IRS Says All Saints Can Keep its Tax-Exempt Status

The Los Angeles Times, the Associated Press, and the Pasadena Star News note that All Saints Episcopal Church in Pasadena, California, announced yesterday that the IRS has closed a lengthy investigation into whether a sermon by a former rector shortly before the 2004 presidential election constituted impermissible electioneering in violation of the church's tax-exempt status.  Here's more from the AP story:

In a letter dated Sept. 10, the IRS said the church continues to qualify for tax-exempt status but that Regas' sermon amounted to a one-time intervention in the presidential race. The letter offered no specifics or explanation for either conclusion, but noted that the church did have appropriate policies in place to ensure that it complied with prohibitions on political activity. . . .

[The Rev. Ed Bacon, the current rector of All Saints,] demanded an apology and a clarification from the agency.

The sermon Ed Bacon delivered yesterday is here, and other related documents are here.   Here's the key passage from the September 10 IRS letter to the church:

Based on the existing record, the Church's actions lead us to the conclusion that the Church intervened in the 2004 Presidential election campaign.  We note that this appears to be a one-time occurrence and that you have policies in place to ensure that the Church complies with the prohibition against intervention in campaigns for public office.  We advise you to inform your guest speakers of this policy and to be mindful of that policy when posting information that makes reference to specific candidates during future election campaigns.

The Associated Press also reports that "All Saints has also asked a top Treasury Department official to investigate what the church described as a series of procedural and substantive errors in the case, including what the church said were inappropriate conversations about it between IRS and Justice Department officials."   Here's more from the LA Times on that score:

Along with its requests to the IRS, All Saints has asked a top Treasury Department official to investigate what the church called a series of procedural and substantive errors in the case, including allegedly inappropriate conversations between IRS and Justice Department officials about the investigation.

Those conversations, documented in e-mails obtained by the church through Freedom of Information Act requests, appear to show that Justice Department officials were involved in the All Saints case before the IRS made any formal referral of it for possible prosecution, an attorney for the church said. The discussions raise concerns that the IRS' investigation was politically motivated, church officials said. One e-mail, for example, appears to show coordination between IRS and Justice Department officials about a request to the church for documents. Others discuss the timing of the request and news coverage about the case.

"In view of the fact that recent congressional inquiries have revealed extensive politicization of [the Department of Justice], my client is very concerned that the close coordination undertaken by the IRS allowed partisan political concerns to direct the course of the All Saints examination," attorney Marcus S. Owens wrote in a letter Friday requesting an investigation.

Owens, a former director of the IRS division that handles tax-exempt organizations, said that although liberal and conservative congregations and other nonprofits had been investigated by the IRS in recent years, its examination of All Saints was "highly unusual" in a number of ways, not only in its seemingly contradictory conclusions.

Among other things, he said the agency had never allowed the church the chance that all taxpayers are typically granted when audited to explain and discuss the issues of concern. "There's always an opportunity to do that, to sort of push back," Owens said.

A story in the Pasadena Star News adds this nugget: " 'We want the (blacked-out) names of the IRS and DOJ officials and if any people in the White House were involved' Bacon said at a multidenominational forum after the services."  A letter from the church's counsel to the IRS provides more details on these matters.  Here's how that letter closes:

The Church is currently considering its other procedural options, including ways to ensure that the merits of this case and the government's handling of it are subject to judicial review.  If we do not receive a satisfactory response within thirty days, the Church will have no option but to pursue these alternatives.

I'm not going to comment right now on the church's demands for these investigations.  Instead, I'd like to focus for a moment on these letters the IRS sends organizations when it closes cases.  It seems strange and counterproductive for the IRS not to explain in its closing letter to All Saints exactly why it believes this sermon violated the rules.  The church has always contended that it did not do so, so one would think the IRS would lay out its reasoning in this document.  (Perhaps the IRS explained its reasons in writing in some other document it gave the church, but the church's comments do not make it sound that way.) 

The IRS took the same tack when it dropped its case against the NAACP, issuing a final letter that failed to provide any sense of the way it reached its conclusions in that case.  It apparently did better in its recent letter clearing Focus on the Family (FoF) of any improprieties.  (According to Denver Post, the IRS letter to FoF said that the audit "[r]evealed that Dr. Dobson's reported remarks did not occur in publications of Focus on the Family, did not occur at functions of Focus on the Family, and did not involve Dr. Dobson suggesting that he was speaking as a representative of Focus on the Family.") 

The letter to All Saints did note that the sermon was a "one-time occurence" and the church's policies on these issues were sound.  But it should have also explained to the church (or referred to an earlier explanation, if any had been offered) why that one sermon crossed the line, in its view. And it should follow a standard practice in its closing letters so that all organizations that have been scrutinized and cleared get the same treatment.

Comments

[Michael Westmoreland-White]

This is not full vindication for All Saints and, since I read the sermon in full, it should be. Right wing churches violate the first amendment egregiously. This church did not violate either the 1st Amendment or the tax code. No candidate was endorsed.

If a church cannot preach peace, it cannot preach the gospel!

[Melissa Rogers]

Michael, we'll have to wait and see what these investigations turn up, but it has been my hunch that the IRS targeted All Saints for scrutiny because the sermon referenced voting and the election, named the candidates, and was offered the Sunday before the election. If preachers address the issues without naming the candidates or referencing voting or the election (even the Sunday before an election), I don't think the IRS will come after them (as well it shouldn't). I think the IRS made the right call in closing this matter, but it would be helpful if it would explain the specific reasons this sermon drew IRS scrutiny. If the IRS did so, and my hunch is correct, then the church and others would have a clearer understanding that merely preaching on the issues should never be the cause for IRS scrutiny.

Of course, All Saints has now raised troubling allegations about partisan meddling, and in the past it has cited concerns about procedural irregularities associated with the IRS inquiry and overreaching in terms of IRS requests for church documents and other information. All of these allegations must be examined carefully.