Nonprofits and Tax-Exempt Status

For those of us involved in war tax resistance, the issue of working or doing programs with organizations that have the tax-exempt status 501(c)3 comes up fairly frequently. Just recently I was talking about a potential war tax resistance workshop with a group for which I have great respect and who are very supportive of war tax resistance. When I suggested a certain activity as part of the workshop, the organizer hurriedly said, “Oh, no, we couldn’t sponsor that; we’re 501(c)3.” Admittedly, my suggestion may not have been the most brilliant idea, but I was surprised at her quick reaction.

NWTRCC is, of course, an organization that has never considered seeking tax-exempt status, and there are a few others, like War Resisters League, one of NWTRCC’s founding groups, who decided long ago that applying for 501(c)3 would constrain their work. But this discussion is bubbling up in other circles too. Last year I heard about the 2004 INCITE women of color against violence conference called “The Revolution Will Not Be Funded: Beyond the Non-Profit Industrial Complex.” Left Turn Magazine ran an article about the conference by Eric Tang, “The Non-Profit & The Autonomous Grassroots”. Tang quoted speaker Suzanne Pharr as saying: “We, the Left, have been described as being weak, fractured, disorganized. I attribute that to three things — COINTELPRO.* 501(c)3. Capitalism.” We’ve heard many analyses of what’s wrong with “the left,” but the question of tax-exempt status doesn’t usually come up.

In the December 2005 More Than a Paycheck we ran a small piece about All Saints Church in Los Angeles, which was under investigation by the IRS (see The following article was sparked by that event. In 2007, the IRS determined that they were able to keep their tax-exempt status. Shelley Douglass’s note was solicited for this issue.

—Ruth Benn

* FBI program aimed at investigating and disrupting dissident political organizations within the United States (1956–1971).

All Saints vs. the State

by Matt Vogel

This article is reprinted from The Catholic Worker, January–February, 2006.

On November 7, 2005, the Los Angeles Times reported that All Saints Episcopal Church in Pasadena, California, had been warned by the Internal Revenue Service (IRS) that its tax-exempt status was in danger because of an antiwar sermon given by Rev. George R. Regas, the former rector of the church. The sermon was delivered in 2004, shortly before the presidential election and imagined something of a conversation between Jesus, John Kerry, and George Bush, harshly criticizing President Bush for the war in Iraq. It included the suggestion that Jesus would never have supported the war.

In a political climate in which religion is playing an increasingly important role, especially amongst conservatives, such an investigation smacks of selectivity. Why, when numerous churches invite politicians and generals to speak from the pulpit during religious services or when tax-exempt religious organizations produce voter guides that all but link salvation to a particular slate of candidates, was All Saints Church singled out? It seems odd that a sermon that did not endorse any particular candidate and that came from a church and a priest who had attacked previous wars, wars of both Republican and Democratic administrations, should raise the ire of the IRS.

But, this episode begs a much deeper question: why do the churches hold so firmly onto their tax-exempt status? After all, as we see here, tax-exempt status is granted by the government and can be taken away by the government. It is the government that determines what is or is not political speech. Additionally, tax-exempt status is effectively a kind of subsidy to churches, a subsidy that is bought with the churches’ silence on political affairs. This is not to say that Jesus Christ, Scripture, or Christianity itself endorses any particular program, party, or politician. Nor is it to deny churches’ myriad good works, which themselves contribute greatly to the common good.

However, the Church ought to be more than just another nonprofit agency. Indeed, what lies at the heart of the Church’s mission is the proclamation of the Gospel, the Good News of Jesus Christ. This is never easy, it requires a certain amount of independence, an independence difficult to secure when financially dependent on anything. We have seen, in the harsh persecution of the Church over the centuries and in the blood of the martyrs, the difficult demands of living a faithful life. Scripture does not recommend any specific political plan, no, but the message infers the political. Time and time again Jesus castigated the powerful and turned to the poor and lowly, eating with tax collectors and sinners, with love. In a country like the United States, where the gap between the rich and poor is growing steadily and where preemptive war is seen by many as legitimate, to defend the poor is to make a political choice.

A situation like the one at All Saints Church affords us the opportunity to focus our reflection on the nature of the church and its relationship to the State. Are the churches too wary of tax-exempt regulations to speak out in ways that may be deemed political? Perhaps it would be easier if churches were to renounce tax-exempt status and sever ties to the State. The State acts out of its own interest, interests churches often find to be at odds with God’s will and their mission. The Church has always insisted upon its freedom, upon its independence, and has gone to great lengths to maintain both. Does tax-exempt status stand in the way?

Matt Vogel is part of the Catholic Worker community in New York City.

Your Gifts Are Not Tax-Deductible

By Shelley Douglass

“All gifts to Catholic Worker go to a common fund which is used to meet the daily expenses of our work.

“Gifts to our work are not tax-deductible. As a community, we have never sought tax-exempt status, since we are convinced that justice and the works of mercy should be acts of conscience which come at a personal sacrifice, without governmental approval, regulation, or reward. We believe it would be a misuse of our limited resources of time and personnel (as well as a violation of our understanding of the meaning of community) to create the organizational structure required and to maintain the paperwork necessary for obtaining tax-deductible status. Also, since much of what we do might be considered ‘political’ in the sense that we strive to question, challenge, and confront our present society and many of its structures and values, some would deem us technically ineligible for tax-deductible charitable status.”

This is the statement that Catholic Worker in Birmingham, Alabama, prints from time to time; we have experience through Fellowship of Reconciliation with having the tax deductible status threatened and how that constrains a group and eats up time and energy that could be better used. We don’t want to have to deal with the IRS or whoever over our trips to Iraq, for example!

Shelley Douglass is based at Birmingham (Alabama) Catholic Worker.

War Tax Resistance and Tax-Exempt Status

From NWTRCC’s Practical War Tax Resistance #6, “Organizational War Tax Resistance” (2000)

To date, the war tax resistance movement is unaware of any nonprofit organization that has lost 501(c)(3) tax-exempt status due to its position or action relating to conscientious resistance to war taxes. There is also no indication that the IRS has ever even considered a campaign to challenge tax-exempt status on such a basis. However, it is possible the IRS could argue that support for war tax resistance violates the definition of “charitable” in the legal sense.

Due to varying decisions in court cases in recent years, it’s not clear how the IRS or a court would rule on the question of “charitable” status if faced with an organization that supported war tax resistance but did not directly and immediately advocate it. It is clear that a group whose primary purpose was to advocate civil disobedience of any sort would have trouble qualifying for tax-exempt status. However, there is some precedent that tax-exempt status would not be revoked if illegal activities were merely incidental to the purposes of the organization (U.S. v. Omaha Live Stock Traders Exchange, 366 F.2d 749, 751 (8th Cir. 1966)).

Editor’s note: Since the 2004 elections, the IRS says that it is investigating more tax-exempt organizations, especially churches, for involvement in political campaigning. Of the 40 churches that were investigated, 37 were found to have broken the law. They were given warnings or in some cases paid a tax, but none had their tax-exempt status taken away. (New York Times, 9/18/06)