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Can the IRS Tell My Preacher What Not to Preach?

Updated on May 26, 2014

Does having an IRS nonprofit status mean the government can tell you what you can't preach?

And the answer is……

“We don’t really know yet.”

A lot of folks don’t understand what a 501(c)(3) nonprofit corporation is. It is simply a designation for tax purposes. It means no board member, “owner” or director receives a distribution of company profits. The organization theoretically pumps all its money back into the mission of the nonprofit.

Theoretically!

All churches are by default, nonprofit organizations, so far as the IRS is concerned. Yet, over the years, we’ve watched with some consternation as religious organizations have redefined what company activities are included as legitimate expenses for a “not for profit” organization. Is a swimming pool a reasonable perk for a busy church executive so long as you do baptisms in there? Under what circumstances is the preacher’s pink Lamborghini a legitimate company car? How many million dollars is a telegenic man of God worth salary-wise if your ministry preaches that God will make you rich?

Some parishioners worry whether the government can order their pastor not to preach about homosexuality, abortion or socialism if they are recognized as a nonprofit by the IRS.

Okay, some clarification. First, a 501(c)(3) nonprofit corporation receives no funding from the government unless it asks for government funding specifically in some form of grant-in-aid. The government, therefore, has no say in its operations unless it does take federal or state funding. If a nonprofit once takes a grant from the government, then they must abide by the terms under which the grant was awarded and the government can make them pay back the money if they don’t.

So long as the church takes no money from the government, the government can’t say anything about how they operate unless they lobby for legislation directly. More about that in a moment.

A big old enough-to-drive-a-log-truck-through-it loophole in the “no profit” deal is that the board can award the staff of the organization any size salary they want to. The flip side to that is that the folks that get a salary aren’t allowed to be on the board of directors and vote. So, if the board decides it doesn’t like the director, they can also fire him. Theoretically Osteen Ministries, Inc. could fire Joel Osteen if they wanted to.

They won’t, of course – at least not unless someone hauls him off in handcuffs.

IRS recognized nonprofits are NOT government controlled. A nonprofit church can preach on abortion if they want to. They just can’t directly lobby legislators to get anti-abortion legislation passed.

Sort of.

A nonprofit faith-based ministry can provide “educational materials” about an issue to elected officials so long as there is no pressure or quid pro quo arrangement (like donating to a congressman’s campaign) in exchange for a vote on a bill. Since every church in America is a nonprofit organization and by default does not pay taxes, they are technically bound by the no-lobby rule. Officials in President Obama’s administration have recently threatened to “go after” churches that preach about political subjects using agents of the IRS, claiming that instructing their congregations to vote a certain way is technically lobbying. Though many faith-based ministries and preachers have challenged this, almost as many have become reluctant to discuss politically sensitive subject in their sermons for fear of jeopardizing their tax exempt status. For an average church with a million dollar budget, having the IRS revoke it’s nonprofit status would represent a sizable chunk taken out of the budget in taxes.

The 501(c)(3) designation is just for tax purposes and doesn’t have anything to do with the government having power over the nonprofit so long as the nonprofit doesn’t engage in lobbying. The question really is whether instructing their members as to how to vote is “engaging in lobbying”. There have been calls from the left to stop preachers from sermonizing on other politically sensitive subjects like homosexuality, abortion and environmentalism. I expect that to figure this one out will take the IRS agents hitting one of the more vocal fundamentalist churches and revoking their exempt status. Then it will be a question be for the Supreme Court and a legion of lawyers to answer.

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