Selling our soul for tax breaks: electioneering, lobbying and the substantial burden factor under RFRA.

Author:Hickman, Luca L.C.
Position:Religious Freedom Restoration Act


While numerous commentators have explored the many sub-issues surrounding the tax-exempt status of churches, recent events have brought renewed importance to the question of whether churches should engage in political activity at the expense of forgoing tax-exempt status. Central to this renewed importance are the various religious liberties issues which have attracted significant attention during the past several years. For example, the recent Health and Human Services ("HHS") regulation mandating coverage for contraceptives and abortifacients in employee health plans (including religiously-affiliated organizations such as Catholic universities and hospitals) has drawn the condemnation of every American bishop who heads a diocese as well as the Assembly of Orthodox Bishops in North America which represents all 53 Orthodox bishops in the United States. (1) These current events have led even left-leaning periodicals such as the New York Times to characterize Catholic/Government relations as involving a "growing sense of siege" and the HHS mandate as the equivalent of "Pearl Harbor." (2)

In response to government actions like the HHS mandate, which they see as interfering with religious liberties, the Catholic bishops have taken unprecedented steps to influence the political process. One clear example was the benediction given by Timothy Cardinal Dolan at the closing of the 2012 Democratic National Convention, where Dolan made numerous references to pro-life and pro-religious liberty positions. (3) Indeed, many examples of "semi-political" activity by Catholic bishops have recently been reported in the popular press. (4) On several occasions, the actions of Catholic bishops have called into question whether or not the ban on political activity by religious organizations under 26 U.S.C. [section] 501(c)(3) (5) has been violated. (6) Such arguably political activities increased greatly in the run up to the 2012 Presidential election, sparking a lawsuit against the Internal Revenue Service by the Freedom from Religion Foundation for failure to enforce the electioneering ban in 26 U.S.C. [section] 501(c)(3). (7)

While much has been written both in support and in opposition of the ban, (8) the currently available literature was written at a time when churches were less engaged in potentially political speech. Additionally, this body of scholarship appears to overlook an important Free Exercise argument that the courts have implied might be sufficient to overcome a Section 501(c)(3) challenge to church speech. In this Note, I intend to: (1) Survey the history of the electioneering and substantial lobbying ban on tax-exempt organizations found in 26 U.S.C. [section] 501(c)(3); (2) Explain the appropriate Free Exercise tests to 26 U.S.C. [section] 501(c)(3) under both the First Amendment and the Religious Freedom Restoration Act (RFRA); (3) Demonstrate that Catholic doctrine morally obligates the bishops to actively oppose legislation containing, or political candidates espousing, clear moral evils--including through the use of political means which would violate the political-prohibitions in 26 U.S.C. [section] 501(c)(3); and (4) Show that alternatives to directly engaging in political activity--such as the use of derivative lobbying organizations formed under 26 U.S.C. [section] 501(c)(4)--do not sufficiently alleviate the substantial burden placed on Catholics by the electioneering and substantial lobbying ban.

Taken together, these four sections will explain how a litigant could mount a colorable Free Exercise challenge to the political restrictions on Section 501(c)(3) organizations under RFRA. These claims will be constructed using theories that the Courts themselves have suggested may be sufficient to overcome the substantial burden hurdle to a successful RFRA challenge.

While the legal principles discussed in this Note are equally applicable to religious non-profits of all faiths, this Note draws primarily upon Roman Catholic teachings and organizations because of the doctrinal unity and recent political activity of that organization.


    In discussing challenges to the electioneering and substantial lobbying ban on non-profit organizations, it is first prudent to discuss the origins of tax-exempt status itself. The first principle in such a study is the recognition that there "is no constitutional law principle mandating tax-exemption." (9) Rather, "[t]here is no entitlement in a nonprofit organization to tax-exemption; there is no entity that has some inherent right to exempt status. The existence of tax-exemption and the determination of entities that have it are essentially the whim of the legislature involved." (10)

    Despite the seeming lack of constitutional protections on tax-exempt status, constitutional issues are implicated when the conditional privilege of tax-exempt status is revoked upon engaging in Free Exercise behavior that would normally be protected under the Constitution. (11) In the context of Free Exercise challenges to the loss of a federal conditional privilege, RFRA provides even more stringent safeguards than the Free Exercise Clause itself. (12) Accordingly, religious challenges to Section 501(c)(3) should incorporate RFRA claims.

    The earliest exception to a federal income tax for charitable organizations appears to have been included in the Wilson Tariff Act of 1894, (13) which was later found unconstitutional by the Supreme Court in Pollock. (14) After passage of the Sixteenth Amendment, (15) Congress enacted the Tariff Act of 1913, which once again included tax-exemption for religious organizations. (16) Regrettably, the congressional record does not appear to provide illumination for the Congress' reasoning for exempting charitable organizations from taxation in this act. (17)

    The lobbying restrictions as they exist in their current form may be traced back to the Revenue Act of 1934, (18) which provided tax-exemption for certain organizations, including those "organized and operated exclusively for religious ... purposes." (19) While there were no specific statutory restrictions on lobbying activities prior to the 1934 amendments, early treasury regulations provided that organizations "formed to disseminate controversial or partisan propaganda" were not "educational" within the meaning of the 1913 Act. (20) This restriction was the result of considerable early litigation, most notably Slee v. Commissioner. (21)

    In Slee, Judge Learned Hand, writing for a unanimous court, held that organizations could engage in some lobbying where "[t]he agitation is ancillary to the [charitable] end in chief, which remains the exclusive purpose of the association." (22) It is generally believed that the 1934 substantial lobbying restriction was a codification of the Slee decision and a rejection of the strict position taken in the 1919 treasury regulations. (23) However, the 1934 amendments adopted a different test than the court in Slee, deciding on an activities-based "no substantial part" test rather than an intent-driven "destination of lobbying" approach." (24)

    While the legislative history behind the 1934 act is sparse, (25) it does provide some insight into the intent of the legislature in crafting the first political restrictions on federally tax-exempt organizations. The lobbying restriction was added as a floor amendment to the Revenue Act of 1934 and sent to the Senate Finance Committee. (26) This floor amendment also included an early version of the electioneering ban that restricted "participation in partisan politics." (27) Perhaps instructively, this provision was deleted in conference because, as one Congressman stated, "[w]e were afraid this provision was too broad." (28)

    The vague congressional record also includes rather sharp criticism from Senator David Reed, the ranking minority member of the Senate Finance Committee and apparent sponsor of the amendment, who wrote: "[W]e found great difficulty in phrasing the [substantial lobbying] amendment. I do not reproach the draftsmen. I think we gave them an impossible task; but this amendment goes much further than the committee intended to go." (29) Whether Senator Reed was speaking for the entire Committee or merely himself remains unclear. (30)

    After the proposed and rejected "participation in partisan politics" amendments in 1934, the next time electioneering restrictions seem to have been considered was the ban's current incarnation--proposed in 1954 by then-Senate Minority Leader Lyndon Johnson. (31) Once again, this provision came without committee notes or other indications of congressional intent. (32) In fact, this amendment was "added without the benefit of hearings, testimony, or comment" by Johnson during Senate floor debate. (33) Within a few minutes, Johnson's amendment passed on voice vote without debate. (34)

    It does not appear that Johnson targeted or even considered the implications for churches while proposing this amendment. (35) Indeed, George Reedy--Johnson's chief aide in 1954--once wrote that he was "confident that Johnson would never have sought restrictions on religious organizations." (36) Rather, it appears that Johnson's intent was to "insure that the tax-exempt organizations that had supported Dudley Dougherty, his challenger in the 1954 primary election, would not do so again." (37) The final relevant changes to the IRS code took place in the Revenue Act of 1987 when the words "on behalf of (or in opposition to) any candidate" were substituted for "on behalf of any candidate" in an apparent attempt to clarify that mere opposition to a candidate could qualify as political activity. (38)

    Despite the sparse legislative history of these provisions, and the arguable political motivation behind the 1954 amendments, courts have subsequently interpreted Section 501(c)(3) as embodying the constitutional principles of "separation and neutrality" and "the principle that...

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