Hamill: Here’s one way to encourage the growth of churches

The IRS is an enforcement agency. Specifically, it is charged with, among other tasks, enforcing the tax laws.

As you probably know, recent acts of the executive and legislative branches have led to substantial reductions in the IRS workforce.

Workforce shortages in an agency charged with law enforcement are not unusual. The Albuquerque Police Department could attest to that.

When enforcement agencies have workforce shortages, one consequence tends to be the forced neglect of certain offenses.

Agency decisions to not focus on certain offenses may later be reversed. This may occur because of new leadership or increased manpower.

On July 7, the IRS entered into a consent judgment in the District Court for the Eastern District of Texas, Tyler Division.

Something like this might normally be of little consequence. But it became a nationwide story because of the issue involved.

The case was brought by National Religious Broadcasters, with Texas churches Sand Springs Church and First Baptist Church of Waskom in tow.

The IRS consent was to allow religious organizations, under Section 501(c)(3) of the tax law, to effectively endorse — or oppose — specific candidates for office.

The consent language seems reasonable. It says “When a house of worship ….speaks to its congregation….on matters of faith, it neither participates nor intervenes in a political campaign.”

More fully, speaking to “its congregation through its customary channels of communication on matters of faith….concerning electoral politics” is deemed OK.

So the IRS now says, formally, it will not challenge a 501(c)(3) for political speech as limited by the quoted language. Let’s flesh this out.

The First Amendment prohibits the establishment of a religion by the government. Found in the Bill of Rights, it guards against government intervention in faith.

Section 501(c)(3) grants tax-exempt status to certain organizations. It prohibits such organizations from engaging in political endorsement activities.

There are many other types of tax-exempt organizations. But Section 170(c) of the tax law allows a tax deduction for contributions to a Section 501(c)(3) organization.

There is no tax deduction allowed for a direct contribution to a political candidate for office.

The restriction on political behavior of Section 501(c)(3) organizations is to ensure they are not used as an end run around the prohibition on deducting political contributions.

That said, past Supreme Court decisions have said the First Amendment prohibits government interference in religion.

Tax exemptions are said, by the Supreme Court, to be “benevolent neutrality” not establishing a particular religion.

Section 501(c)(3) status is one of many ways to secure a tax exemption. But it carries with it a special treatment for the person who makes a contribution.

Section 170 allows a tax deduction for contributions to 501(c)(3) organizations. A tax deduction represents a government subsidy of that organization.

It then becomes possible for the government to simultaneously act with neutrality in granting tax-exempt status and to avoid government subsidy of speech.

This simultaneous action involves limiting a tax deduction for contributions to only those tax-exempt organizations that do not engage in prohibited political speech.

The vast majority of churches do not now — and do not intend to in the future — endorse specific candidates for office during their worship service.

The minority of churches that have used worship services to endorse candidates claim First Amendment protection.

If the IRS challenged a church’s Section 501(c)(3) status in the past, the tax effect would be on the deductibility of contributions.

That is, there are plenty of other tax-exempt status provisions that an organization could qualify for while also engaging in political speech.

The problem with the other provisions is that the contributions to the organization may become nondeductible.

So the past treatment of Section 501(c)(3) organizations was to say, if you want a government subsidy of your speech, avoid political speech.

Tax exemptions alone, when neutral to religious belief, do not violate the First Amendment prohibition on establishment.

Tax exemptions coupled with subsidies for contributions (from a tax deduction) need to avoid subsidizing political activity.

But the IRS now says it will make no challenge. Of “internal communications.” Between the “house of worship and its congregation.”

When the communication is “through its customary channels.” What do all these terms mean?

What is the congregation? If video streaming started during COVID, is that customary? Is that even an internal communication?

The IRS consent affects a very small number of churches. But if political groups see an opportunity, we may find ourselves with a growth in churches.