Does the Government Have a Right to Put Conditions on Tax-Exempt Status?


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Just like individuals, entities that have any sort of income are required to pay taxes on that income. This is how we pay for roads, schools, tanks and many other things. But because life is complicated, we have made exceptions for some entities, allowing them to claim tax-exempt status. One would think that the taxpayers, acting through their elected officials, should be able to decide what the conditions are for enjoying such tax-exempt status. For example, there seems to be no reason to grant a tax subsidy to an organization that endorses a political candidate. Most people would agree that we should not grant a tax subsidy for activities geared towards winning political power for an individual or party.

But there is at least one organization that disagrees. The conservative Alliance Defense Fund seems to believe that Congress has no right to set such conditions on an entity enjoying tax-exempt status. The ADF sponsored what it called "Pulpit Freedom Sunday" a week ago, which consisted of 33 conservative pastors endorsing presidential candidate John McCain during church services. If any church loses its tax-exempt status, the ADF wants to challenge this action by the IRS on the grounds that the right to free speech under the First Amendment is being violated.

As one preacher in Minnesota recently put it, "The scripture is very clear about our need to obey all laws," he said. "I want people to realize that there are two laws here that compete with each other. The IRS says that I cannot talk about politics. The Constitution says I can. Unless there's a court battle, we don't know which law to obey."

Actually, there is no conflict, and such a challenge will not stand up in court. Every organization is free to endorse whomever it wants for any political race. The law simply says the government will not grant any organization doing so an exemption from taxes.

Some of the pastors involved actually seemed quite aware of this. The same Minnesota pastor said he was aware that his church could lose its tax-exempt status "but it's not that big a deal... The church will go on." That's actually a rather startling admission. If the churches don't actually need a tax exemption, then there really is no conflict here after all.

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