Tuesday, July 22, 2008

Kenneth Copeland Ministries Responds to Grassley Memo: Through a Glass, Darkly

Last week, we reported that Senator Charles Grassley had issued a lengthy and detailed memorandum regarding the status of his investigation of certain Megachurches.  Kenneth Copeland Ministries recently responded to Grassley's memorandum with its own press release (scroll down one third):

The Church’s position continues to be that it has responded to the request of Senator Grassley in good faith and to the greatest extent possible without compromising the privacy, confidentiality, and freedom of association rights and protections afforded to the Church by the United States Constitution and the Internal Revenue Code (the “Code”).  As stated in the Church’s letters of December 6, 2007, and March 31, 2008, to Senators Grassley and Baucus, and in discussions with Committee staff members, the Church continues to believe that the most timely and efficient way for the Committee to obtain the requested confidential information — without compromising the universally recognized fundamental constitutional and statutorily based rights of this Church and all religious institutions — is for the IRS to request and obtain the information through a “church tax inquiry” under section 7611 of the Code.  At the completion of the 90-day inquiry period provided by section 7611 of the Code, the IRS would have in its possession and available for disclosure to Senator Grassley all of the confidential information, including financial data, Senator Grassley is seeking from the Church.

In his memorandum, Grassley accused some of the churches of hiring Washington DC law firms to assist them in "foot-dragging".  I'm a praying man, but I'm not quite sure at all what to make of the Kenneth Copeland response.  On the one hand, I gotta say that the Kenneth Copeland response seems to confirm that allegation.  The IRS is extremely loathe to initiate a church tax inquiry and Kenneth Copeland's lawyers probably understand that all too well.  And while Grassley sits on a committee that no doubt has the IRS' ear, he cannot simply mandate that the IRS initiate a church tax inquiry under IRC 7611. There is, indeed, a question as to whether the statute is yet applicable.  I suspect that if the Service did initiate a church tax inquiry, Kenneth Copeland ministries would argue that the Service does not meet the "reasonable belief" standard required of that statute.  The press release does not say that 7611 applies, exactly, but merely that the IRS should "request the information" under that statute.  I doubt that the press release will be construed as a waiver of the requirements under that statute, nor will Kenneth Copeland treat it as such. 

On the other hand, I agree with Kenneth Copeland when he asserts that houses of worship are a different sort of tax exempt entity and should not be subject to the regular sort of government oversight Grassley asserts:

However, the Church respectfully disagrees with Senator Grassley’s position that churches are no different from any other tax-exempt organization.  Any government inquiry into the affairs of a church raises serious constitutional issues that must be carefully balanced against the government’s need to evaluate the effectiveness of the laws of the land.  To ensure its constitutional rights are not unnecessarily infringed upon, the Church firmly believes that it must be given the protections from disclosure afforded by the federal tax laws and the benefit of the processes and procedures that apply to inquires of churches made by the IRS.  Without such confidentiality and due process of law, the potential exists for the information to be used in an effort to damage or attempt to embarrass the Church, its pastors, and its members.  Any such use of the information provided interferes with, and ultimately threatens, the religious liberties of this Church, the thousands of other Pentecostal and Charismatic Churches who preach the “Word of Faith” message, and all other churches — irrespective of their particular doctrine or faith.

Though the religious blogs (like this  one) seem on both sides of the issue, those in support of Kenneth Copeland generally assert that the government has no business prying into the finances of houses of worship (see the comments to the blog linked above).  They basically state that followers can make their own decisions regarding the extent to which they financially support their religious leaders.  Gotta point there. 

The Senate Finance Committee, and Grassley in particular, present an interesting context in which to study the effects of the "bully pulpit" on tax exemption jurisprudence.  It doesn't yet appear that Grassley will push this to the point of a Congressional subpoena -- IRC 7611 imposes limitations on the Secretary, by the way, not the Congress -- but as with colleges and  universities, he is seeking to bring public attention and pressure on houses of worship in an effort to influence their financial affairs.  While the effort seems to have resulted in symbolic gestures in the higher education community, I'm not quite sure they have had (or should have) any effect in the religious community.  We see through a glass, darkly.

dkj

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Comments

They basically state that followers can make their own decisions regarding the extent to which they financially support their religious leaders.
Why wouldn't that apply to any non-profit? What makes churches unique in this respect? One answer, I'd imagine, is that churches are different from other non-profs in that the benefits accrue largely to the membership of the church, and if they want their pastor earning a 6 or 7 figure salary, by gum, it's their business.

That response effectively cuts off at the knees the rationale for exemption in terms of public benefit. The revealed theory of exemption, then, would have to diverge from that of other non-profs (which likely leads to something like sovereignty theories of exemption for churches). And I think that tracks existing law, as much as I think churches should be treated like any other nfps.

Posted by: jpe | Jul 22, 2008 5:55:30 AM

The irony of the Copeland claims of "privacy" is that the filing exemption for "churches" is based on the very public nature of most churches. So, unlike most other charities (and most other religious organizations, because there is a difference between a religious organization and a "church"), churches are not required to file annual tax-exempt information returns (Forms 990). Instead, the government relies on the membership of the church to police its own finances.

And, in every church I have attended, the financial affairs of the church, including both contributions received and the salaries of the pastor and other paid staff members, were known to all of the members of the church, as well as to anyone else who chose to attend meetings of the congregation. The identity of donors was kept confidential, but the totals received were not a secret, and neither were the amounts of compensation or other expenses paid, or to whom paid.

But these principles don't necessarily apply to churches led by charismatic preachers who control not only the pulpit and the theology but the checkbook and the fisc as well.

A "private church" is an oxymoron, and we should not allow religious leaders who can dominate their congregations to dominate our tax laws as well.

Posted by: D Evans | Jul 24, 2008 4:38:32 AM

I thinkn that Copeland has a godo argument here. Grassley could have saved himself a good bit of trouble had he simply used a typical IRS investigation. Copeland himself invited one. This, of course, would mean that Grassley would have to keep the information confidential. So why did he reject typical protocol and go this route? Leaves me wondering...

Posted by: Toes Tapping | Jul 29, 2008 2:23:36 PM

Of course Grassley's sources and motives are questionable here. It seems that his crew is continuing to try to find allegations with the most recent being the nepotism angled attack last week. It is becoming apparent that Grassley's motives weren't all as he implied in the beginning. Thank goodness Copeland is fighting this - I fear the precedents that could come out of this situation.

Posted by: Tyler | Aug 4, 2008 11:51:12 AM

Seeing the latest attack using the nepotism angle by Grassley's camp, has reinforced the fact that this has dragged on for too long. Grassley screwed up in his handling of this investigation, and Copeland is not backing down. I say end it, and get back to some more serious issues.

Posted by: TGIF | Aug 8, 2008 2:24:32 PM

The Grassley “investigation” is wearing thin and running out of steam. The nepotism ploy is just the latest absurdity. Retort on this is building - from the public, supporters, ministries totally unconnected with the WOF message and even within his own party.

Anyone else wonder about the status of those two who have divvied up their records en toto? Mr. Grassley’s got what he said he wanted from them. So, what’s the result? The IRS turns this around in a few months. He’s stalled with the ball in his court now. Why? Verdict please. Innocent or guilty? Cleared or smeared? Either produce the mud or dry up. Instead, they are left dangling on the media circus wire.

Judicial/investigative process in the US is expected to give a ruling, especially when the media spotlight has been drawn to it. It is no wonder some of the group have chosen not to be drawn into the show. We now see it has made little difference whether you complied or not. Everyone is still left in that cage Mr. Grassley shoved them in with everyone gawking and poking at them. The holdouts were right.

Posted by: Charles | Aug 12, 2008 6:28:03 PM

The Grassley “investigation” has just spun one more dimension out of orbit.

The nepotism ploy is just the latest absurdity. Retort on this is building - from supporters, the public, ministries totally unconnected with the investigees’ message and within his own party.

Anyone else wondering about the status of the two of the six who provided all their records - en toto? Mr. Grassley’s got what he said he wanted from them. So, what’s the result? The IRS only takes a couple of months on this. Verdict please. Innocent or guilty? Cleared or smeared? Either produce the mud or dry up. Instead, they are all left dangling on the media circus wire. Now this.

Didn’t we all hear at the beginning that this was not about doctrine - no, no, not at all - and now it is about nepotism. They’ve just made obvious what many saw from the beginning -- that it was never about financial records.

It is no wonder some of the group chose not to be drawn into the charade. We now see it has made little difference whether you complied or not. The holdouts and the compliers are all still left in that cage Mr. Grassley shoved them in, still subject to everyone gawking and poking at them.

The holdouts were right.

Posted by: Charles | Aug 14, 2008 8:54:27 PM

To me, the nepotism charge has made it obvious that this so-called investigation has never been about accounting records or use of money. The ones who sent it all in seem to be still on the griddle. The IRS only takes a couple of months to do this. With something as public as Senator Grassley has made this, it seems those who provided everything he asked for should be given some public statement of release pretty soon. Don't you know if he found things badly out of order, he would have passed that along to the media. He's not been shy to do that. It seems a lack of justice. Where is due process in this?

Posted by: Laura | Aug 16, 2008 4:59:52 AM

Charles & Laura - great comments. You are right - I have watched this from the beginning, and Grassley has mishandled this situation from day one. Copeland was right to fight this from the beginning, and hopefully he will see the right decision made before this ends. Grassley has lost his grasp on whatever he thought he might have had, and needs to admit his mistakes. This WILL affect us all and as you say - what's the hold up?

Posted by: Jack | Sep 3, 2008 2:13:38 PM

I have to agree jack. I sit here 2 months later and still no conclusion. Grassley lost his grasp a LONG time ago. If not he would have used the sub peonas he threatened. I don't think he realized the strong opposition he was going to face. Thank God for Copeland. Although I am not a follower of his, I do see the big picture here. It's time to end this. Grassley needs to own up.

Posted by: Luke | Nov 4, 2008 8:24:03 AM

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