IRC Section 501(c)(3) and the end of Free Speech

Section 501(c)(3) of the Internal Revenue Code allows for the income of certain charitable and religious organizations to be tax-exempt. Contributions made to these501s are generally tax deductible to the donor. Most churches in America are tax-exempt 501(c)(3) organizations.

In order to maintain 501(c)(3) status, organizations are limited in the sort of political activites in which they participate. IRS publication 1828 contains guidelines for churches relating to their 501 status.

By voluntarily subjecting themselves to the limitations of 501 status — I wonder whether churches are both rendering to Caesar the things that are Caesar's and rendering unto Caesar the things that are God's.

Let me start by saying that the elders of my church have no desire to enter the political fray — nor do I think they should. However, through my involvement in politics I know of church leaders who feel compelled by their faith to speak out from the pulpit on the political issues of the day. having accepted 501 status their voices have been effectively silenced.

The regulations are somewhat vague regarding allowed and prohibited activities. 501s are allowed to conduct voter registration drives. 501s are allowed to speak out on issues (like gambling, abortion, gay rights, etc.) 501s may not endorse political candidates. 501s may not contribute to political campaigns.

According to the IRS, ministers may endorse candidates publicly and in doing so state their affiliation with their church. However a minister may not do so from the pulpit or in the church newsletter without jeopardizing the 501 status of the church.

My church recently went through a discussion about politicizing the church's electronic prayerlist. There are many practical reasons for not doing so but a couple of people pointed to the IRS and the church's 501 status as a reason.

Churches accept these limitations when they voluntarilty file for 501 status. Why would a church, even one that does not feel compelled to involve itself in politics, choose such limitations? The answer is simple — mammon. Mammon is the term used for worldly wealth in Luke 16:9-13 in the King James Bible. Churches receive significant financial benefits from 501 status.

Contributions to a 501 are often tax-deductable. At the end of the year church members will often look at ther church giving in the same way they look at selling a stock or starting an IRA. If it lowers their tax liability they give more if not they give less. As 501s, churches get to retain all of the money donated to suport the church ministries. Some employers match a portion of an employees giving to 501s and this is an important source of income for some churches. Other churches will take the expenses of running a church school directly out of church funds rather than charging tuition so monies that might otherwise be paid in tuition (and therefore non-deductible) may instead be given to the church (tax-deductible).

I am not suggesting that my church or any other drop its 501 status — I am just musing about the cost of being a 501(c)(3).