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There are special audit procedures that the IRS must follow before commencing any inquiry about
potential violation by a church of the political campaign intervention
prohibition. The IRS may begin a church tax inquiry only if the Director, Exempt
Organizations, Examinations, reasonably believes, based on facts and
circumstances recorded in writing, that the church may not be qualified for
section 501(c)(3) tax exemption, including potential violations of the political
campaign intervention prohibition. Once an inquiry is begun, the IRS must follow
special procedures set forth in the Internal Revenue Code in its further
dealings with the church. Thus, the IRS does not have unfettered discretion to
investigate activities by churches, including violations of the political
campaign intervention prohibition, and must obtain high-level authorization
before doing so. Generally, IRS inquiries about potential violations by churches
of the political campaign intervention prohibition are initiated based upon
facts reported by the media or complaints submitted by third parties.
When it participates in political campaign activity, a congregation or religious organization
jeopardizes both its tax-exempt status under IRC section 501(c)(3) and its eligibility to receive tax-deductible contributions. In addition, it may become
subject to an excise tax on its political expenditures. This excise tax may be imposed in
addition to revocation, or it may be imposed instead of revocation. Also, the
congregation or religious organization should correct the violation.
Excise tax. An initial tax is imposed on an organization at the rate of 10 percent of the political expenditures.
Also, a tax at the rate of 2.5 percent of the expenditures is imposed against
the organization managers (jointly and severally) who, without reasonable cause,
agreed to the expenditures knowing they were political expenditures. The tax on
management may not exceed $5,000 with respect to any one
In any case in which an
initial tax is imposed against an organization, and the expenditures are not
corrected within the period allowed by law, an additional tax equal to 100
percent of the expenditures is imposed against the organization. In that case,
an additional tax is also imposed against the organization managers (jointly and
severally) who refused to agree to make the correction. The additional tax on
management is equal to 50 percent of the expenditures and may not exceed $10,000
with respect to any one expenditure.
Correction. Correction of a political expenditure requires the recovery of the expenditure, to the extent possible,
and establishment of safeguards to prevent future political expenditures.
Please note that a
congregation or religious organization that engages in any political campaign
activity also needs to determine whether it is in compliance with the
appropriate federal, state or local election laws, as these may differ from the
requirements under IRC section 501(c)(3).
For more information contact socialjustice @ uua.org.
This work is made possible by the generosity of individual donors and congregations.
Please consider making a donation today.
Last updated on Thursday, September 13, 2012.
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