Wednesday, May 19, 2004

Of particular interest following yesterday’s discussion of whether the Catholic Church’s criticism of Sen. Kerry will result in the loss of its tax exemption: Douglas Cook (Regent) has published The Politically Active Church, 35 Loy. U. Chi. L. Rev. 457 (2004). Here is part of the Introduction:

The title of this Article appears to be an oxymoron. Conventional wisdom holds that under current law, a church cannot be politically active….[T]he notion that churches may not be involved actively in politics is at the same time inaccurate, misleading, and incomplete.

Churches, as religious entities, enjoy a special status under … [t]he First Amendment…. Churches, as exercisers of religion, thus have a constitutional right to pursue their religious activities, even if that pursuit takes them into the political arena. Likewise, churches enjoy a First Amendment free speech right to engage in political speech. Courts have never interpreted the Establishment Clause of the Constitution to mean that churches or religious organizations are prohibited from being active in political matters. A politically active church is thus engaging in constitutionally protected activity.

Nonetheless, many churches have elected to organize and operate under section 501(c)(3) of the Internal Revenue Code (the “Code”). As a condition of enjoying exemption from federal entity income taxation, such churches and many other exempt organizations must refrain from substantial attempts to influence legislation and from any participation in political candidate campaigns. Courts have held that conditioning tax exemption on these political activity limitations does not violate the First Amendment.

In the face of these clear limitations on 501(c)(3) churches, this Article proposes that churches might elect instead to organize and operate as tax-exempt “social welfare” organizations under section 501(c)(4) of the Code. These organizations are permitted a much wider range of political activities than 501(c)(3) entities. Part II of this Article will summarize existing tax law pertaining to the political activities of 501(c)(3) and 501(c)(4) organizations. Part III will examine how the 501(c)(3) limitations have been applied to churches. Finally, Part IV will present a proposal for organizing churches as 501(c)(4) exempt organizations, allowing them to conduct virtually unlimited lobbying and substantial political candidate activity.