Judgment Day

IRS Can Revoke Tax Exemption Of Church For Partisan Politicking, Federal Appellate Court Rules

In a sweeping defeat for the Religious Right, a federal appellate court has ruled that the Internal Revenue Service may revoke the tax exemption of churches that engage in partisan politics.

A three-judge panel of the Court of Appeals for the District of Columbia ruled May 12 that the IRS acted properly when it withdrew the exemption of the Church at Pierce Creek, a Binghamton, N.Y., congregation that bought political advertisements in the 1992 presidential election.

Writing for the unanimous court, Senior Circuit Judge James Buckley found that "the revocation of the Church's tax-exempt status neither violated the Constitution nor exceeded the IRS's statutory authority."

The Branch Ministries v. Rossotti decision is a major blow to Religious Right efforts to prod churches into electioneering.

"This decision slams the door on mixing religion and partisan politics," said the Rev. Barry W. Lynn, executive director of Americans United for Separation of Church and State. "This is a staggering defeat for Pat Robertson, Jerry Falwell and others who want to convert America's churches into a partisan political machine."

Americans United played a key role in the case.

The dispute began in 1992 when the Church at Pierce Creek took out full-page newspaper ads attacking then-presidential candidate Bill Clinton just days before the November election. Appearing in USA Today and The Washington Times, the ads claimed Clinton supported legal abortion, gay rights and condom distribution in the public schools.

Under a headline blaring "CHRISTIAN BEWARE," the church observed, "Bill Clinton is promoting policies that are in rebellion to God's Laws...The Bible warns us to not follow another man in his sin, nor help him promote sin lest God chasten us."

Adding to the legal implications of the church ad was a line at the bottom of the page that said, "Tax-deductible donations for this advertisement gladly accepted."

Americans United immediately sprang into action. In a Nov. 3 letter to the IRS, AU complained that church's electioneering clearly violated federal tax law and IRS rules barring partisan intervention by tax-exempt groups. "The advertisement presents a gross violation that the IRS cannot ignore lest the regulations become a mockery," observed AU Legal Director Steve Green.

According to court records, the IRS quickly took action. On Nov. 20, tax agents notified the congregation that a church tax inquiry was being undertaken. After a lengthy investigation, the federal agency sent the church a letter on Jan. 19, 1995, announcing that its tax exemption had been revoked.

But it soon became apparent that the Church at Pierce Creek a fundamentalist flock with only about 50 families is no ordinary congregation. The church is led by the Rev. Daniel J. Little, a religious leader best known as the mentor of Religious Right radical Randall Terry of Operation Rescue notoriety. (The two have since parted ways, and Terry has been ejected from the congregation in a dispute over alleged "sinful" relationships with women.)

Little has a cavalier attitude toward the government. In a 1995 TV interview, he said the church didn't seek legal advice before placing the election ads. "Why should we consult attorneys?" he asked. "We have the word of God.... Principle sometimes takes precedent over silly laws."

This militant Religious Right viewpoint gave the church access to powerful allies. Three months after the IRS revocation, the congregation sued the tax agency with help from TV preacher Pat Robertson's American Center for Law and Justice. The ACLJ charged that the IRS had exceeded its statutory authority, violated the church's free speech and free exercise rights and engaged in selective enforcement.

The courts have found the claims unpersuasive. On March 30, 1999, U.S. District Judge Paul L. Friedman rejected the ACLJ's case. Now a higher court has done the same.

The appellate panel includes Judges Buckley, Karen LeCraft Henderson and Laurence H. Silberman, all Reagan appointees who are considered quite conservative. But none of them bought the ACLJ arguments, finding that "the objections are without merit."

The court ruled that the revocation of the tax exemption does not violate the church's First Amendment free speech and free exercise rights. The congregation, Buckley noted, could set up a separately incorporated "social welfare" organization and a political action committee (PAC) if it wanted to get involved in partisan politics. However, the law forbids the use of tax-exempt donations to do so. (The small congregation has refused to reveal where it got the thousands of dollars necessary to place full-page ads in national newspapers.)

Buckley also found no evidence that the church faced discriminatory treatment from the IRS. The ACLJ, he noted, was unable to cite any other instance where a church took newspaper ads in opposition to a candidate. Therefore, there was no foundation for the church's claim of unfair treatment.

The judge was also unimpressed by the ACLJ's astounding argument the IRS has no legal authority at all to deal with the tax exemptions of churches. "We find this argument more creative than persuasive," Buckley observed dryly, noting that Section 501(c)(3) of the IRS Code governs religious organizations. Churches, he said, are clearly religious organizations.

ACLJ attorney Jay Sekulow tried to put the best face on his group's loss. "While we are disappointed with the...case involving the Church at Pierce Creek," he said, "we are encouraged that this court appears to provide a blueprint for churches to express their beliefs in a political context."

But church-state separationists had a completely different view. According to Americans United, which filed a friend-of-the-court brief in the Branch Ministries case, the appellate court action was a significant victory.

"This is an extraordinarily important ruling," said AU's Lynn. "All over the country, Religious Right figures like Robertson, Falwell and others are trying to lure churches into jumping headfirst into politics. This decision should bring those efforts to a grinding halt."

Lynn noted that Falwell has launched a plan to mobilize millions of voters to help elect presidential candidate George W. Bush and other Republican office seekers. Meanwhile, Robertson and his Christian Coalition are raising money to distribute millions of voter guides on behalf of the GOP.

"In light of this ruling," observed Lynn, "pastors who allow partisan politicking in the sanctuary are jeopardizing their church's tax exemption." He said Americans United will make sure that religious leaders across the nation learn of the decision during this election year.