To Tax Churches Is to Muzzle Religion

BY Gerald J. Russello

September 6-12, 2009 Issue | Posted 8/28/09 at 1:22 PM

While it is tempting to focus on the raging health-care debate or the Supreme Court now that Judge Sonia Sotomayor has been added to the bench, those concerned about religious liberty need to pay as much attention to what happens in the depths of the administrative state as to the decisions emanating from Washington.

The apologetics group Catholic Answers knows that danger all too well.

In 2004, the Internal Revenue Service investigated Catholic Answers for allegedly improperly interfering in the 2004 presidential campaign. The supposed violations revolved around two e-letters posted on the Catholic Answers website, Catholic.com. The letters deal not with politics or whom Catholics (or anyone else) should vote for, but rather with the propriety of letting Catholic politicians who are known not to support Church teaching, in this case abortion, receive Communion.

The IRS found these letters to be “political expenditures,” which meant that the publication of the letters possibly violated Catholic Answers’ status as a tax-exempt religious organization. After a lengthy audit of Catholic Answers, the IRS essentially forced the president of Catholic Answers, Karl Keating, to pay for the letters personally.

Catholic Answers sued the IRS for a refund in federal court in California. In essence, Catholic Answers is arguing for a decision holding that the rules the IRS uses to find supposedly violative “political” conduct by religious groups is too vague to be of any use and subject to abuse. The IRS has agreed to allow Catholic Answers to refund Keating, but has not moved from its position that the letters were improper interference in a political campaign.

An IRS finding that a church or other religious organization has violated the prohibition on political activity can be devastating. Not only would the entity have to pay taxes, but their contributors’ support of those institutions may no longer be considered deductible. And not many religious entities have the resources to combat IRS audits, and so may feel compelled not to resist.

To maintain their tax-exempt status, IRS regulations provide that churches “must not provide a substantial benefit to private interests, they must not devote a substantial part of their activities to attempting to influence legislation, they must not participate in, or intervene in, any political campaign on behalf of (or in opposition to) any candidate for public office.” Needless to say, these provisions are somewhat vague and are possibly subject to manipulation or abuse. Indeed, as the Catholic Answers case shows, the plain discussion of doctrine that may have public implications can too easily be transformed into prohibited intervention in a political campaign.

This danger is of especial concern to Catholics. The Church is a private institution, of course, but one with a concrete, public existence, one that of course long predates the IRS and even the nation. It has a long tradition of calling leaders to repent and live in the fullness of the faith they profess, no matter the particular political system. While no American bishop has called a politician to repent as Henry IV at Canossa did a thousand years ago, nevertheless the Church has never denied the ability to do so. The public acts and personal faith of Catholics cannot be as easily separated as the IRS may think.

We should also be mindful of the proper basis for protecting churches against taxation from the state, which in the United States, at least, is a protection of long standing. Since the 18th century, churches in the United States have been exempt from taxation and have enjoyed other favorable tax benefits. But the understanding of the bases for these protections has shifted. Churches do not exist by sufferance of the state, and not taxing churches is good policy not because the state may believe it is a good idea.

Rather, like our right to worship freely, the existence of churches and their ability to freely practice their faith — including calling politicians to live that faith — exist apart from, and prior to, state power. If taxation is one way for the state to limit and restrict churches to fulfill their mission, and so is limited, the threat of removing tax-exempt status can be used to the same effect. In any event, why can’t churches promote political positions? Involvement of religious organizations with public causes — such as those against slavery or in support of the temperance movement — are a firm part of American history. The evolution of the IRS rules has become another example of a secular culture hostile to the religious traditions of the nation.

The targeting of churches that engage in unpopular advocacy is very real. An April 2009 Department of Homeland Security report on “extremism” explicitly identified “anti-abortion” groups as one possible type of right-wing extremist group. While the report makes no mention of the Church or Catholics, nevertheless there is a common theme evident. If pro-life agitation can be a sign of an extremist group, then discussion of the proper ecclesial response to politicians who advocate the contrary position can perhaps be too easily seen as improper “interference” in political campaigns — like the protests against the contributions the Mormon church made in support of California’s Proposition 8. There, too, arguments were made to eliminate the Mormons’ tax-exempt status as punishment for engaging in public debate.

Religious freedom remains a robust part of the American heritage of constitutional liberty, and the chances of churches losing their tax-exempt status remain, thankfully, small. Nevertheless, as the Catholic Answers case demonstrates, that heritage cannot be taken for granted.

Gerald J. Russello is a fellow of the

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