Tuesday, November 18, 2008
The past election cycle brought a lot of attention (see prior blog posts here and here) to the issue of churches intervening in "any political campaign on behalf of (or in opposition to) any candidate for public office . . .," what we in the tax-exemption world call the political campaign prohibition. But it appears that the passage of Proposition 8 in California (making same-sex marriage illegal in the state) has caused some folks in the blogosphere to rediscover the other limitation on political activity in Code Section 501(c)(3): the requirement that "no substantial part" of the activities of an exempt organization can be for the purpose of "carrying on propaganda, or otherwise attempting, to influence legislation . . ." (what we call the lobbying limitation).
Some bloggers and web sites (see here, here and here for a representative sample) have pointed out that the Church of Latter Day Saints expended a lot of money and effort in support of Proposition 8, and believe that LDS should be stripped of its exempt status under the "no substantial part" test for lobbying. But this argument misapprehends the law in this area. First of all, there is no specific standard for what constitutes a "substantial part" of an organization's activities. For example, the 10th Circuit Court of Appeals in Christian Echoes National Ministry v. United States, 470 F.2d 849 (1972) refused to adopt a bright-line mathematical test for "substantiality," instead focusing on the centrality of lobbying to the overall mission of the organization in question:
The political activities of an organization must be balanced in the context of the objectives and circumstances of the organization to determine whether a substantial part of its activities was to influence or attempt to influence legislation. A percentage test to determine whether the activities were substantial obscures the complexity of balancing the organization's activities in relation to its objectives and circumstances. An essential part of the program of Christian Echoes was to promote desirable governmental policies consistent with its objectives through legislation. The activities of Christian Echoes in influencing or attempting to influence legislation were not incidental, but were substantial and continuous. The hundreds of exhibits demonstrate this.
470 F.2d at 855-56. Note the court's reference to the lobbying activities of Christian Echoes as "substantial and continuous" and the "hundreds of exhibits." I think it is fair to say that based on the case record, virtually the entire message of Christian Echoes had lobbying overtones. In contrast, the major denominational churches in the U.S., such as the Catholic Church and LDS, do many, many other things than lobby. Each would undoubtedly take the position that their primary purpose is to spread their religious message, and that this is what they do on a daily basis (along with programs to help the poor, promote social justice and so forth). And in fact, such a statement is true. LDS's (and the Catholic Church's) involvement with Proposition 8 in "the context of [its] objectives and circumstances" was simply a small, incidental part of their ministry, particularly when compared to the record in Christian Echoes.
Second, even though the 10th Circuit declined to adopt any kind of mathematical test, it is almost certainly the case that the amount of time, money, and other resources spent on lobbying at least would be probative of the "substantiality" of lobbying to the overall mission of the organization in question. And again, on this front whatever efforts were expended by the LDS on Proposition 8 pale in comparison to the size of their overall operation. Aside from the fact that the time frame for this activity was limited, one blogger reports that the Church spent $5 million on efforts to pass Proposition 8. Financially, that's probably a rounding error for LDS. While churches do not have to file a Form 990 with the IRS (a travesty that should be corrected by Congress), and thus there is no public record of the assets or income of LDS, there are some informed estimates. For example, a 1997 Time Magazine article estimated the assets of LDS as between $25-35 billion. Richard Ostling's book Mormon America, which grew out of the Time article and was published in 1999, estimated LDS revenues at $5.9 billion annually. And all this was over a decade ago. So . . . some friendly advice for those folks who think they've got a legitimate shot at getting the IRS to revoke LDS's exemption based on its Proposition 8 activities: find a more productive use of your time.
Of course, all this begs more serious legal and policy questions, which are (1) whether we should have political restrictions on charities at all and (2) if so, why do the rules permit some ("insubstantial") lobbying but absolutely prohibit political campaign activity. My own view is that if one of the reasons we grant tax-exemption to charities is because of their role in promoting a pluralistic society (a common explanation for exemption, which I don't necessarily adhere to entirely), I can't understand why we would remove from them the main method by which a minority (I'm using this term in its broadest sense to mean any political minority) can influence policy: petitioning their government. But I understand that this is an issue on which reasonable people (and many unreasonable ones) differ.