The San Francisco Chronicle reports that the controversy surrounding California's Proposition 8 has led to accusations that the Mormon Church was improperly involved, violating their the church's tax-exempt status. But the truth is that IRS' strict prohibitions against political activity concern working for or against candidates, not legislation.
"They almost certainly have not violated their tax exemption," said Barry Lynn, executive director of Americans United for the Separation of Church and State, the leading advocacy organization on the issue. "While the tax code has a zero tolerance for endorsements of candidates, the tax code gives wide latitude for churches to engage in discussions of policy matters and moral questions, including when posed as initiatives." Generally speaking, churches, schools, and nonprofits that are 501c(3) organizations are prohibited from spending more than 20 percent of their budgets on political activities… The 20 percent threshold means that the Catholic or Mormon churches, whose organizations span the globe, would have had to spend hundreds of millions of dollars – if not billions – to violate their tax-exempt status.
The IRS guide for churches(pdf) describes lobbying restrictions as falling under a "substantial part" test:
Whether a church's or religious organization's attempts to influence legislation constitute a substantial part of its overall activities is determined on the basis of all the pertinent facts and circumstances in each case. The IRS considers a variety of factors, including the time devoted (by both compensated and volunteer workers) and the expenditures devoted by the organization to the activity, when determining whether the lobbying activity is substantial.
The San Francisco Chronicle reports that the controversy surrounding California's Proposition 8 has led to accusations that the Mormon Church was improperly involved, violating their the church's tax-exempt status. But the truth is that IRS' strict prohibitions against political activity concern working for of against candidates, not legislation.
"They almost certainly have not violated their tax exemption," said Barry Lynn, executive director of Americans United for the Separation of Church and State, the leading advocacy organization on the issue. "While the tax code has a zero tolerance for endorsements of candidates, the tax code gives wide latitude for churches to engage in discussions of policy matters and moral questions, including when posed as initiatives." Generally speaking, churches, schools, and nonprofits that are 501c(3) organizations are prohibited from spending more than 20 percent of their budgets on political activities… The 20 percent threshold means that the Catholic or Mormon churches, whose organizations span the globe, would have had to spend hundreds of millions of dollars – if not billions – to violate their tax-exempt status.
The IRS guide for churches(pdf) describes lobbying restrictions as falling under a "substantial part" test:
Whether a church's or religious organization's attempts to influence legislation constitute a substantial part of its overall activities is determined on the basis of all the pertinent facts and circumstances in each case. The IRS considers a variety of factors, including the time devoted (by both compensated and volunteer workers) and the expenditures devoted by the organization to the activity, when determining whether the lobbying activity is substantial.
