Branch Ministries v. Rossotti (2000)
Religious Tax Exemptions: Political Activity According to tax laws, organizations which receive tax exemptions as charitable trusts are prohibited from actively participating in political campaigns either on behalf of or against any particular candidates for election. They may speak all they want about political, social, and moral issues, but they must avoid statements about the individual candidates. Is this prohibition against churches participating in political campaigns a violation of their free speech and free exercise of religion?
Background Information
Four days before the 1992 presidential election, Branch Ministries, a tax-exempt church near Binghamton, New York, placed full-page advertisements in USA Today and The Washington Times. With the headline "Christian Beware," Bill Clinton was accused of supporting "policies that are in rebellion to GodÕs Laws," along with other vituperative attacks on the Democratic party and liberals generally. The ads urged Christians not to vote for then-presidential candidate Bill Clinton because of his positions on various moral issues.
The Internal Revenue Service was informed about these political advertisements and eventually concluded that they violated the prohibition on organizations exempt from taxation from participating actively in political campaigns either on behalf of or against political candidates. For the first time in its history, the IRS revoked a bona fide church's tax-exempt status because of its involvement in politics. Branch Ministries and its pastor, Dan Little, challenged this decision on three grounds: (1) the IRS acted outside its authority, (2) the revocation of the church's tax-exempt status violated the its right to the free exercise of religion, and (3) the church was the victim of selective prosecution in violation of the Fifth Amendment. In 1999 a federal judge in Washington, D.C., held that the IRS acted properly. Branch Ministries appealed this decision to the Washington, D.C. Circuit Court of Appeals.
Court Decision The Washington, D.C. Circuit Court of Appeals rule against Branch Ministries on every single count, thus affirming the first-ever revocation of tax-exempt status from a genuine church.
The argument that the IRS had no authority to place conditions on the church's tax-exempt status was deemed "more creative than persuasive" because it amounted to an attempt to claim that the "church" was not really a "religious organization." A bit more serious was the church's contention that the revocation of their tax exemptions resulted in a violation of their right to freely exercise their religion, both under the First Amendment and the Religious Freedom Restoration Act. According to the church's lawyers in arguments before the court, "The Church at Pierce Creek will have to close due to the revocation of its tax exempt status, and the inability of congregants to deduct their contributions from their taxes." This, however, was not a valid argument to make: The Church appears to assume that the withdrawal of a conditional privilege for failure to meet the condition is in itself an unconstitutional burden on its free exercise right. This is true, however, only if the receipt of the privilege (in this case the tax exemption) is conditioned "upon conduct proscribed by a religious faith, or ... denie[d] ... because of conduct mandated by religious belief, thereby putting substantial pressure on an adherent to modify his behavior and to violate his beliefs."
In other words, the church was unable to demonstrate that the loss of their tax-exempt status would result in any religious burden. At most they might have less money for their religious goals, but even that is unlikely consider the largely symbolic nature of the revocation. As Judge Friedman noted in the district court decision being appealed here: "[Their] choice [between tax exemptions and political campaigns] is unconnected to [their] ability to freely exercise their religion."
Moreover, the church is not prevented from communicating either its religious or its political beliefs - all that the government had done was inform them that to continue to participate in political campaigns would mean that they would not be able to retain their tax-exempt status. The church could also choose to form a companion organization which was not tax-exempt and, hence, could speak out either on behalf of or against individual political candidates. Finally, the Court rejected the argument that the church had been the target of selective enforcement in violation of the Equal Protection Clause of the Fifth Amendment. Although the church was able to provide evidence that other churches elsewhere had engaged in activities which may have resulted in their loss of tax-exempt status, they were not able to demonstrate the existence of any churches which had done anything remotely similar to their own actions and then ignored by the IRS.
Significance
This was the first time that a bonafide church, as opposed to a non-church religious organization, had had its tax-exempt status revoked by the IRS. For many reasons it should send a message to churches and religious groups all over the country that they must take care in how they frame their political messages. Although they can speak out on political, social, and moral issues, they are not permitted to attack or defend political candidates.
Unfortunately, this is also a largely symbolic decision. If the church does not intervene in any future political campaigns, it can continue claiming 501(c)(3) status and receive all of the attending benefits. Even the letter in which the original status was revoked did not, according to the IRS, "convert bona fide donations into income taxable to the Church." The church can even reapply for official tax-exempt status.
So what does the ruling mean? According to the court decision, "All that will have been lost is the advance assurance of deductibility in the event a donor should be audited." This means that people who contribute to the church are not assured, in advance, that their contributions will be tax-deductible because of the status of the church. Donors to the church may continue to deduct their contributions; but in the event of an audit, they will bear the burden of proving that the church meets the requirements.
It is interesting to note the extreme language of fear employed by ACLJ Chief Counsel Jay Sekulow when discussing this case and using it as a means to get people to donate more money to the ACLJ. He said that the group was making the case their "top priority" and that "If we lose this battle with IRS, IRS could use precedent to threaten every church in America into silence," implying (or rather, misrepresenting) that clergy and churches are somehow lacking in their ability to speak out on vital issues.
Sekulow further misrepresented the facts of the case in a mailing where he claimed that the church's only crime was in "highlighting moral issues during 1992 presidential campaign!" In the end, after all of the dire predictions about the world coming to an end should they lose this case, Sekulow only expressed "disappointment" after the actual loss was announced and that he was even "encouraged that this court appears to provide a blueprint for churches to express their beliefs in a political context."
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