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I try to be objective here on the blog, but I really can’t do that with Westminster Baptist Church… I won’t bother repeating their beliefs, but most of you have heard of their act. This week, they lost a tax case regarding exemption of their van used to drive to and fro. The nonprofit law prof blog raises a good point that this may not necessarily have been a good ruling from a pure tax law standpoint. If we replaced the petitioner with another group, would many of us feel ok about the ruling?

The ongoing saga of Sen. Grassley’s investigation into megachurches, including Kenneth Copeland Ministries, brought this response from KCM in a press release:

However, the Church respectfully disagrees with Senator Grassley’s position that churches are no different from any other tax-exempt organization. Any government inquiry into the affairs of a church raises serious constitutional issues that must be carefully balanced against the government’s need to evaluate the effectiveness of the laws of the land. To ensure its constitutional rights are not unnecessarily infringed upon, the Church firmly believes that it must be given the protections from disclosure afforded by the federal tax laws and the benefit of the processes and procedures that apply to inquires of churches made by the IRS.

When I have taught tax exempt law concepts in seminars and conferences, I have found that some in the secular charitable world find the unofficial distinctions and preferences often afforded to religious entities as unfair and unjust. I’m not sure I totally agree with that (there are a host of reasons why churches and religious institutions should be held to different standards than groups like Nature Conservency or even small community charities). I think it’s an interesting discussion however – what do you think? Should churches and religious institutions be treated differently by the IRS and tax law?

Update… today’s Des Moines Register… did Sen. Grassley lose his delegate spot at the GOP convention because he’s pursuing churches?

The Chronicle of Philanthropy reports that Nina Olson, the national taxpayer advocate, has noted an improvement in the Internal Revenue Service’s processing of exemption applications, but still sees room for improvement. As anyone who has applied for exemption recognition recently can attest, she’s absolutely right. The process needs to improve – ten years ago the process was measured in months (even weeks if you were lucky). Now, the length of your wait can last over a year under some circumstances…

The Chronicle is reporting an impending legal firestorm:

In a test of federal tax law, a conservative legal group is encouraging pastors to preach about election candidates in September, reports The Wall Street Journal.

The Alliance Defense Fund hopes a court case will result from this open defiance of tax rules, which bar churches from engaging in partisan politics, and that the restrictions will be struck down by the courts.

Would the current Supreme Court turn back the decades-old ban on electioneering by churches? Would there be an equal protection problem if this was not also extended to other public charities? These and other questions might be answered in the next couple of years…

Alliance for Justice has a nice summary of the latest on the IRS Political Activities Compliance Initiative:

On April 17, 2008, the IRS Tax Exempt and Government Entities Division issued a letter providing guidance on how they will treat certain activity in the 2008 political campaign season. The letter stated the goals of the Political Activities Compliance Initiative (PACI) task force in the 2008 election season and provided limited guidance on PACI’s enforcement of 501(c)(3)s engaging in election-related activity in two specific areas: 501(c)(3)-501(c)(4) websites and issue advocacy.

See more here.

From the Chronicle of Philanthropy:

The new business entity is to be called a low-profit limited liability company, or L3C, and Vermont’s governor is expected to sign into law at the end of the month the bill creating the designation.

An L3C, a variation of a limited-liability company, would operate like a for-profit business generating at least modest profits, but its primary aim would be to offer significant social benefits, such providing jobs in an economically depressed area. Such business models already exist: The Vermont law would give them a name, and, its advocates hope, both encourage the creation of more socially conscious businesses and attract more money to them.

I’m really intrigued with this new model, having been working more closely with a socially responsible LLC that also has an affiliated sister 501(c)(3) charity, it seems this might be a new path. Often we see a lot of these corporate models beginning in a few states (the laboratories for laws) and see them sweeping across the country. This one bears watching.

Roll Call reports…

Tax regulators are hinting at an imminent crackdown of outside political outfits masquerading as nonprofit organizations, groups that already are making a splash in the 2008 Congressional primaries.

So, we might see some of the new 501(c)(4)s that were gearing up to engage in a lot of activity supporting or opposing candidates drop out before they begin… this might prompt some litigation depending on how the IRS chooses to enforce things. It’s still stinging from losing the DLC case recently, and I suspect the DLC’s success may prompt other 501(c)(4)s to fight it out in the courts with the IRS over anything in the exempt activity (loosely speaking, anything that supports or opposes a candidate) category.

Considering the new form is not to be filed until 2009, it might be a bit premature for most people to take a peek, but if you want to see what next year’s Form 990 instructions look like, the IRS is ready to show you… here. More on this from the Chronicle.

Church Executive Magazine asks whether the IRS is amping up enforcement this year.

From the IRS:

The IRS is encouraging various partners and stakeholders such as charities, churches and governmental organizations to assist in efforts to reach out to those Americans who may be eligible for the 2008 economic stimulus payment but who normally have no requirement to file a tax return. People who receive certain Social Security, Veterans Affairs, Railroad Retirement or wages from earned income or combat pay may be eligible and not know it.

It’s good to see that the IRS is trying to make it easier for low-income individuals receive the allocated funds. Asking charities to aid in the process strikes me as a good idea to facilitate the effort… more about this program here.