IRS Reviews Church's Status

2004 Antiwar Sermon Sparked Look at Tax Exemption

The Internal Revenue Service is examining the tax-exempt status of a liberal church in Southern California because its former pastor delivered a fiery antiwar sermon that criticized President Bush by name on the Sunday before the 2004 presidential election.

But All Saints Church in Pasadena is more than just standing its ground. The 3,500-member Episcopal congregation has hired a heavy-hitting Washington law firm, unleashed a torrent of publicity and received support from religious groups across the political spectrum, from the National Council of Churches to the National Association of Evangelicals.

In effect, the church and its allies have turned the tables on the IRS, forcing the agency to defend itself against accusations of crossing the line into politics, essentially the same complaint the IRS originally brought against the church in June.

"I'm very interested to know whether the IRS is taking a look only at churches that are critical of the war in Iraq, or also at the churches that are supportive of the war and the president," said the Rev. J. Edwin Bacon Jr., rector of All Saints. "I have no evidence that the investigation is politically motivated, but I do wonder whether it is."

In the 1980s and '90s, when the IRS investigated the ministries of Pat Robertson, Jerry Falwell and Jimmy Swaggart, it was accused by conservatives of targeting the Christian right.

Though constrained by privacy laws from commenting directly on All Saints or naming other churches under investigation, IRS Commissioner Mark W. Everson denied that tax authorities are now using audits to go after the religious left.

He cited a report in February by the Treasury Department's inspector general that said IRS examinations of tax-exempt organizations are marred by tardiness, a lack of clear guidance and inadequate resources -- but not political bias.

"The report was quite clear that the complaints that came in, and the exams that were launched, hit both sides of the aisle. They did not skew one way or the other in the political spectrum," Everson said. "There is absolutely no place for any politics in our consideration of these things."

The Pasadena church made the investigation public. On Nov. 7, Bacon put the IRS's letter of inquiry on the church's Web site, along with a news release. Within 24 hours, he said, he gave 13 media interviews decrying the tax probe as a "chilling" attack on freedom of speech and religion.

"We have been so careful to be sure we did not get involved in endorsing anybody" in elections, Bacon said. "Then for the IRS to look at a sermon and say 'We smell an implicit endorsement' -- that is a place where I will fight, my congregation will fight and, I think, the American people will fight."

Under federal law, religious groups and other nonprofit charitable organizations that qualify for tax exemptions under Section 501(c)3 of the tax code may not "intervene in . . . any political campaign on behalf of (or in opposition to) any candidate for public office." If the IRS determines that a charity has intervened in an election, it can remove the group's tax exemption, though it has seldom done so.

Everson said that after the 2004 elections, the IRS received 170 allegations from the public of improper political activity by 501(c)3 organizations. He said a panel of three IRS career civil servants reviewed the complaints and launched inquiries into 132 organizations, including about 60 churches. More than half of the inquiries have been completed, thus far without penalties, he said.