IRS Ends Two-Year Probe of California Church's Anti-War Sermon

OMB Watch 9/25/07

All Saints Episcopal Church in Pasadena, CA, recently announced that the Internal Revenue Service (IRS) investigation which began in June 2005 has now been closed. The IRS will not revoke the church’s tax-exempt status because of a 2004 anti-war, anti-poverty sermon delivered by its former pastor Rev. George F. Regas on the Sunday before the 2004 presidential election. However, the IRS concluded that the church in fact intervened in the election. While churches and other tax-exempt organizations are prohibited from endorsing or opposing political candidates, the 2004 sermon did not urge anyone to support either President Bush or Sen. John Kerry (D-MA).

All Saints released the Sept. 10 letter from the IRS, which concluded without explanation that “the Church intervened in the 2004 Presidential election campaign. We note this appears to be a one-time occurrence and that you have policies in place to ensure that the Church complies with the prohibition against intervention in campaigns for public office.” In response, the church has demanded an investigation of the IRS and an apology.

The church has asked the Treasury Department to determine whether the investigation was politically motivated and whether officials from the Justice Department had become involved in the matter. Through Freedom of Information Act requests, e-mails obtained by the church prove that Justice Department officials were involved in the case before the IRS made any formal referral.

The unfortunate impact of this finding is that it increases uncertainty about what is and is not allowed for charities and religious organizations, who are left unsure of when the IRS may come knocking at their door after public discussion of important social issues. The Los Angeles Times reports that “[Rev. J. Edwin Bacon Jr.] predicted that the vague, mixed message from the IRS after its nearly two-year investigation of the All Saints case would have a continued ‘chilling effect’ on the freedom of clerics from all faiths to preach about moral values and significant social issues such as war and poverty.” Leaders of all faiths preach about social issues to get congregants to understand and act on religious teachings. The IRS must provide some guidance and explain which activities violate the rules against intervening in a political campaign.

All Saints is located in the district of Rep. Adam Schiff (D-CA), who has expressed support for the church. In 2005, Schiff unsuccessfully sought a Government Accountability Office (GAO) investigation into the IRS’ scrutiny of churches and other nonprofits, including All Saints. The Los Angeles Times quoted Schiff as saying, “They thought that All Saints would fold up the tent and admit it was wrong . . . but instead they found a church that would stand up for itself.”

The All Saints Sept. 23 press release states, “In response to a letter closing the two-year old IRS examination, All Saints Church, Pasadena announced today that it has formally referred the numerous procedural and legal errors of the exam to the Commissioner of the Internal Revenue Service and demanded correction and an apology.”

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Filed under IRS & Non-profits, Religions

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