not the issue. The issue is that the IRS can remove tax-exempt status because a church has a doctrine that is not illegal, but contrary to "public policy". It should be obvious that a tax-exempt church organization is being treated like an extension of the government, not like an extension of the family and as a work of Christ.

There is no official definition or legal limit to "public policy". Black's Law Dictionary (6^th ed.) defines it like this:

PUBLIC POLICY. Community common sense and common conscience, extended and applied throughout the state to matters of public morals, health, safety, welfare, and the like; it is that general and well-settled public opinion relating to man's plain, palpable duty to his fellowmen, having due regard to all circumstances of each particular relation and situation.

Governments should act according to law. Christians should act according to the Scriptures.

But "public policy" seems to be "situation ethics"—doing whatever seems right to the government at the moment. Church organizations that teach against homosexuality or even against sex between any two consenting individuals could someday find themselves losing their tax-exempt status for violating "public policy"—without the passing of any new laws.

To demonstrate how far public policy is from law, consider this: The IRS removed the tax-exempt status of the Landmark Church, in Binghamton, New York on May 12, 2000 because they took out full page ads stating that presidential candidate Bill Clinton's views on abortion, homosexuality and condom distribution in schools were unbiblical (a concept similar to John the Baptist's message to Herod—Mark 16:18). The Landmark Church had solicited and received many tax-deductible donations from that ad. But during the same political campaign, Bill Clinton and many other liberal candidates made announced appearances in churches, which caused many additional people to attend and place tax-deductible contributions in the churches' collection plates. It is completely up to the IRS to decide upon which churches they will enforce their public policy and upon which they will not. Appeals courts frequently reverse all convictions when a law is being "selectively enforced". (For example, if a city requires a fire escape for 3-story houses, but only enforces the law against a few "enemies" of the mayor, a court is likely to reject convictions as "selective enforcement".) The Landmark Church raised the "selective enforcement" issue in court and was essentially told that it does not apply to bureaucracies like the IRS.

Before concluding, it would be good to expose one more "bomb waiting to go off" that is in the foundational documents of nearly every 501(c)3 organization. The wording from IRC section 501(c)3 which is included in the founding documents of most tax-exempt churches says:

" no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation"

What does "carrying on propaganda" mean? "Propaganda" is a word not typically used in law. Black's Law Dictionary does not have any definition of this term. It appears only five times in Title 26, the Internal Revenue Code, none of which define it. Each time, it is used in a clause almost identical to the above with the phrase "or otherwise attempting to influence legislation". These words are used to define the term "lobbying expenditures" in section 4912(d). From this, we can deduce that "carrying on propaganda" is something that would influence legislation or the thinking of people in general, but we still do not know exactly what it means. The term "communist propaganda" was typically used in the 1960s and it meant essentially the publishing of lies to achieve communist political ends. But this is not the point of the 501(c)3 wording, since the cross reference at the end of section 501 (currently 501(p)) specifically says that communist organizations are not tax-exempt:

For non-exemption of Communist-controlled organizations, see section 11(b) of the Internal Security Act of 1950 (64 Stat. 997; 50 U.S.C. 790(b)).

The word "propaganda" is a noun form of the verb "propagate", which means "to cause something to be distributed". Here are all four definitions of "propaganda" from the 1966 edition of Webster's New Twentieth Century Dictionary Unabridged:

1. Propaganda in the Roman Catholic Church, a committee of cardinals, the Congregation for the Propagation of the Faith, in charge of the foreign missions.

2. any organization or movement working for the propagation of particular ideas, doctrines, practices, etc.

3. the ideas, doctrines, practices, etc. spread in this way.

4. any systematic, widespread, deliberate indoctrination or plan for such indoctrination: now often used in a derogatory sense, connoting deception or distortion.

The above definitions were very close to those that were in effect when the IRS code was written. Until researching this, I had never thought that the preaching of the Gospel could be considered "propaganda". But would not most churches like to have a "systematic, widespread, deliberate" plan for propagating biblical "ideas, doctrines, practices"? The first definition usage by the Catholic Church shows that the word has a long history of usage for religious evangelizing. Only definition four has a negative connotation. Unfortunately, many government employees and judges would consider a Bible-based Gospel that puts God above the state "in a derogatory sense, connoting deception or distortion".

If the IRS has ever challenged an organization for "carrying on propaganda", it is not known to this writer. There are not a huge number of organizations that have lost their tax-exempt status for "attempting to influence legislation", but the frequency of such events is increasing. Numerous complaints have been sent to the IRS (some published on the Internet) against all kinds of 501(c)3 organizations for attempting to influence legislation contrary to IRS rules. Pro-abortionists turn in pro-lifers and vice versa, liberals turn in conservatives, conservatives turn in liberals, etc. It seems that many are trying to use the IRS as a weapon against "enemy" 501(c)3 groups. Most of these complaints, if pursued, would probably result in the denial of an exemption. It is up to the IRS which exemptions they will deny. Almost no organizations that have challenged the IRS removal of their tax-exempt status have had the decision reversed by a court.

The potential of the IRS to raise money by denying the tax-exempt status of numerous organizations, including churches, is vast. Not only can they take away tax-exemption retroactively for years, making organizations liable for back income tax, they can also charge both the organization and its management each a 5% excise tax on all "lobbying expenditures" for those tax years (IRC section 4912). (This is one of many examples where corporate laws do not protect the people—the IRS can assess penalties directly to corporate management.) "Lobbying expenditures", for purposes of this 5% excise tax, are defined as "carrying on propaganda, or otherwise attempting to influence legislation".

Christians should be preaching that the solution to national and global problems will come when people have the Bible in their heads and Christ in their hearts—not from more and more massive national and global human governments.

Will the IRS classify the preaching of that message as "propaganda" at some time in the future?

Everything they need is ready for them to do it. In other areas, decades sometimes pass between the addition of a code section and the first time the IRS enforces it. The only thing that would seem to stop them is a public outcry. If history is a clue, the IRS would likely move against the most despicable cults and church organizations first. That will not upset many people. Once they have precedents established for defining Bible preaching as propaganda, they can move against more "normal" church organizations. All 501(c)3 church organizations have already agreed to it in their foundational documents.

Do any church organizations ever ask the IRS what they mean by "carrying on propaganda" when they include that phrase in their foundational documents? The ones I helped start did not, and I do not know of any that ever have. (The IRS usually will not give a legally binding answer to questions like this, anyway.) Do the attorneys that incorporate churches advise churches of all the liabilities of agreeing to follow all present and future IRS rules when their meaning is not clearly known?

The whole issue boils down to this: Why should the Church, under Jesus Christ, entangle itself with an incredible mass of rules which are not based on the Bible and can be interpreted by a human bureaucracy almost any way they want? This is doubly true when a country, such as the USA, still allows churches to operate in one of the freest environments possible. Even if the IRS never threatens one church for "carrying on propaganda", the cases where they have removed tax-exempt status from sincere church organizations that went against "public policy" or attempted to "influence legislation" show that 501(c)3 churches are serving "two masters".