LGBT political advocate Fred Karger has threatened to file a complaint against the “Mormon Church,” otherwise known as The Church of Jesus Christ of Latter-day Saints, with the IRS once he uncovers the Church’s “vast business holdings and all of the secret political activities.”[1] He hopes to get the tax exempt status of the Church revoked.[2] To assist with this, he has launched a TV ad campaign and has put up a new Website looking for tips and documents that will support his cause.

So, as I understand it, once he finds evidence of a crime—because he is sure there has been a crime, he will act on it and report the Church to the IRS, which he is sure will revoke the Church’s tax exempt status.

This sounds a lot like when he accused the Church of election fraud in 2008. The Church filed some of its reports with the State of California using the wrong forms. They gave the State the correct amount of in-kind donations, but in the last two weeks of the election failed to put it on the daily form that is required.

To be clear, they told the State the correct number, but just put in on the wrong form, which had a different due date.[3]

Even though the state law in question specifically states it doesn’t deal with election fraud[4]; even though the Church corrected the paperwork and paid their fine for late notification; even though the State of California recognized that the instructions were not clear so they changed them after this incident, it didn’t stop Fred Karger from crying fraud. In an article in the Huffington Post he claimed,

“The FPPC prosecuted the Church, and after an 18 month investigation, found the Mormon Church guilty on 13 counts of election fraud. The Church plead guilty and paid a fine.”[5]

This isn’t even possible because the FPPC does not deal with election fraud and specificially says so on its Website.[6] To put it another way, if it involves the FPPC, it isn’t election fraud. If it were election fraud, it would go to Investigative Services in the Secretary of State’s office, which it didn’t in this case.

For a more in depth discussion on this, see http://www.mormonnewsroom.org/article/background-information-on-the-fppcs-enforcement-process

If you want more discussion on Prop 8 and Mormons, see http://en.fairmormon.org/Mormonism_and_politics/California_Proposition_8

Since that time Fred Karger seems to be looking for other avenues to punish the Church. This Mormon tips ad campaign seems to be his new project.

In reading the comment section of articles about Fred’s new project, I have seen quite a bit of confusion from others regarding politics and a church’s tax exempt status.

So let’s review the information about politics and all tax exempt organizations including churches.

All tax exempt organizations, including churches, are allowed to be politically active.

For those that missed it, let me repeat that. All tax exempt organizations, including churches, are allowed to be politically active.

Some tax exempt organizations even have political lobbying as one of their main activities. Think of organizations like the Sierra Club, the NRA, Planned Parenthood, AARP, GLAD, National Association for Transgender Rights, and even Americans United for the Separation of Church and State. Lobbying is a big part of their purpose for existing. Can you imagine the uproar if the NRA or Sierra Club were not allowed to be politically involved?

So long as they qualify under the IRS substantial part test, it is legal to be political. The substantial part test maintains an organization cannot spend a substantial part of its total budget on political activities. While it is unclear what “substantial part” means, most organizations use a 20% rule of thumb.[7] The Church of Jesus Christ of Latter-day Saints is an international organization with millions of members. Given the Church’s low level of political involvement, even Barry Lynn, executive director of Americans United for the Separation of Church and State, the leading advocacy organization on the issue, does not see any risk of the LDS Church violating this rule.[8]

What churches and other 501(c)3 organizations are not allowed to do is engage in political campaigning for a particular candidate.[9] There has been some recent controversy on this. More on that later. First let’s talk about the tax exempt nature of churches.

The Supreme Court debated this issue in 1970. In Walz v. Tax Commission of the City of New York, the Supreme Court ruled 7-1 the tax exemption for churches is fair because tax exemption is a benefit not solely given to religious groups, but includes groups like schools and nonprofits. They made the following findings:

The First Amendment tolerates neither governmentally established religion nor governmental interference with religion. Pp. 667-672. The legislative purpose of tax exemptions is not aimed at establishing, sponsoring, or supporting religion. Pp. 672-674. The tax exemption creates only a minimal and remote involvement between church and state, far less than taxation of churches would entail, and it restricts the fiscal relationship between them, thus tending to complement and reinforce the desired separation insulating each from the other. Pp. 674-676. Freedom from taxation for two centuries has not led to an established church or religion, and, on the contrary, has helped to guarantee the free exercise of all forms of religious belief. Pp. 676-680.[10]

Chief Justice Burger even addressed the common complaint that churches should only be tax exempt as they feed the poor and do other good works. He wrote:

We find it unnecessary to justify the tax exemption on the social welfare services or “good works” that some churches perform for parishioners and others — family counseling, aid to the elderly and the infirm, and to children. Churches vary substantially in the scope of such services; programs expand or contract according to resources and need. As public-sponsored programs enlarge, private aid from the church sector may diminish. The extent of social services may vary, depending on whether the church serves an urban or rural, a rich or poor constituency. To give emphasis to so variable an aspect of the work of religious bodies would introduce an element of governmental evaluation and standards as to the worth of particular social welfare programs, thus producing a kind of continuing day-to-day relationship which the policy of neutrality seeks to minimize. Hence, the use of a social welfare yardstick as a significant element to qualify for tax exemption could conceivably give rise to confrontations that could escalate to constitutional dimensions.[11]

Now let’s look at the restrictions. As I already said, churches and other tax exempt organizations may not campaign for a particular candidate. But, the ban on churches supporting candidates is not as old as, and is less settled than, the tax exempt status of churches. In 1954, then Senator Lyndon B. Johnson of Texas put forward a new law that made it so tax exempt organizations could not support specific political candidates. This not only affected churches, but all 501(c)3 non-profit organizations. There have been several recently who have lobbied for a repeal of this law claiming it violates the first amendment. Many believe that it was put forward in retaliation for the support a non-religious non-profit organization that gave support to Johnson’s political opponent.[12] There has been some recent discussion as to whether the law is constitutional, but it has already survived several court challenges and is unlikely to change.

To summarize:

All non-profit organizations including churches are allowed to be politically involved. Under current law, the only two restrictions they have are:

They can’t publicly support a political candidate. They can’t spend a substantial part of their budget on politics. This is currently interpreted to mean spending more than 20% of their total budget. Total budget includes everything they do.

Other than those two restrictions, they are free to support or oppose any political cause they please. This can be national, state, or local politics and is not limited to items of a religious nature.

Finally, there is one more claim that Mr. Fred Karger makes on his Website that we need to address. He states:

The Mormon Church’s business holdings, estimated to be nearly $1 trillion, are run as tax free enterprises owned outright by the Church. Thus the Mormon Church does not likely pay any federal, state or local taxes on its profits from all its holdings.

This is simply false. In 1991 April General conference, Gordon B. Hinckley said the following:

I repeat, the combined income from all of these business interests is relatively small and would not keep the Church going for longer than a very brief period. I add, also, that these commercial properties are tax-paying entities who meet their tax obligations under the laws of the areas where they are located. Again, all such commercial properties are taxed under the government entities where they are located. Not only do they pay property taxes, but also income taxes on any profits. So it is with all of the commercial operations of the Church.[13]

To summarize:

Churches can legally be involved in elections and political issues involving gay marriage, marijuana use, euthanasia, housing, gun control, missile defense, global warming, taxes, zoning changes, school bonds, or any other issues they desire. Demands for revoking tax exempt status shows a lack of understanding of the law. Churches, under the Johnson Amendment law, may not campaign for a particular candidate. There is controversy over the legality of this law, but it has been upheld in more than one court decision. The Supreme Court has ruled that churches are not to be judged for tax exemption based on feeding the poor or doing other good works. That would create a situation of government monitoring churches, create excessive entanglement, and would violate the constitution. The Church of Jesus Christ of Latter-day Saints pays taxes on all of its commercial properties such as Deseret Book, Bonneville International Corporation, and Utah Property Management Associates. This includes property taxes and income taxes. Fred Karger, the person heading up this campaign to strip the Church of its tax exempt status by soliciting questionably obtained documents, does not have a good track record for understanding the law, or representing what it means.

There is no risk of The Church of Jesus Christ of Latter-day Saints (aka The Mormon Church) losing tax exempt status no matter what political cause it may engage in. Political speech is all constitutionally protected. This issue has already gone to the Supreme Court and they have ruled on it. This recent campaign by Fred Karger is nothing more than Don Quixote attacking windmills.

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[1] Quote from Fred’s recent Television commercial which is airing in Utah this month.

[2] http://www.sltrib.com/home/4690644-155/lgbt-activist-plans-ad-blitz-targeting

[3] http://www.mormonnewsroom.org/article/statement-regarding-fppc-settlement

[4] http://www.fppc.ca.gov/enforcement/file-a-complaint.html

[5] http://www.huffingtonpost.com/fred-karger/mormon-church-bleeding-me_b_8299882.html

[6] http://www.fppc.ca.gov/enforcement/file-a-complaint.html

[7] http://www.nolo.com/legal-encyclopedia/how-much-lobbying-can-nonprofit-do.html

[8] http://www.sfgate.com/bayarea/article/Tax-exempt-benefit-disputed-in-Prop-8-campaign-3183401.php

[9] https://www.nolo.com/legal-encyclopedia/limits-political-campaigning-501c3-nonprofits-29982.html

[10] https://www.law.cornell.edu/supremecourt/text/397/664

[11] https://www.law.cornell.edu/supremecourt/text/397/664 Page 674

[12] http://www.politifact.com/truth-o-meter/statements/2016/jul/22/donald-trump/donald-trump-correct-lyndon-johnson-passed-legisla/

[13] https://www.lds.org/general-conference/1991/04/the-state-of-the-church?lang=eng